Brexit: Weekly Update

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Posted on October 3, 2016

Heading for the Exit Door
Prime Minister Theresa May, using the Tory Party annual conference this weekend, has now indicated that the Article 50 Brexit negotiations will now take place early in 2017. She knew that she couldn’t hold the line on when Article 50 would be triggered with a number of Brexiters pressuring her into “getting on with it.” Brexiters command the high ground at the moment and they have numbers in Parliament that can vote against the Government on anything they feel isn’t going their way.
The sense is that Mrs. May is leading the UK towards a “Hard Brexit” which would decouple the UK from the EU at all levels, including the single market and customs union. That move serves her in two ways. Firstly it keeps Brexiters at bay and gives her time. Secondly, it shows the European Union (EU) that the UK is serious about leaving the EU on the UK’s terms, even with the threat of leaving the single market.

The initial response from other EU member states to talks about talks has been a firm “no.” They will only be prepared to start negotiations once Article 50 has been triggered. May will have known this was the likely outcome, but she will still be seeking out more pragmatic member states to have, at least, informal talks about talks.

She also needs to put some clear water between the departure of the UK, sometime in early 2019 and the next UK general election, scheduled for 2020, as it will be more than likely that the divorce won’t be clean or trouble free. They rarely are.

The irony for the UK, which now wants to trumpet its future free trading status, is that it will need to come to some kind of trading relationship with the EU in the way that other countries have, including a deal with South Korea and the ongoing negotiations over the Comprehensive Economic and Trade Agreement (CETA) with Canada.
Boris Johnson
Boris’ strategy is less about what is best for the country and more “what is best for me.” Should May’s popularity fail due to messy divorce proceedings with the EU, Boris will be positioning himself as her natural successor. He is, after all, the second most popular politician in the UK, according to polling completed in August by ComRes and YouGov.
The EU Single Market
The Prime Minister knows that she will now be under intense pressure by business and foreign governments supporting their countries’ UK investments to keep the UK competitive for foreign direct investment. Gone is the message of “access to the world’s largest single market”. Nissan, who already exports 85% of their UK car production to the EU, has demanded Government compensation should tariffs be introduced, before they would consider further investment in the country. Others will follow along with those who will have lost EU support, including UK farmers.
The current UK government message is that the UK is “open for business” and the UK would be looking to do trade deals with China, India, Australia and other economic giants. However, the UK knows that it cannot do a separate trade deal with the EU with respect to CETA, until it ceases to be a member.

In our view, many within Parliament would be well served by some reminders on the realities of striking trade deals. The EU has been talking to India for nearly 10 years now without any hint of a deal being on the table, and despite the importance of emerging markets to the British economy, the UK exports four times more products to Belgium than India. Trade deals are hugely complicated, with the devil in the details and the driving force of vested industrial interests keen on protecting their markets from foreign competition.

Navigator's Brexit Response Team

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