Brexit protesters wave flags made up of a European Union flags and British Union flags. (Photographer: Chris Ratcliffe/Bloomberg)

Brexit Has Brought Britain to a Standstill

(Bloomberg Businessweek) -- An enormous amount of activity attends every episode in Britain’s painful quest to leave the European Union. The drama is unrelenting: from Brexiteer-in-Chief Boris Johnson’s political antics to the latest rupture in the cabinet, from the Bank of England’s warnings about the dire consequences of a hard Brexit to major financial institutions in the City of London plotting exit strategies for Frankfurt, Paris, or Luxembourg. Prime Minister Theresa May’s job seems to be always in the balance—except for the fact that no one else really wants the responsibility of seeing the process through. On Sept. 19, she was due in the Austrian city of Salzburg for a key summit with EU leaders to edge the Brexit train further down the track.

But while the ruling circles in London are frenetic over the details of the divorce proceedings, the rest of the U.K. is stuck in political and bureaucratic torpor. The country—as an administrative entity—has virtually stopped working. “Brexit is absolutely sucking energy away from the routine business of government,” says Ruth Alcroft, a councilor in Carlisle, a city in England’s far north, 260 miles from the power brokers in London.

Different communities and enterprises have their different beefs. Alcroft’s complaint is that the bigger and better flood defenses promised by the U.K. government after her city and surrounding areas were inundated almost three years ago haven’t arrived because anything that doesn’t pertain to Brexit gets kicked into the long grass. Even the daily business of running the country is suffering. Ministers just don’t have the time to attend to the needs and ambitions of ordinary citizens.

John Gallacher, who runs Gaia Wind Ltd., a wind energy company based in Edinburgh, says he struggles to get face time with ministers to discuss policy affecting his industry. Another power company that won permission for a regeneration project in the Welsh city of Swansea three years ago says it has the same problem. And when it eventually got a hearing, its plan was nixed by the government. Local councilors in Yorkshire blame Brexit for delays in railway upgrades.

Brexit Has Brought Britain to a Standstill

Brexit is literally stifling the workplace. The hours absorbed by machinations and negotiations could be diverted to making the country more productive. The average U.S. worker gets as much done by Thursday afternoon as a U.K. counterpart would in an entire week, according to the International Monetary Fund. Growth in output per hour has yet to recover to precrisis levels and lags behind many European peers. “If the same level of energy and passion was deployed in improving productivity as there is in debate of the granularity of Brexit terms, it would certainly lead to an increase in productivity,” says Christine Lagarde, head of the IMF.

Cutting loose from Europe is the British incarnation of the populist revolts that swept Donald Trump into the White House and, more recently, Italian nationalists into power. But since the result of the referendum stunned the establishment in June 2016, the political obsession in the U.K. has been how to fulfill the outcome rather than address the causes of the rebellion. As a result, Britain has become frozen in time, gripped by the herculean task. The paradox is that many of the very regions that voted with gusto for Brexit are now even more cut off from the center of power. “There are the micro-processes of government that are in turmoil because of the revolving doors of ministers, and then there’s been the internal party fighting and squabbling, which is then consuming all of the political oxygen,” says Mary Creagh, a lawmaker for the opposition Labour Party and chair of Parliament’s Environment Committee. “It means the normal decision-making of government is not happening and has not happened for two years.”

Whether or not a palatable deal with Brussels is finally agreed on in coming months, the discontentment and isolation that caused the rupture have been left to become even more entrenched. And if some Brexit opponents get their way and orchestrate a repeat referendum, there’s no guarantee it will be reversed, despite more warnings of economic hardship this month from the chief of carmaker Jaguar Land Rover Ltd., the governor of the Bank of England, and others.

Manifesto promises from the Conservative Party have been ditched, ministers are shying away from policy initiatives, and legislative time in Parliament is dominated by bills to prepare the country for its scheduled departure in March. May’s flagship EU Withdrawal Bill has taken up 273 hours of legislators’ time—17 times the average spent on other bills, according to the Institute for Government.

In the meantime, the U.K. tax authority has been forced to drastically scale back a £1.8 billion ($2.4 billion) transformation program that was supposed to make it one of the most digitally advanced tax administrations in the world while it tries to prepare Britain for as-yet-undecided new customs and border service arrangements. It cut the number of modernization projects from 267 to 128. “We very clearly prioritized Brexit, receipts, and efficiency,” Jon Thompson, the civil servant who runs the tax office, told a committee in Parliament in April. “If they did not meet those criteria, then they got a lower priority.”

