BREXIT: Heading to a Deal or No Deal While UK Politics Implodes?

Kirsty Hughes | 18 July 2018

© 2017 European Union

This paper was first published by the Federal Trust and is re-published here with their consent

Introduction

As EU-UK Brexit talks resumed in mid-July, the UK government’s Chequers’ statement and white paper[1] had, in theory, provided some basis for talks on the future relationship while causing political controversy at home, not least within the Conservative party. The white paper is a ramshackle affair: it attempts to keep the UK almost as close to the EU as it is as a member state, with the crucial exception of services, while denying that closeness and re-emphasising its red lines to Brexiters in the Conservative party and to ‘leave’ voters more widely.

But the Chequers’ agreed approach to Brexit (that preceded the white paper by a week) and the white paper itself have left the government facing considerable political unrest and disarray – with two cabinet-level resignations, threats from Tory Brexiter backbenchers not to support the government in its declared Brexit strategy and then the government caving in to Brexiter amendments that undermine their own negotiating stance in a crucial moment on Monday 16th July. On the 17th July, the UK’s Electoral Commission fined the official ‘Vote Leave’ campaign for illegal coordination with another group, referring some officials to police – leading to more calls for a ‘people’s vote’ or second EU referendum. Yet the same day, Theresa May succeeded in defeating an amendment to the Trade bill that would have imposed a customs union as a backstop on her negotiating policy, despite losing one to the rebels and opposition on staying in the European Medicines Agency.

This unfolding chaos raises the possibility that the UK government may yet, perhaps, bring home a deal with the EU only to fail to find the votes at Westminster to ratify such a deal. Or, it may find it cannot even agree a deal – much though both the EU and Theresa May, at least, still want one. With the crucial issue of a backstop arrangement for the Irish border yet to be clarified from the UK side, and made more problematic by the Brexiter amendments of 16th July, support from the DUP as well as Tory backbenchers cannot be guaranteed either in the coming period, despite May’s narrow win on the 17th July. The EU will not agree a framework on the future relationship without a backstop in place. With 14 ‘remain’ or ‘soft’ Brexit Tory MPs voting against the government on the Brexiter amendments, and 12 on the customs union amendment – and the government’s majority falling to between 3 and 6 on different votes – there is now no clear route ahead.

A politically turbulent few months lie ahead and uncertainty reigns. In the midst of this uncertainty, this paper looks at where the Brexit process has got to and where it may go in the next crucial few months to the end of 2018. It considers the substance of the EU-UK talks and where they may go next. And it assesses both EU and UK political dynamics and where they may lead. The paper concludes with four main scenarios as to where Brexit may end up by this autumn.

Talks Stumble On

Earlier this year, it looked as if the Brexit talks might finally pick up speed. With the joint UK EU report in December 2017[2] having set out key principles on the divorce bill, on EU citizens’ rights, and on how the border between Ireland and Northern Ireland could be kept open after Brexit, including through a backstop approach, there was then more progress in early 2018. In February, the European Commission produced a draft Withdrawal agreement[3] – colour-coding where there was and was not yet agreement. By March, the European Council had both provisionally agreed a transition period with the UK (or ‘implementation’ period in UK government jargon) to last to the end of December 2020, and had agreed that sufficient progress had been made to start talks on the future EU-UK relationship producing guidelines to that effect[4].

But the talks then made little progress – neither on the Irish backstop or on governance of the withdrawal agreement and with no UK proposals on the future relationship clear til mid-July.

The Irish Backstop Must Be Agreed

The UK initially failed to come up with its own proposals for a backstop for the Irish border at all – having rejected the Commission’s proposals in February which would effectively have kept Northern Ireland in the EU customs union and (more or less) in its single market, so requiring a border in the Irish Sea. Then, by early June, the UK finally set out some ideas on effectively keeping the whole UK in the customs union – labelled a ‘temporary customs arrangement’[5]. But not only did this proposal not address regulatory issues – vital if the border is to be open and frictionless – it also failed to meet the basic criteria of such a backstop i.e. that it could continue on a permanent basis if no other EU-UK deal had superseded it (as set out in the December joint report). It looked like a second, temporary transition period – and as such was never going to be acceptable to the EU (including to Ireland).

In the Chequers’ statement[6] on 6th July, Theresa May tried to take the sting out of the Irish backstop by emphasising that the outline proposals, agreed by the cabinet, on the future UK-EU relationship would lead to frictionless trade with the EU for the whole UK. The Chequers text insists this will ensure “that the operational legal text the UK will nonetheless agree on the ‘backstop’ solution as part of the Withdrawal Agreement would not need to be brought into effect”. The Brexiter amendments to the Customs bill now rule out a customs border in the Irish Sea, and also insist the UK should be in a separate VAT area which could cause problems even if there were a UK-wide backstop as May’s June paper suggests, so how May can square this circle is quite unclear.

