Crashing out of Europe?

The prospect of the UK crashing out of Europe grows every day

Our politicians seem more focussed on what they don’t want during transition and after Brexit, rather than a clear plan for what the UK does want. The recently resigned Brexit Minister Lord Bridges told the House of Lords of his frustration. “What do we value? Sovereignty and control or market access and trade? There are still no clear answers to these basic questions”. Angela Merkel meanwhile says “we are open to any kind of partnership but it is in the UKs hands to tell us how close a partnership it wants”.

This lack of clarity means officials on both sides are finding it difficult to draw up a framework for the next stage of Brexit talks. All the chatter in Brussels is that the UKs position must move beyond rhetoric and into what future vision we have for the relationship, before any further progress can be made. The Chancellor, Philip Hammond, has said the future relationship will be only “modestly different”, while the hard Brexit heads in the Cabinet, and many Conservative MPs, continue to insist that any future relationship is fundamentally different.

The Prime Minister, lacking in political authority and, it seems, political will, appears to dither. Her position weakens by the day and the prospect of her being toppled is growing. She is kept in post only by Conservative MPs fear of chaos, particularly regarding the impact on Brexit negotiations, and the lack of enough support for an obvious successor. Boris is the most likely replacement still, but he is not popular amongst Tory MPs. Amber Rudd’s ambitions are hampered by being seen as an ardent remainer.

The agreements that have already been reached now seem to be in doubt in key respects, including whether EU citizens arriving in the UK after March 2019 and during the transition period will be included in the agreement on the future right to remain in the UK. The European Parliament’s Guy Verhofstadt says there must be a “continuation of existing acquis in full”. As MEPs must approve any deal, Verhofstadt’s views are significant.

David Davis has, according to Brussels commentators “stunned Brussels” by demanding a mechanism for objecting to any new EU rules during the transition. There is also an argument over the customs union arrangements during transition, with Liam Fox saying he would not accept a deal if it prohibits the UK agreeing trade deals with non EU countries.

Labour’s position is still unclear and deliberately so, to avoid alienating either leave or remain voters. A senior Shadow Cabinet member told me, I think expecting sympathy, that Labour is “in an impossible position”. This leaves Keir Starmer to continue to focus on process issues, like the row over releasing the ‘Impact Statements’. One clear Labour policy is the decision by Jeremy Corbyn to rule out Labour support for a second referendum.

A certainty in all of this is that the clock continues to tick down. Every day that passes without progress towards a deal increases the prospect of the UK crashing out of Europe. Three scenarios seem at this point all equally possible.

1. An unsuccessful negotiation process triggers a ‘hard Brexit’ in March 2019 with no future arrangements agreed other than WTO rules

2. Negotiations lead to a ‘soft’ Brexit at the end of 2020, following a transition period, and with new favourable arrangements made for market access and a form of customs union.

3. Negotiations lead to a hard Brexit at the end of 2020, following a transition period, and with new arrangements that are either on WTO rules or agreed new rules with restrictions on market access and customs.

In any scenario, assume the end of free movement after final Brexit, with arrangements during the transition still unclear. All three possible scenarios will have significant impacts on the UK economy and labour market, as well as specific sectoral impacts.

Connect is currently working with clients including the UK fishing industry, automotive manufacturers, chemical companies and trade unions to assist with managing the impact of Brexit. Please do get in touch if you would like to discuss how we can help your organisation.

Andy Sawford by:
Andy Sawford