Hard Brexit, tough times – Theresa May’s Britain will be stretched at the seams

Chamberlain square in Birmingham. Shutterstock

Birmingham has a square named after Joseph Chamberlain, its most famous politician, through which visitors to the Conservative Party conference will pass this week. Although the square is home only to a lacklustre memorial fountain, and not his statue, Chamberlain still looms large over proceedings at the conference.

He is celebrated by Theresa May and her colleagues as a champion of the manufacturing industry and a great social reformer. He is the radical who campaigned for municipal education, decent housing and civic improvements for the Victorian working class.

Chamberlain was also an apostle of imperial unity between Great Britain and her settler colonies – what today’s Brexiteers call the “Anglosphere”. As colonial secretary, he sought closer economic and political ties between Great Britain and Canada, South Africa, Australia and New Zealand.

His passion for this cause would eventually lead him out of government, to campaign for tariff reform that would give preference to colonial goods and shelter British industry from international competition. It was a lost cause. Free trade was too deeply embedded in the political economy of Edwardian Britain for Chamberlain to dislodge it. Birmingham’s manufacturers were no match for the City’s financial, commercial and shipping interests, or the industries, like cotton, that would pay more for imported raw materials.

Chamberlain himself lost the loyalty of the working class to a new progressive alliance of Liberal and Labour interests.

A lesson for a new PM

May wants to succeed where Chamberlain failed in uniting working-class voters with the British industrial interest. She has created a new department for industrial strategy and promised to prioritise “just managing” households. Housing policy is to be refocused from subsidising home ownership, to building homes and supporting private renters. Fiscal policy will be relaxed, easing planned cuts to services and benefits.

The electoral coalition that delivered Brexit – of struggling working-class voters and middle-class older voters (or the “excluded and the insulated”, as David Willetts recently put it) – will form the ballast of a new Conservative hegemony.

But the prime minister’s chosen path to Brexit – of prioritising immigration control over the single market, and “sovereignty” over the jurisdiction of the European Court of Justice – will bring her into conflict with Britain’s existing political economic interests. She will face similar pressures as Chamberlain in his campaign for tariff reform.

Britain’s leading-edge manufacturers – in the automotive and aerospace sectors, for example – are deeply integrated into the European single market. They do not simply make products in the UK and sell them to the rest of Europe, tariff free, as Brexiteers suppose. They have complex supply chains. They move parts and people across plants in the EU. Imposing custom checks, slowing down supplies and limiting the movement of workers will matter as much as tariffs to their operations. And what goes for manufacturing is doubly true for services.

Decisions about new investment will often be taken in global HQs, not national branch offices. The growth of foreign direct investment in the UK since the 1980s means that much of Britain’s industrial capital is no longer national in any meaningful sense. Economic patriotism will hold little sway over multinational investors or global bankers.

May: doesn’t yet cast a shadow as long as Chamberlain. EPA

Some political economists argue that the advanced sectors of the economy are not subject to partisan division. Their centrality to national prosperity is such that political parties agree on the policies needed to secure their interests. If so, that may be about to change. The City of London and the leading export sectors – trade unions and employers – have yet to properly flex their muscles in the Brexit debate. Although they cannot currently turn to an electorally credible Labour opposition to make their case, they will have advocacy routes of their own. They include the mayor of London and the Scottish government.

Hard Brexit will stretch May’s unionism and the unity of the country, as much as that of her own party, to the limit (and that is before the status of Northern Ireland’s border is factored into the equation).

Few peacetime prime ministers have confronted a set of challenges like those facing May. Holding together the United Kingdom, revitalising British industry, delivering shared prosperity to working people and renegotiating Britain’s place in Europe and the world make for a formidable list. Lesser ones defeated Chamberlain and his generation. Theresa May will hope that she isn’t memorialised by failure.