What is clear is that the EU will still demand a coherent Irish backstop in the withdrawal agreement – and the UK government will have to sign up to one soon if talks on the future relationship are to progress. There are two main ways this could potentially be done. The first would be as proposed by the Commission – keeping Northern Ireland in the customs union and effectively the single market, so necessitating a border in the Irish Sea – the Brexiter amendment would have, somehow, to be over-ruled. The second would be for the whole UK to stay in the customs union and single market – a substantial step beyond the UK government’s early June proposal and not in line with the EU’s interpretation of last December’s joint report, where the backstop is seen by the EU as being Northern Ireland specific. Moreover, a backstop for the whole UK would, in effect, be the future trade relationship (potentially) and, legally, for the EU the future relationship cannot be agreed through a Northern Ireland protocol nor through the withdrawal agreement. The former option, even with May insisting it would never be used (and now with the amendment), would probably mean the loss of DUP and Tory Brexiter support at Westminster while the latter would enrage even further the Tory Brexiter MPs.

May is, it seems, banking on the EU-UK framework on the future relationship stating that frictionless borders are possible – so helping the DUP and Tory MPs swallow whatever Irish backstop finally is in the withdrawal agreement. It’s a big gamble that looks unlikely to pay off given the turmoil in the Conservative party. The EU’s chief negotiator Michel Barnier has insisted repeatedly that the only way to ensure frictionless borders would be for the UK to stay in the EU’s single market and customs union[7] – though whether the EU might fudge that enough to get an agreed declaration on the framework for the future relationship is an open question.

Yet the closer May moves to a quasi-single market and quasi- customs union approach, as the Tory reaction to the white paper shows, the tougher the politics gets. May faces a catch-22: if she moves towards a ‘softer’ Brexit she loses DUP and Brexiter votes, if she moves towards a ‘harder’ Brexit she will lose the Tory ‘soft’ Brexit rebels – and unless she combines a ‘hard’ Brexit with a Northern Ireland backstop she won’t get a deal with the EU.

And if the UK really were to stay in both the single market and customs union, then there would indeed be no point to Brexit at all. So the path to a political declaration on the framework for the future relationship and to a withdrawal agreement – ratified by Westminster, the European Council and the European Parliament – looks very rocky indeed.

The Future UK-EU Relationship

In various speeches since autumn 2016, Theresa May has set out repeatedly the red lines she insists must not be crossed as the UK leaves the EU[8]. Yet, until the publication of the white paper in July 2018, there was a complete lack of clarity of what sort of relationship the UK government did want. This incoherence was driven entirely by the deep divisions in the cabinet between those, like Chancellor Philip Hammond – and May herself – who wanted to stay close to the EU and those, like Michael Gove and Boris Johnson (before his resignation) who wanted a ‘hard’ Brexit.

The EU set out its own red lines in the form of various guidelines in April and December 2017 and in March 2018[9], followed by more detailed negotiating directives. These made it clear that there is little ‘in-between room’ between a Norway and a Canada option. This meant getting the divided cabinet to agree between these ‘soft’ and ‘hard’ Brexit routes was always going to be a tough call, even before Brexiter rhetoric and positions also made it clear that their positioning is more ideological and emotional than rational.

In the face of the UK’s political incoherence and failure to produce clear negotiating positions, in December 2017, Michel Barnier made a high impact, succinct intervention in the form of a slide, that showed how the UK’s red lines ruled out all options – from EU membership, to the European Economic Area, to Swiss and Ukraine-style deals to a Turkey-style customs union – except for a Canada-style trade deal[10]. After the white paper was published, Barnier reiterated that a Canada-style ambitious free trade deal was the EU’s opening offer.

Overall, the EU has made it clear that the UK cannot have all the benefits of a Norway-style EEA deal with the much lower obligations of a Canada-deal (and even for a Canada-style deal, the EU would be determined to ensure a level-playing field on regulatory standards). Yet in its endless debates and divisions over policy, the UK government has desperately tried to find some mid-way position that does just that. And it is that which has, therefore, led to repeated descriptions of UK positions (such as they are) as ‘cherry-picking’ and ‘cake and eat it’ – or as fantasy, magical thinking and more.

