Moving Onward

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Posted on January 23, 2018

The EU agreed with the UK in December that there had been sufficient progress on the three main issues of EU citizens’ rights, the divorce bill, and the border between the Irish Republic and Northern Ireland to allow the negotiations to go on to the next phase to discuss trade. Even so, not all three issues have been settled enough to be part of the final package. Until they are agreed, uncertainty remains. Northern Ireland in our view remains the most difficult to resolve.

With the clock ticking, it is less than 15 months after all before the UK leaves the EU with currently no framework for an overall agreement.  Additionally, none of the UK governmental infrastructure is in place (e.g. additional border controls for goods/people). The only way that the UK can prepare for this is to, in effect, delay the final departure by an additional two years (i.e. a transitionary period). The EU is likely to agree to this, but on their terms.

What are the likely terms of a transition or delayed departure from the EU?

The EU have indicated that this could only be based on the Norway model: a) the UK continues to accept free movement, b) the UK continues to be part of the customs union and single market, c) the UK would continue to pay into the EU budget, but with no voting rights nor influence, and d) remain under the jurisdiction of the European Court of Justice (ECJ). This last point, in particular along with free movement, is the most problematic for the government. It is likely that they will have to accept it. The EU wants the final departure to be no later than December 2020. This has member state support.

And the overall sentiment?

Public opinion is clear that the government has not handled the negotiations well so far, and now for the first time, there is a louder call for a second referendum on the terms of the deal. That position may gain traction as it becomes clearer that the UK will be far worse off in terms of its economic well being, and perhaps global standing. At this stage, it is unlikely that a second referendum will take place unless the UK’s economy really starts to nosedive and/or the government falls. While the UK economy has been performing well enough, what is clear is UK growth and productivity is lagging behind the economic global upturn, including the Eurozone.

The leavers do have a problem in that it has been increasingly difficult to articulate the benefits to the UK from leaving the EU apart from ’taking back control’. Becoming more of a ‘global player’ has less resonance too, as many of the UKs long term partners and allies see the UK stepping back from the global stage.

And the main actors?

The Prime Minister is finding it difficult to keep her Brexit ministers under control. Even Boris Johnson, with ever an eye on No.10, pushing his own profile by suggesting the UK builds a bridge to France and increase funds to the beleaguered National Health Service. No. 10 pushed back on his idea of a multibillion pound bridge to France. He knows that it is a pipe dream, but that is not the point. It has more to do with keeping his profile high, especially within the Tory party membership. David Davis, the Brexit Minister has been almost absent for the last few weeks with speculation that he will quit, having been undermined by Cabinet colleagues including Boris Johnson and Michael Gove.

What remains Theresa May’s strongest card is that if she steps down and an election is called, it is highly probable that a Corbyn-led government will replace her. A chance most Tories don’t want to take. And will she stay? We believe the answer to that she will. In these highly divisive days of UK hard-right, hard-left politics, the centre ground remains vacant; an area successfully held by Blair and to a certain degree by Cameron.

And now?

Expect the hard work to begin. The UK does not want to be part of the single market, but ‘have access to the single market’. The difference is yet unclear. ‘Canada plus plus plus’ is still being banded around (i.e. zero tariffs plus non-tariff barriers and full access for services). Neither side will find it plain sailing, to reach an agreement which keeps the UK as close to the single market and customs union without being part of either.

And day-to-day governing of the UK?

This is probably the greatest challenge, as so much of the government’s work on Brexit uses resources that would normally be engaged on the day-to-day work of the government. Increasingly ’not enough bandwidth’ is heard when dealing with non-Brexit issues. The parliamentary sex abuse scandal, the collapse of Carillion who ran a number of high-profile PPP schools and prisons, the crisis in the National Healthcare Service, and the crisis in the UK’s defence capabilities are all issues with which the government should be dealing, but are struggling.

Uncertainty remains the watchword.

Navigator's Brexit Response Team

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