Yesterday I went to a Brexit Briefing organised by the Global Success Partnership. We got into a discussion about how unprepared business was for what happened in 2016 and how most companies still have a pretty poor grasp of politics. KPMG’s public policy director, Mark Essex, remarked that business hadn’t really had to take account of politics for the last 40 years or so and that boardrooms need to be more focused on the geopolitical agenda.
There is certainly a sense of bewilderment among business leaders at much of what happened in 2016. I sense, from talking to people in a number of sectors, that there still is. People know intellectually that we will leave the EU and probably the Customs Union too but they don’t quite accept it emotionally. Few believe there will be a cliff edge Brexit with no deal and a default to trading under WTO rules. ‘It will never happen. Something will get sorted out,’ is a sentiment I hear a lot. But Mark Essex is advising his clients to prepare for such a scenario, not because he thinks it will certainly happen but because there is enough of a risk that it might:
Any reasonable politician wants to avoid this scenario so surely a disorderly Brexit is vanishingly unlikely? I do believe goodwill exists on all sides. However in an increasingly unpredictable world and a scenario like Brexit – where a lot of different things all have to go right – the actual chance of failure is higher than many realise.Imagine our ship, The Brexit, has to navigate around six rocky hazards. Even if it has a 95% chance of making it past each one, taken together, the ship still has a 1 in 4 chance of mishap. That is why some commentators have put the chance of ‘no deal’ at 1 in 3, and some as low as 50-50.
As shocking as Brexit was, though, many business leaders have also been surprised by the Red Tory direction of the Conservative Party under Theresa May’s leadership. Business groups and employers’ organisations were, to say the least, disappointed by the Tory manifesto. Bloomberg quoted one private equity boss, saying Theresa May is “the least business-friendly Conservative prime minister in decades”.
The Economist, too, is aghast, advising its readers to vote Liberal Democrat:
Though they sit on different points of the left-right spectrum, the Tory and Labour leaders are united in their desire to pull up Britain’s drawbridge to the world. Both Mrs May and Mr Corbyn would each in their own way step back from the ideas that have made Britain prosper—its free markets, open borders and internationalism. They would junk a political settlement that has lasted for nearly 40 years and influenced a generation of Western governments (see article). Whether left or right prevails, the loser will be liberalism.
Which, of course, is the point. The last 40 years were defined by what David Goodhart described as the triumph of the two liberalisms; the social liberalism of the left and the economic liberalism of the right. The people who voted for Trump, Brexit and Le Pen, by and large rejected both. They didn’t like immigration and political correctness but they didn’t care much for corporations and free-market policies either. In the UK, three-quarters of UKIP voters supported re-nationalisation of the railways and utilities. The phenomenon that we call populism is neither left nor right, at least, not in the way that we have been using those terms in recent decades. It’s a revolt against immigration but also the offshoring of jobs. It dislikes ‘rich banksters’ as much as ‘nanny-state social workers’. And it wants more state, not less. It wants governments to ‘do something’ about immigration, crime, stagnating wages and the lack of secure employment.
The Economist hopes things will soon get back to normal:
Backing the open, free-market centre is not just directed towards this election. We know that this year the Lib Dems are going nowhere. But the whirlwind unleashed by Brexit is unpredictable. Labour has been on the brink of breaking up since Mr Corbyn took over. If Mrs May polls badly or messes up Brexit, the Tories may split, too. Many moderate Conservative and Labour MPs could join a new liberal centre party—just as parts of the left and right have recently in France. So consider a vote for the Lib Dems as a down-payment for the future. Our hope is that they become one element of a party of the radical centre, essential for a thriving, prosperous Britain.