The UK White Paper

The UK white paper represents a quite extraordinary effort to keep the UK extremely close to the EU across trade, socio-economic and security issues while attempting to insist red lines are not being crossed. It is a tangled, Heath-Robinsonian effort that has already failed in one of its aims of placating Tory extreme Brexiters. And the EU will not and cannot accept it in its current form.

In many ways, in fact, the white paper looks like a detailed UK-wide version of the Northern Ireland backstop the Commission proposed in February, underlining it was not available for the whole UK. Yet while many commentators are declaring the white paper dead on arrival, given the turmoil of the last week, as the autumn deadline approaches, it is the only current basis for talks with the EU to continue – so it remains important to analyse its approach.

EU negotiators and politicians have so far been cautious in their responses to the white paper, not least given the political instability in the UK. The EU would rather get to a deal than ‘no deal’ – and if talks can now move forwards on the future framework, and on the Irish backstop, then an autumn agreement is not impossible. For the EU, getting to a withdrawal agreement including an effective Irish backstop is the central aim – the framework on the future relationship is necessary but the serious talks on that would come after the UK leaves in March 2019. Two key questions are how much further the UK government will move towards meeting EU positions as set out in their guidelines, and how much the EU may fudge the political declaration on the framework for the future relationship to allow an autumn deal on the withdrawal agreement.

Theresa May’s introduction to the white paper sets out succinctly her key red lines: the UK will not stay in the single market or customs union, free movement will end as will the jurisdiction of the European Court of Justice (ECJ), the UK will leave both the common agricultural policy and the common fisheries policy, it will stop sending ‘vast’ sums of money to the EU, it will have an independent trade policy, and it will solve the Irish border issue through the future relationship, and last but not least it will return sovereignty and accountability to the UK, to Westminster and the devolved assemblies.

But the white paper then immediately gets into the tortuous paths (crossing many of these red lines) that could ensure frictionless borders for goods and agri-food products, including through following a common rule-book i.e. an EU rule book, for goods and agriculture (though not for agricultural policy as such), through staying in a myriad of EU agencies and programmes and through a ‘facilitated customs arrangement’. Services and investment get the short straw in the white paper since, if they were to follow the EU rule-book too, the game would be up and this would be the UK asking to stay in the single market and something close to the customs union though without free movement of people.

What is most striking about the white paper is not its varied attempts at cherry-picking – most obvious in the UK wanting to stay in the EU’s single market for goods and agriculture but not for services, capital or people – but how much of current arrangements it attempts to replicate. From the single market for goods to research to judicial and security cooperation, from development aid to personal data, from customs to transport (of all types), the vast effort needed to more or less replicate the existing deep, complex and varied rules, laws and policies that are today’s EU is extremely clear. It’s also a little reminiscent of how the EU – in the face of the rejection of its draft constitutional treaty in 2005 (in referendums in France and the Netherlands) – rewrote that draft into a more technical, tortuous form that became the Lisbon treaty, preserving the main elements of the constitutional treaty. The UK, though, looks much less likely to get away with its ‘Heath-Robinsonian’ manoeuvre, as the politics of the last week shows.

It is also noteworthy how the white paper proposes a future structure for the EU-UK relationship similar in outline to one set out in another succinct table by Michel Barnier in May this year[11]. In proposing that the relationship may take the form of an Association Agreement (which the EU has with several countries, including Ukraine, and which the European Parliament has emphasised as a desirable structure), the white paper also attempts to draw on existing approaches in existing EU deals with the EEA and EFTA, with Ukraine, and with third countries like Canada[12].

In his May slide, Barnier suggested a four-pillar structure for the future relationship: trade (a Canada-like deal including customs cooperation and a deal on fisheries); socio-economic cooperation (including mobility); police and judicial cooperation in criminal matters; and foreign, security and defence matters. The UK’s white paper proposes a three pillar approach: an economic partnership, a security partnership (judicial and foreign policy cooperation put together into one pillar), and cross-cutting cooperation – with most agreements to be within the overarching association agreement structure. It looks similar but there are crucial differences – not least the big attempt to stay in the single market for goods, albeit called a free trade area for goods.

Challenges in Getting to a Deal on the Future Framework

There will be challenges aplenty in getting to an agreed EU-UK framework for the future relationship given the UK’s white paper even without the chaotic instability of UK politics.