It’s also tough to get ministers to attend weekday events outside London since the referendum, according to two people with experience of the situation. May and her Conservatives lost their majority in the House of Commons in an election last year that backfired spectacularly. She now needs all her lawmakers to avoid defeat in a number of key Brexit votes—no easy trick given the rift among them over if, when, and how to leave the EU.

Brexit also appears to have dimmed the energy of May’s junior ministers. While up-and-coming politicians would typically use their first ministerial postings to advance their careers, they know there isn’t the parliamentary time to listen anymore, according to Dave Penman, who heads the FDA, a union for the country’s top civil servants. “This is a zombie government in terms of domestic policy,” he says. “Depending on the department, you’ve got the drain of the brains, and the actual time and numbers [of people] are going elsewhere.”

Spare a thought for foreign policy. Britain has all but disappeared off the map when it comes to wars in Syria and Yemen. It helped spearhead sanctions against Russia, though that was mainly because a former spy and his daughter were poisoned in England. “Brexit is squeezing our policymaking in almost every other area,” says Peter Westmacott, the U.K. ambassador to the U.S. until 2016. “We currently have very little bandwidth in the U.K. for foreign policy.”

May took over as prime minister in 2016 after David Cameron quit following the Brexit referendum. The former Home Secretary vowed to steer the U.K. through the ensuing chaos. She talked of tackling the “burning injustices” that led to the Brexit vote following years of spending cuts in the wake of the global financial crisis. Her government insists that that’s all being done. As well as fulfilling Brexit, it’s delivering on an “ambitious domestic agenda,” according to a government spokesman, one that includes bolstering the National Health Service, improving schools, and scrapping taxes for people buying their first home.

The problem is that May’s weak government struggles to pass anything remotely contentious through Parliament, and most big efforts at legislation are linked to unraveling four decades of membership in Europe’s integration project. The date for an agreement with Brussels was pushed out again to November.

The remote county of Cumbria, on the Scottish border, is an example of the circle of neglect created after voters backed Brexit. It’s almost three years since the village of Crosby-on-Eden was flooded for the second time in six years. The water destroyed the home of Natasha Heslop, a friend of Alcroft, the Carlisle councilor for the Labour Party.

The red-brick, three-bedroom house was repaired, but this year Heslop decided to sell it for 30 percent below market value, convinced it might be flooded again. “I don’t want to have to keep worrying about moving stuff every time it gets wet,” she says. Other residents haven’t been able to return to their houses, schools, and offices, which sit derelict and empty, and some bridges are unusable. Alcroft’s own municipal office building will soon be partly demolished. It was damaged by almost 5 million liters (1.3 million gallons) of water during the storm.

Government funds promised in 2016 to shore up flood defenses have been collected from insurance companies and are sitting in Westminster unspent. The government says some of the £700 million will be spent this year.

Brexit may have been a demonstration of the wider country’s frustration at not having its voice heard, but the result is even more centralization of power in London. “Almost all the work of Parliament is built around Brexit,” says Vince Cable, the Liberal Democrat leader who served as business secretary in Cameron’s five-year coalition government. “Big decisions that should be grappled with are all being put on hold because they are difficult and are going to involve some friction between ministers.”

Indeed, the government’s Environment, Food and Rural Affairs unit, which looks after flooding, is consumed by its Brexit workload. Many non-Brexit issues are being systematically pushed to the bottom of the pile while Michael Gove, the cabinet minister in charge of the department, focuses on making a success of the EU divorce he championed.

Aside from the NHS, there’s little if any new money available for non-Brexit-related issues, and top civil servants are being assigned to work on Brexit either in their own departments or in the unit created especially for exiting the EU. Even the extra £20.5 billion promised to the NHS by 2024 could be attributed to Brexit: Campaigners had promised the cash injection as a dividend from leaving the EU. While delays to government plans are nothing new, policy drift has reached unprecedented levels, and lawmakers complain that progressive plans on everything from modernizing radiotherapy for cancer patients to tackling plastic waste are in stasis.

Parts of May’s flagship industrial strategy, which aims to get the economy “firing on all cylinders,” have stalled. Nine months after it was announced, there’s no sign of a council of business leaders that’s supposed to advise the government. An official for the business department said it would be announced shortly.

The delay in providing clarity on Britain’s post-Brexit future is denting investor confidence in the country, says Stephen Phipson, head of EEF, a manufacturing lobby group. The mood of large multinationals has changed over the past two years “from waiting and being impatient to anger in a lot of cases,” he says.

Others are more sanguine. Gallacher, at the wind turbine business in Edinburgh, says maybe having less government in the background is a good thing. “What Brexit has done is, it means we have no access to the politicians at the moment to influence anything,” he says. “But actually they are so taken up with Brexit activities, at least they’re not making things any worse.”

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net, Rodney Jefferson

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