Adam Wildman is Principal Research Consultant at ResPublica, where he co-ordinates the think-tank’s work on business and the economy.
Now that we have a new party leader and Prime Minister, the hard work begins on navigating Britain’s path to Brexit. Theresa May has rightly indicated that “Brexit means Brexit” and will establish a new Brexit Department to determine our future relationship with the rest of Europe.
It’s clear that this new department will have its work cut out. As of yet, a clear plan has yet to be determined on what model Britain should pursue for its new trade relationship with the EU. During the Referendum campaign, supporters of Brexit offered competing visions for a post-exit Britain.
We could pursue the Norway model, which is within the European Economic Area. Under this agreement, Norway has access to the single market, but must accept EU laws and the freedom of movement of people. The Switzerland Model is another option, which is part of the European Free Trade Association. This model employs a more of a ‘buffet style’ system with a series of bi-lateral agreements comprising the relationship, but also largely accepts freedom of movement.
Both Norway and Switzerland pay contributions to the EU for access to the single market. Because of this, and because they accept freedom of movement, neither of these options might appeal to the new Prime Minister. As immigration was such a key issue during the referendum campaign, a more bespoke option may need to be pursued. Such an agreement would take longer to draft and cannot be rushed, but in the end may benefit Britain more than any other option.
Whatever choice Theresa May eventually decides upon, at some point her Government will need to invoke an Article 50 notice for Britain to exit the EU. This fires the starting gun for Brexit, with the UK’s departure occurring exactly two years after its issuing. But despite calls to the contrary, there should be no rush to invoke Article 50.
Once we set the ball rolling, we lose our one great bargaining chip with the other 27 EU member states, and they know this. Once two years have elapsed, if no new deal is reached, then the UK would leave the EU without a new trade deal and be reduced to accepting trade under mere World Trade Organisation rules. Under these, Britain would be treated as any other non-EU economy by the EU and would not receive any special trade concessions. Also, as the liberalisation of services is less progressed under WTO rules, the City and Britain’s professional services industry would particularly suffer. The fall-back WTO option would probably be costly for the UK economy. Granting the EU such a strong bargaining position would, therefore, clearly be unwise.
Given Britain wants the best deal it can get, it is worth holding back on Article 50 for as long as possible. One very good reason for doing this is the fact that there are several European elections due over the next few years. Britain would benefit greatly if Brexit and our new role in Europe were key issues throughout these elections. The uncertainty caused by our still undetermined departure terms and the effect this would have on European economies would guarantee the salience of Brexit.
Starting off in March next year we have the Dutch general election, after that we have the French (April 2017), German (October 2017), Hungarian (May 2018), Swedish (September 2018) and Finnish (April 2019) elections. In all of these, centre-right or Eurosceptic parties sympathetic to Britain’s stance on the EU are polling high and are likely to do well. Keeping Brexit relevant throughout this period would require May and the new Brexit Department to hold fire on Article 50.
Be it the promise of a ‘Frexit’ referendum by Marine Le Pen in France or the anti-immigration stance of the AfD in Germany, the tone of political discourse on the continent has become significantly more Eurosceptic. The latest YouGov poll puts support for Leave in France at 43 per cent once undecided voters are removed, remarkably similar to the levels of support for the Leave campaign at the beginning of the UK referendum campaign.
With Europe falling out of love with the EU and resentment for the institution at an all-time high, now is clearly the right to time to extract as may concessions as possible from our European partners.
No doubt holding our nerve will be tricky, but under the steely leadership of the new Prime Minister we can use the UK’s exit as leverage during the upcoming trade negotiations. Ensuring the issuing of Article 50 is still relevant during the forthcoming election periods would enable Britain to extract the best possible trade deal. To do otherwise and rush our exit would likely result in a poor deal and would probably make Brexit nothing more than a missed opportunity.