Customs: The ‘facilitated customs arrangement’ that May proposes – and that is very similar to one the UK proposed a year ago, dismissed back then by the EU – is a heroic effort to act ‘as if’ the UK and EU were a combined customs territory (helping to ensure frictionless borders) while also having the ability to run an independent trade policy. The UK would operate a system of tariffs whereby it would ensure goods (including agri-foods) coming into the UK would be charged EU tariffs if the EU were their final destination and UK tariffs if the UK is the destination. Companies would be able to claim back having paid higher tariffs if their products were mis-classified – the white paper suggests 96% of trade would not need to make any such claims. One of the Brexiter amendments also intrudes here as it insists the UK can’t collect tariffs for the EU, unless the EU reciprocates. But with the EU unlikely to accept this rather tortuous customs proposal, Brexiter amendments here may matter less.

The white paper admits that the technology and processes for the facilitated customs arrangement would take time to deliver – and aims for the end of the transition period i.e. by January 2021. It is less clear on the implication of that which presumably is that the UK would, in the meantime, stay in the EU’s customs union. The European Parliament Brexit steering group – which rapidly issued a statement welcoming the white paper – also concisely warned “In this framework [for the future relationship], there will be, for example, no space for outsourcing EU‘s customs competences”[13].

Nor, as Donald Trump pointed out on his recent UK visit, will it be easy for the UK to agree separate trade deals, even if the EU accepted this fantastical customs proposal, since it will, according to the white paper, be signed up to EU laws and regulations for goods.

Following the EU’s Rulebook: Theresa May lost two ministers and other junior players in her shift towards a ‘softer’ Brexit for goods, yet she has at the same time moved to appease the Tory Brexiters through accepting their four amendments to the Customs bill on 16h July and seen off the ‘remainer’ rebels attempts to impose a customs union backstop on her negotiating position. It’s a contradictory and shifting approach – hardly the basis for serious talks. The white paper proposal to have a common rule-book for goods and agri-foods would mean following EU laws without any longer having a vote – also anathema to the Brexiters. And the white paper sets up a democratic deficit of the sort the EEA countries face. If the UK were to also stay in the EU’s customs union, it sets up an even bigger democratic deficit.

But the UK’s proposals also shift around on exactly what the UK may or may not follow. The common rules will only apply to goods where necessary for frictionless borders – so, for instance, food labelling regulations need not be the same claims the white paper (which the EU surely will not accept). The white paper recognises that the EU wants to be sure the EU will not compete through deregulation: it suggests ‘no regression’ clauses for environmental and labour laws (skirting round the decision-making role of the devolved assemblies in the former) while simply offering ‘high standards’ for climate change and consumer protection. The EU will want something tougher than that – or it could face the UK lagging behind as it upgrades its own standards.

The white paper also desperately attempts to argue that following EU rules does not make the UK a rule-taker by suggesting the UK parliament (and devolved assemblies) could reject EU laws with some sort of penalties then attached – in the EEA case, the penalties attached have led to Norway never doing this. This is, clearly, the opposite of taking back control: it’s a relinquishing of sovereignty – and both remainers and Brexiters (if not ‘soft’ Brexiters) are clear on this, adding to the challenging political dynamics May faces.

The EU is highly unlikely to accept the sort of cherry-picking of the single market’s four freedoms that is inherent in the white paper’s proposal on common rules for goods but not services. And the UK’s mobility framework – only sketched out – is not a free movement proposal in disguise (or not so far, as the white paper suggests something similar could be offered to other trade partners in future too). The fact that the UK wants a self-harming ‘hard’ Brexit for services is no reason for the EU to give up on its clear position on defending the integrity of the single market across the four freedoms.

But there is plenty here that could potentially be discussed not least on ensuring a level-playing field. The UK suggests there could be a common rule-book too on state aids (while then suggesting that wouldn’t stop it having ‘new tailored arrangements’ for payments to farmers and the UK’s future public procurement policy). The EU will be tough on such exceptions.

The UK also wants to remain part of, or associated to, a whole myriad of EU agencies, programmes, and databases which will give the negotiators plenty to discuss. Red lines are dropped all over the place in the white paper on this – the UK will pay for access, it will respect ECJ oversight if it is in agencies and so forth. But it also wants ‘cake and eat it’ here too. For some associations with EU bodies, it wants to be treated like other third countries, but for many, it wants the EU to go beyond what it has offered to any other third country. The EU may offer some compromises here but certainly not to anything like the extent the UK is requesting.