Which earned it this stinging rebuke from Guardian economist Aditya Chakrabortty:
The Economist used to think it was the future. Now it’s the magazine for washed-up Elite-ists who cry ‘Stop the world I want to get off.’ https://t.co/FdXNU7biPg
— Aditya Chakrabortty (@chakrabortty) June 1, 2017
Is he right? Could this be the end of the Roy Jenkins and Margaret Thatcher blend that has held sway since the 1980s? It has become fashionable in recent weeks to call time on populism, especially after the defeats of Geert Wilders and Marine Le Pen and the collapse of UKIP. But this is to ignore the gravitational pull that populism has had on the mainstream parties. The Red Tory agenda has come about almost entirely because of Brexit and the Conservatives’ strategy of appealing to working class voters attracted away from Labour by UKIP. Labour, traditionally more in favour of immigration, has stated its opposition to free movement. Angela Merkel, facing an election next year, has also taken a tougher line on immigration, though still not tough enough for some in her party.
We should also be wary of the assumption that the Labour revival at the expense of Theresa May’s Red Toryism signifies the waning of populism. Populism has left-wing as well as right-wing aspects. By appealing to them, Labour has increased its support. Labour’s interventionist policies, like taxing the rich, banning zero hours contracts and nationalising the railways and energy companies, are popular. The collapse in support for Jeremy Corbyn’s Labour Party was blamed on it being too left-wing but voters actually like a lot of those left-wing policies. What they are less keen on is a leader they perceive as lacking in patriotism and likely to run down the country’s defences. That sort of thing doesn’t go down well with those northern voters who, as Sunder Katwala said, are most proud of the NHS and the army and won’t hear a word said against the Queen.
There are signs of an organisational revival in the Labour Party. Last year’s chaos has given way to a formidable election campaign which even the party’s opponents admit has been well run. It is not inconceivable, then, that a new leader with a revitalised party might lead Labour to government once again. One, in many ways, just as left-wing as Jeremy Corbyn’s but taking slightly tougher line on immigration, keeping Trident and protecting defence spending, while also nationalising the railways and utilities, increasing worker protection, regulating corporations and raising taxes. No longer constrained by EU regulations, a left-wing government could nationalise and subsidise whatever it liked. While the Economist hopes for a political realignment and the emergence of a new centre party, it is just as easy to imagine Theresa May’s government being replaced in 2022 by one that is even less corporation friendly. Before the last election, Fraser Nelson predicted the rise of left-wing populism. He may yet be right.
Over the last few decades, British business has been operating in a relatively benign environment. Open goods trade with our nearest neighbours, falling restrictions on services, some of the lightest regulation in the developed world and access to a huge pool of mobile, well-educated, English-speaking labour. But the political developments that we lump under the populist heading may have brought this period to an end. That free trade and free movement are good for everyone is an argument that is becoming increasingly difficult to win, regardless of the evidence. The next decade might not be so corporation-friendly.
What I still find surprising is that so many people in major companies didn’t see any of this coming. In January, after reading about the collective sense of shock at the Davos meeting, I reflected on how little discussion of politics I had seen in companies over the past 30 years. It’s not as though no-one saw any of this coming. I have had my eye on the forces that led to the rise of UKIP and ultimately to Brexit for a few years. (Though, until recently, I didn’t think the impact would be so great.) Some people, like Matthew Goodwin and David Goodhart, have been on the case for a lot longer. The phenomenon that we call populism didn’t happen overnight. It had been gathering pace since over the previous fifteen years or so. The financial crash poured petrol onto the fire bit it didn’t start it. The sparks were there some years earlier. But no-one in business was paying attention. They hadn’t had to take much notice of politics for years and had become used to seeing it as an interesting side-show.
Of course, the hopes of the Economist and others might be right. Perhaps populism will burn itself out and we will return to the business friendly world in which, with some small variations, the two liberalisms guide our major political parties once again. Even if that happens, there will be some volatile times beforehand. Brexit has raised people’s expectations in all sorts of areas, whether it be more secure jobs, higher wages, better public services or fewer immigrants. With trust in business at an all time low, if any or all of these things are not delivered people are likely to blame ‘elites’ and demand more government action. After being ignored for decades politics has taken business by surprise. If they don’t want it to happen again, people in the boardrooms need to pay a bit more attention.