And so it begins, the extraordinary process of UK withdrawal from the European Union, after 44 years of membership. What comes next: a smooth set of talks leading to a constructive new ‘deep and special’ relationship? Acrimonious talks leading finally to breakdown, crashing out of the EU onto World Trade Organisation rules? Or might the UK public change its mind so the UK remains after all – and what would the EU27 say about that?
A Deep and Special Relationship?
Theresa May admits in her speech that the UK cannot cherry-pick from the EU’s single market nor stay within it. She is looking for a deal within two years – after which there will be an ‘implementation phase’. The UK will still aim to cooperate with the EU on security and defence issues, says May, and to be part of EU research, education and scientific cooperation. At the same time, the UK will be more open and global with new trade deals.
Listening to the Prime Minister, it is hard to see why the UK is leaving the European Union. The UK is about to spend several years renegotiating access to a market where it will no longer influence the rules and where it will – if and when a deal is done – have less access than now. The UK, in future, hopes to still cooperate on foreign and security policy – but doubtless the interaction will be less intense and multi-level than it is now. The UK will also spend much political and civil service time on bringing EU laws into UK law, establishing new regulatory systems, and developing a new migration system, amongst others.
What the UK gets from this is no longer being part of the EU’s free movement of people and no longer being directly under the European Court of Justice. But it will remain obliged to follow EU rules for companies and organisations that trade and invest there.
Few agree with Theresa May that a new deep and comprehensive trade deal can be done in two years. After an exit deal is done (if it is done) on the rights of EU citizens, the UK’s budget liabilities, and a transition arrangement, there may also be an outline of the goals and nature of a new trade agreement. But in Brussels, the view is that it will take another 3-7 years after the UK leaves in 2019 to agree such a deal – which will then need to be ratified by 38 parliaments across the EU27 including regional parliaments. Such a deal will put more barriers – mainly non-tariff barriers – in the way of UK companies than they face today. It will, almost by definition, damp down UK-EU27 trade rather than encourage it to grow.
A Breakdown in Talks?
If the talks break down irretrievably, then the UK will leave the European Union without a deal in March 2019. This would mean major economic disruption and legal uncertainty as WTO tariffs kicked in and existing cross-border supply chains and contracts hit new barriers. The UK’s relations with the EU would be in tatters – economically and politically. It is an outcome both sides will do their best to avoid, but it is one that some see a serious chance of happening – perhaps as much as a one-in-three chance.
Or Will the UK Change its Mind?
Now Article 50 has been triggered, and Brexit looks almost certain in 2019, what effects will we see? Some companies have already shifted their headquarters or staff to the EU27 – others will now surely follow. Foreign direct investment may go to the EU that would previously have come to the UK. But economic effects are likely to be staggered – some are visible now, some may not come for several years.
But if Brexit starts to be seen by the public as having serious negative effects, and/or if the talks fail and the WTO cliff beckons, might public opinion shift? At the moment, the Lib Dems are calling for a second referendum on the deal. But what if there is no deal – will other opposition parties join the Lib Dems in calling for a second referendum to reverse Article 50 and stay in the EU? At the moment, this looks unlikely. But a failure of the talks would surely trigger a major UK political crisis.
Meanwhile, in Scotland, the Scottish government – and Scottish Greens – will continue the demand to hold a second independence referendum. May has said she will oppose this demand while Brexit talks are under way. But this is an argument that will continue. If the public across the UK start to regret the decision to leave the EU, and if talks fail, what position will the Scottish government take? Would the SNP back the Lib Dems in asking for a second EU referendum – and perhaps delay their own push for a second independence referendum – or will they carry on regardless?
UK in Crisis
As Article 50 is triggered, the UK is in a simmering political and constitutional crisis. With Northern Ireland and Scotland voting to remain in the EU, and 48% of the public across the UK, there is no ‘team UK’ approach to back Theresa May in her particular and specific negotiating stance. Meanwhile, with the Labour opposition in disarray, there is no major political party voice in England and Wales to represent the 48% who voted remain. And while Labour, like the Tories, not only supports the triggering of Article 50 but also agrees, apparently, with ending free movement of people, there is only pressure to remain in the EU’s single market – a so-called ‘soft Brexit’ – from the Lib Dems, the SNP and Greens.
The triggering of Article 50 represents a major shift in the UK’s relationship to the rest of Europe. It will have very big consequences. How damaging these consequences will be will become clearer in the coming months and years.
Co-published with the Centre on Constitutional Change