The UK, the white paper says, wants to be in EU agencies for chemicals, medicines and aviation. It wants to be in Eurojust and Europol – on better terms than other third countries. It wants to be in the Galileo space programme – including its high security parts (already rejected by the Commission). The list of programmes, bodies and databases the UK wants to be in or close to accumulates through the white paper and is very long: Erasmus plus, Horizon Europe, a close association with Euratom, the European health insurance card (Ehic), ‘continued membership of EU cultural groups and networks’, pooling of development aid resources and exchange of expertise (with appropriate UK influence and oversight), collaborating in European Defence Agency programmes, perhaps even staying in the EU single energy market (or perhaps not – the white paper considers both), access to the exchange of criminal records database, cooperation agreements on science and innovation, air transport, road and maritime transport (and the European Maritime Safety Agency) and many more (the list here is illustrative not comprehensive). The detail in the chapters on judicial and foreign policy cooperation add up to a UK goal of recreating almost all of what already happens in those two broad policy areas. So this is an attempt at a massive, imitative set of policies that ensure rather little changes.

Services: The white paper claims that the government’s proposals will protect jobs and support growth. Yet it proposes that for services, including digital and financial services and products, the UK will not follow a common rulebook and so will have less access to EU markets – and vice versa. About 40% of the UK’s trade with the EU is in services, and the UK has a surplus in services with the EU unlike in goods. So the white paper proposals mean cutting market access for UK services in the UK’s more competitive part of the economy (which is also 80% of the economy).

The UK claims to want regulatory flexibility to encourage services growth. But the EU will not only reject cherry-picking of its single market, it will also not go along with free-for-all regulatory competition in services. There is more ‘cake and eat it’ here too. The UK wants freedom and flexibility but it still wants access. It wants better, broader and more permanent ‘equivalence’ deals with the EU than the EU currently has with other third countries in financial services. And it also wants to maintain mutual recognition of professional qualifications and the ability for service providers to travel to other EU countries to supply services (going substantially beyond the Canada trade deal). For digital services, the UK wants a range of agreements to cover digital trade and e-commerce, broadcasting, technology and telecoms.

The white paper does not address the fact that goods and services are often highly integrated. Nor does it consider any of the estimates of the fall in UK-EU trade in services that would result from leaving the single market (one estimate puts it at a massive fall of 61% (ref Ebel)[14]. Overall, the white paper aims for frictionless trade in goods where it has a deficit and to introduce frictions in services where it currently has a surplus – if implemented this would mean a substantial worsening of the UK’s current trade deficit with the EU. And if the EU sticks to its Canada deal as its best offer on services so far, there will be a big gulf to cross between the UK and EU negotiating positions.

Fisheries: On the sensitive subject – domestically and for the EU – of access to fishing waters, the white paper is brief. It proposes annual talks “on access

rights and fishing opportunities for UK, EU and coastal state fleets”. The EU’s opening position is that it wants to maintain current levels of access and that a deal on trade in goods and services will need to encompass access to fishing waters too. For both sides, this is a substantive and a neuralgic issue which will not be easily resolved.

Overall: The white paper makes strikingly clear the depth and breadth of cooperation that the UK currently has with the EU as a member state – and the vital need for the UK to replicate most of it as it leaves. Faced with this extensive list of proposals – some that will be straightforward as other third countries have such relationships with the EU and some that will be difficult (restricted to EU and/or EEA members), some that are cherry-picking, others that are unrealistic – the question jumping out of the white paper is why the UK is leaving the EU at all, only to replicate in cumbersome fashion most of the existing structures and relationships.

That question is unanswered but the range of proposals illustrate only too clearly why the full talks on the future relationship will take some years after Brexit has happened. There will not be agreement on all of this ahead of the political declaration on a framework for that relationship. Nor does the white paper mention the possibility that the transition period to the end of 2020 may very probably need extending – something that will need to be in the withdrawal agreement if it is to happen. Perhaps May will aim to introduce it at the last moment (given the predictable Brexiter howls of outrage it would provoke).

The EU will not agree the white paper overarching proposal as it stands though it will have no trouble with the principle of an association agreement. But the EU could not countenance the sort of cherry-picking of the single market involved. And the EU will not accept the proposed facilitated customs arrangement, both as it is fantastical and as it would outsource the control of the EU’s external trade border. If the EU and UK move towards a deal that is effectively a customs union – perhaps with a different name – that will mean the UK effectively following EU trade policy, even if some deals on services or with countries the EU doesn’t have trade deals with may be possible. But after seeing off the customs union amendment on the 17th July, it’s unclear how May could now shift towards a customs union in all but name and how to get that past her Brexiter backbenchers. And, even then, this would still not ensure frictionless trade if the UK is not also offering free movement of people or services however closely aligned on goods rules the UK is[15]. So the EU will push the UK’s proposals towards one of its models, and the more ground May gives, the deeper her political troubles within the Tory party will be.

