Theresa May is a genius – discuss?

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There, that has caught your eye.

We are accustomed to thinking that Brexit has degenerated into a shambles and Mrs May’s strategy of “kicking the can down the road” has been a disastrous humiliation. That is certainly a valid point of view. But from her own narrow self-interested perspective she remains in Downing Street and has avoided taking any of the many final decisions which might coalesce opposition to her.

That strategy marked up another success overnight when the European Council agreed an Article 50 extension until October 31st.

At Boscobel we have continuously resisted the Government’s claim that the country faced a binary choice of Theresa May’s deal or No Deal, as we believed Parliament would approve neither. That continues to be our advice.

A leadership contest?

This morning, the Today Programme was full of disinterested speculation that Mrs May will now be “forced to step down”. That is a possibility. But the fact is there is no legal or constitutional mechanism to remove her from office in the short term. And unlike most politicians she seems utterly immune to the daily hue and cry of the media, Parliament or indeed other people’s views and feelings generally.

She has particular contempt for Cabinet government, one of the many important constitutional conventions our politicians have undermined in recent years. That said, given that at least five of her colleagues now have leadership campaigns up and running, she can enter a plea in mitigation.

Investor confidence

From an investor perspective, last night’s European Council decision has its merits. There is a huge amount of deferred investment, pent up in the system. There were only three IPOS on the London Stock Exchange in the first quarter, the lowest number since the financial crisis. UK companies are holding a record 35% of GDP in cash on their balance sheets.

For managers and investors with capital to allocate and who can ignore the media, the Brexit pause should be an opportunity to make incremental decisions. Very large decisions may still be put off, as the acute political uncertainty around the UK will continue.

What is the medium term outlook?

  • The UK will almost certainly participate in the European Parliamentary elections, with candidates to be selected in the next couple of weeks. The polls suggest this will be a disaster for the Conservatives.
  • The franchise could be critical, as EU citizens resident in the UK will be entitled to vote. They have been treated appallingly by the political and bureaucratic process and are difficult to poll. One suspects, without evidence, they will vote for remain parties such as ChangeUK.
  • Relative to the hard core Remainers, at the top of which sit the eminence grises of New Labour, notably Tony Blair, the Brexiteers (especially the European Research Group in Parliament) are in disarray.
  • Experience of life suggests the longer and more frequently something big is delayed, the more likely it is to lose momentum altogether. We should start to contemplate the possibility that Brexit may never happen, or not unless the mandate is refreshed by a Second Referendum.

In EFTA, it would be in a working free trade agreement, but outside the jurisdiction of the European Court of Justice, the Common Agricultural Policy, the Fisheries Policy and the Customs Union. We would enjoy rights of consultation and veto over new laws, as they applied to us.

At Boscobel, we have supported a campaign for the so-called Norway solution. It is now commonplace in Parliament that there are, in fact, two pillars of European treaties, holding up a common-roof called the European Economic Area. The EU political treaties make up one pillar, but there is another made up of the European Free Trade Association. It still makes sense for the UK to leave the political institutions of the EU and move into EFTA.

For this policy to work it would require something to shift. But that tinkling sound you can hear is just the can being kicked down the road. Again.

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