Soft Brexit, Hard Brexit, No Brexit, A Labour Govt – Take Your Pick

Business, China, Company Strategy, Economics, Europe, European economy, European petrochemicals, US

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By John Richardson

IT was of course a gamble that backfired hugely. The UK’s General Election would, according to Prime Minister Theresa May, bring certainty and stability to politics during this very important period in British history.

Instead, though, the PM now looks set to be leading a very fragile government with every possibility that the government will be brought down over the next few months.

We could thus be heading for a second General Election very soon and a Labour victory. Fellow blogger Paul Hodges believes that one route to Labour victory in a second poll could be it regaining some more of the Scottish National Party (SNP) seats it lost to the SNP in the 2015 General Election.

It is not just in Scotland that Labour might make further gains if there were a second poll in a short space of time. Some seats in England were only won by the Conservatives with wafer-thin majorities. Take Hastings and Rye as an example, where Home Secretary Amber Rudd only held on by a majority of just 346 after a recount.

One of many reasons why the government is vulnerable is that it depends on the votes of the Democratic Unionist Party (DUP) to get legislation through parliament. At any point the DUP has the capacity – and perhaps the motives – to vote against the Conservatives and bring down the government.

Then there is the DUP’s very conservative, with a small “c”, stances on abortion and gay marriage etc. The DUP has also questioned climate change science. Many MPs, including Conservatives, are uncomfortable with the DUP’s position.

There is also Theresa May’s unpopularity in her own party. The Tories seem to want to avoid a leadership challenge right now because it would risk defeat in the House of Commons and another General Election, which, as I said, Labour could easily win.

But the PM may only survive in office for a few more months, or perhaps even weeks. Rumours are already rife about potential leadership challenges from the likes of Michael Gove, who was yesterday re-appointed to the cabinet. Gove was sacked from the cabinet last year after challenging May for the Conservative party leadership, following the Brexit vote and David Cameron’s resignation.

A Labour victory? If anyone had suggested this as a possibility after the Labour Party’s disastrous showing in the UK Local Elections in May, their views would not have been taken seriously. But the impossible of a very left-wing Labour government has now become perfectly possible.

So many other possibilities are out there right now, including the government muddling through (the least likely outcome, I feel).

The uncertainty doesn’t stop here. Whatever party, or coalition of parties, end ups running Britain over the next few years, the outcome of Brexit has been thrown into the air.

The ‘hard Brexit” that May talked about, with few details provided about what this would actually mean, now seems less likely to happen. The reason is that Labour leader Jeremy Corbyn is standing in the political wings promising to start exit negotiations with Europe on a potentially very positive footing if were to become PM. He told the BBC on 1 June that talks would start with a  “clear commitment” to EU citizens already in the UK that their rights would be guaranteed, adding that this was the “best way to secure reciprocal rights” for British expats in other EU countries..

Soft Brexiters and Remainers within the Conservative Party agree with this position on Europe, even if they disagree on just about everything else that the Labour leader says. And along with these principles, they see the gains that Labour made in last week’s election as partly the result of a protest vote against a hard Brexit – and against any kind of Brexit. The risk for the Tory party is that it sticks to hard Brexit and loses another General Election in a few months’ time.

Will Brexit be reversed? That has to be a possibility, too, as is strong resistance to Britain remaining in Europe from the Leavers, including the Eurosceptics in the Tory party. They could also bring-down today’s very fragile government.

My blog post on Friday might have seemed much more core to your interests as a chemicals and polymers company because the topics were polypropylene and oil prices in the context of the key China market.

You would be wrong to think this. As events in the US tell us – and Emmanuel Macron’s resounding success in yesterday’s first round of the French parliamentary elections also tells us – political uncertainty is at levels that most of us have never seen before.

A wide range of outcomes for chemicals and polymers trade flows, based on new trading relationships and trading blocs, are possible as all of this political upheaval plays out. The same applies to economic growth.

Why are we in this new era of political uncertainty? Because the Economic Supercycle is over.

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