Getting to the Autumn

Few think that a deal can now be wrapped up by the EU’s October summit on 18-19th October – many doubt if a deal can be reached at all. But whether there is an emergency summit in November or a final deal is struck at the December European Council, the end of the year is probably the limit to allow time for ratification by the European Parliament, Westminster and the European Council before 29 March 2019.

To get to a deal, the withdrawal agreement must be finalised. That means agreeing a credible, permanent (if needed) Irish backstop and an acceptable governance mechanism for the agreement. It also means agreeing the text of the framework outline of the future relationship. This framework will, it is expected, be referenced in the withdrawal agreement – but while it will set the starting point for future trade and security talks it cannot bind the two sides to a final deal. That will still need to be negotiated after the UK leaves.

Unstable UK Politics: UK politics is currently highly unstable and may not be able to deliver either a deal or a way forward if there is a deal but Westminster rejects it. Conservatives on both sides – as well as politicians from other parties – are lining up to reject the Chequers/white paper approach. For the Brexiters, the proposal is a sell-out even before more substantial concessions are made that will be needed for any deal – and their ‘win’ on their 4 amendments and the customs union amendment will have shown them they have no reason to compromise. A string of low-ranking Tory parliamentary private secretaries and other junior posts have resigned (mainly Brexiters though one resigned to vote with government policy as it was before May accepted the amendments). But the Brexiters have not necessarily got enough votes to force a leadership election and more importantly not enough votes to win one. On the remainer side, former minister Justine Greening has come out for a further EU referendum – proposing a complex three-option vote[16]. Dominic Grieve MP has argued that if Westminster cannot support any deal then it may be time to “accept that Brexit cannot be implemented and think again about what we are doing”[17].

For other remainers and ‘soft’ Brexiters, the Chequers/white paper proposal is a mixture of too complicated and tortuous, unrealistic, undesirable and for the remainers too undemocratic, leaving the UK as a rule-taker across so many areas. For the ‘soft’ Brexiters, less concerned at the serious democratic deficit, the white paper is an unnecessarily ramshackle affair when the clearer structures of the EEA and a customs union are possible and guarantee frictionless borders where the white paper’s semantics will not.

The Conservatives bitter divisions make their implosion over EU policy, 20 years ago in the run-up to the 1997 general election, seem minor in comparison. Yet the opposition, particularly from Labour, is not rising to the moment. One recent poll puts Labour ahead of the Tories – 40% to 36% – but only as some Tory voters move back to UKIP[18]. Jeremy Corbyn has stuck to his position of supporting Brexit for the last two years and is failing to hold the Conservative government to account even as it descends ever further into infighting and instability. As a result, UK politics is in many ways failing deeply.

And while the Labour policy of supporting a customs union with the EU is much clearer than the facilitated customs arrangement Tory proposal, Labour is now vaguer than May on how it wants to relate to the EU’s single market. Both Tories and Labour reject free movement of people, and Corbyn does not want to agree to the EU’s state aids rulebook, which the white paper concedes. Given Labour’s concerns about northern leave-voting constituencies, and given Corbyn’s own eurosceptic leanings, Labour has not, either, adopted the position of supporting a further EU referendum or people’s vote. The LibDems have long pushed for ‘a people’s vote’ on the deal (assuming there is one) while the Scottish National Party (SNP) have demurred on such a vote, not least concerned at the precedents it might set at the time of a second independence referendum, while saying they would not block such a proposal, not exactly a ringing endorsement[19].

‘No Deal’ still possible: The path to the autumn looks rocky and highly unpredictable. ‘No deal’ remains a possibility. If May continues to make concessions to her Brexiter backbenchers and so moves away from a ‘softer’ Brexit rather than towards it (as the EU will demand) then any outline framework for the future relationship will look more like a Canada-style deal than a Norway one. But that will put the Irish backstop centre-stage. A backstop that applies only to Northern Ireland, with a border in the Irish Sea, would lose DUP and a chunk of Tory support – but has anyway now been ruled out by the Brexiter amendments to the Customs bill that passed on 16 July. But the other option of a backstop that leaves the whole UK in the customs union and single market will result in Tory Brexiters opposing it and may not be agreed by the EU. And while some Labour MPs, LibDems and SNP might support a customs union and single market backstop, they wouldn’t vote for a deal that included a ‘hard’ Brexit framework for the future relationship.

Will any deal pass at Westminster? If May does manage to conclude a deal with the EU and find a way through the political minefield she is in, then it may well not pass at Westminster. Current conventional wisdom is that this is the most likely i.e. that there is no deal that will obtain a majority. But if the Tory Brexiters come back on board – to ensure Brexit happens – and if the DUP are on board, and a handful of Labour rebels (pro-‘hard’ Brexit – four Labour MPs voted with the Tories on the Brexiter amendments on 16th July) then it’s not impossible that a deal may pass. For now, though, it looks hard to see what that deal would look like . However much Brexiters want to get to 29th March 2019, a deal that could keep the UK in the customs union and single market in perpetuity through the Irish backstop would be hard to swallow for them.

Crisis if deal rejected: If Westminster does not pass an agreed EU-UK deal, or if the UK government fails to deliver one, the UK will be facing a major and extraordinary political and economic crisis (even more than it already is). In such circumstances, it is quite likely that there will need to be a general election (even given the constraints of the fixed term parliaments Act) and pressure may rise to hold a further EU referendum.

For now, polls suggest that a new election might not resolve such a crisis. It’s possible that a minority Labour government could come out ahead of the Tories, able to govern if it got support from LibDems and SNP. But the likely price of a further EU referendum, from the LibDems, and a further independence referendum, from the SNP, might be too high. If Labour accepted LibDem demands, then a further EU referendum would finally be on the cards. It’s possible too that public opinion on Brexit could swing more sharply in such a crisis towards remain. There has been a small but steady swing to remain over the last year[20]; a bigger shift, towards the high 50s or even to 60% might transform the political dynamics. But in the absence of that, the UK’s political instability would quite likely continue.

Stay in the EU? If there were a further EU referendum – whether on a deal, or a repeat vote in the absence of a deal – this might lead to a divided UK choosing to stay in the EU. But then the challenge of revoking Article 50 would arise. Legal opinion varies as to whether the UK could unilaterally revoke Article 50. But, politically, the UK would need the support of the EU27 to end the Brexit process. That may not be forthcoming. If the UK looks like it has taken a sharp turn both politically and in public opinion back towards the EU, there may be a way forward.

But if a turbulent UK voted marginally to remain in a further EU referendum, there may be considerable reluctance on the EU side to accommodate that. It may also be difficult to win a second EU referendum if the EU are not onside, offering the UK to return, and if Labour as a party are not campaigning for remain, and if the government of the day (of whatever composition) is not fully supporting it. Given the time it would take to organise such a vote, the UK would surely need to ask the EU to extend Article 50 (as they would be under pressure to in the event of ‘no deal’). This needs unanimity of the EU27 but cannot be ruled out – even though it would also need the UK to participate after all in the 2019 European Parliament elections.

Scenarios

With UK politics, in particular the politics of the Conservative party and government, fracturing more deeply day by day, the way ahead looks highly uncertain and unstable. The March 2019 deadline looms. But, broadly, there are four main scenarios as to where we may get to by the autumn.

Scenario One: Brexit Goes Ahead

If Theresa May strikes a deal with the EU and it passes at Westminster – and at the European Parliament and European Council – then the UK will be set to leave the EU on 29th March 2019. This would mean an Irish backstop has been agreed as part of the overarching withdrawal agreement and a political declaration setting out the framework for the future relationship was also agreed. In such a scenario, either the Tory Brexiters plus DUP and Labour pro-Brexit rebels have all stayed on board and voted for May’s deal or, much less likely, some wider opposition party votes have helped May through. The extent of economic damage to the UK and the extent of democratic damage through becoming a ‘rule-taker’ will depend on the deal – but it will be significant both politically and economically; nor will there be any rapid end to the deep political divisions Brexit has created.

Scenario Two: Deal Falls at Westminster

If May strikes a deal with the EU that is rejected at Westminster, then the UK will face a major political and economic crisis with substantial turbulence in stock markets and the pound likely to fall sharply. A general election may need to be called rapidly – perhaps to take place in early 2019. Meanwhile, the government should then ask the EU for a delay in Article 50 – which in the face of a chaotic ‘no deal’ Brexit, the EU may agree to. Either as an alternative to a general election or possibly following a general election, there may be increased public and political pressure for a further EU referendum.

Scenario Three: No Deal with the EU

If May is unable to shift closer to EU positions, and at the same time to agree an acceptable Irish backstop, then there may be ‘no deal’ for Westminster to vote on. Both sides will want to avoid such a chaotic outcome but in current circumstances in the UK it clearly cannot be ruled out. The question of extending Article 50 would surely come up if there is no agreement on a deal by the end of 2018. In the face of ‘no deal’, there will be pressure from public and at Westminster for a solution to the ensuing crisis – whether for a general election, a further EU referendum or a new negotiating approach to the EU.

Scenario Four: the UK stays in the EU

This scenario could result from a range of developments. Depending on how turbulent UK politics becomes in the coming weeks and months, there might be a majority (where there isn’t now) at Westminster to hold a further EU referendum – whether a repeat referendum or one on a deal if it has been struck. Or, such a referendum, might be a condition of LibDem support for a minority Labour government after a general election – though it would probably need SNP support for such a position too. Public opinion might shift sharply towards ‘remain’ both increasing pressure for a further vote and leading to a clear ‘remain’ result in such a vote. Political divisions in England in particular would nonetheless continue. Politically, the EU would need to support such an outcome.

Overall, it is clear that unless May produces a deal that gets backing at Westminster, then political volatility and divisions will continue probably resulting in a general election and a request to extend Article 50 and possibly a further EU referendum. If a deal does pass at Westminster, the UK will be embarking on a path towards marginalisation in Europe, to less global influence, and to economic self-harm. Domestic political divisions would continue as EU-UK talks moved onto the future relationship – and as the Irish backstop remained as one possible route ahead if it was triggered. In Scotland, pressures for a further independence referendum would probably grow. Staying in the EU looks like the sanest path but political divisions in England in particular would remain deep. There is no easy escape route for the UK from its turbulent Brexit path – and the English populist genie that the 2016 referendum let out will not easily go back in its bottle.

[1] “The Future Relationship between the United Kingdom and the European Union”, HM Government, Cm 9593 12 July 2018
[2] EU-UK Joint Report on Phase 1 of Brexit Negotiations, 8 December 2017
[3] “European Commission Draft Withdrawal Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community” 28 February 2018.
[4] “European Council (Art. 50) guidelines on the framework for the future EU-UK relationship”, 23 March 2018
[5] “Technical Note: Temporary Customs Arrangement” HM Government 7 June 2018
[6] “Statement From HM Government” Chequers, 6th July 2018
[7] See, for example, ‘Speech by Michel Barnier at the European Economic and Social Committee’ Brussels, 6 July 2017
[8] See, for example, “PM's Florence speech: a new era of cooperation and partnership between the UK and the EU” 22 September 2017, and “PM speech on our future economic partnership with the European Union” 2nd March 2018
[9] ‘European Council (Art. 50) guidelines following the United Kingdom's notification under Article 50 TEU’, European Council (Art 50), 29 Apr 2017; ‘European Council (Art. 50) guidelines for Brexit negotiations’, 15 December 2017, and ‘European Council (Art. 50) guidelines on the framework for the future EU-UK relationship’, 23 March 2018
[10] Slide, ‘Future Relationship’, presented by Michel Barnier, European Commission Chief Negotiator, to the Heads of State and Government at the European Council (Article 50) on 15 December 2017, TF50 (2017) 21, published 19 December 2017
[11] Slide on the EU/UK Possible Framework for the Future Partnership Discussions. TF50 (2018) 37 – Commission to EU 27, 15 May 2018
[12] For a clear analysis of where the white paper draws its ideas for enforcement and dispute settlement from, see: Institute for Government: “The PM's Brexit white paper: what does it mean?” 13 July 2018
[13] “Statement by the Brexit Steering Group on UK government White paper”, European Parliament, 12 July 2018
[14] “Will New Trade Deals Soften the Blow of Hard Brexit?” Monique Ebell, 27 January 2017, NIESR blog
[15] Although, as Sam Lowe has argued, the EU may find it easier to move towards the goods alignment proposals within a customs union, ‘Jersey’-style model: “Inching our Way towards Jersey”, Sam Lowe, CER blog, 11 July 2018
[16] “Justine Greening endorses second Brexit referendum” Guardian 16 July 2018
[17] “If we can’t work together on a deal we must rethink the whole idea of Brexit” Dominic Grieve, Evening Standard 16 July 2018
[18] Opinium, ‘Political Polling’ 10th July 2018
[19] “Scotland’s Brexit Choices” Kirsty Hughes, 16 July 2018, Europe’s World blog
[20] See https://whatukthinks.org/eu/questions/in-highsight-do-you-think-britain-was-right-or-wrong-to-vote-to-leave-the-eu/?removed

Kirsty HughesKirsty Hughes | Twitter

Scottish Centre on European Relations

Dr Kirsty Hughes is Director of the Scottish Centre on European Relations. She is a researcher, writer and commentator on European politics and policy, and she previously worked for a number of leading European think tanks.