Sean Rickard - Independent Economic Analysis

No doubt most of the people who voted Leave in June 2016 did so in the belief it would increase parliament’s control over Britain’s destiny.   I wonder how many now realise how grievously they were mistaken.   Since setting out her red lines for Brexit in her Lancaster House speech, Theresa May has spent twenty one months retreating from them.   This was not as a result of parliamentary pressure.   Far from it.   Parliament’s influence has been sadly lacking and MPs are now hopelessly deadlocked as to the way forward.   Rather, Mrs May has been forced to adjust to the reality that leaving the EU will result in irreparable damage to the UK’s economy and global influence.


It is difficult to fathom what Mrs may was thinking when she told her Lancaster House audience that she had a ‘Plan for Britain’.   It is clear that no such plan exists.   At best she had an aspiration – essentially the absence of a plan – that the UK would forge a bespoke trading relationship with the EU to deliver frictionless trade.   Erudition dictates that this requires, de facto, membership of the EEA and customs union.   But, in her Lancaster House speech Mrs May dismissed EEA membership because it would require the UK to enforce laws it had not been party to agreeing.   She also ruled out membership of the customs union as it would prevent the UK negotiating – as yet uncertain – FTAs with third countries.   She went on to list twelve objectives she wanted to achieve in negotiating Brexit, including: a smooth, orderly Brexit providing certainty for businesses; making the UK the best place for science and innovation; and strengthening the Union.   The only mention of Ireland was the intention to maintain a common travel area.   Finally, she expected to have finalised both the withdrawal agreement and the myriad of future relationships with the EU by the end of the 2-year Article 50 progress.    


What a difference reality has made.   With less than six months to go before Article 50 expires the terms on which the UK will leave the EU are still not settled.   The impasse regarding how the UK can meet its commitment to avoiding a hard border in Ireland is a major obstacle but so too is the UK’s failure to articulate a realistic basis for frictionless trade that might be supported in a meaningful parliamentary vote.   The zealots, and their media ‘attack dogs’ seek to put the blame for the chaotic state of the negotiations on an intransigent EU but in truth, the blame for the debacle lies squarely with Mrs May who sought to appease the zealots by setting down an absurd contradiction of objectives and red lines that in reality she could never deliver.   The ultimate choice remains today what it was at the time of the referendum: greater economic hardship for many UK regions or continued subjection to EU jurisdiction.  


Although she attempts to obfuscate with meaningless phrases eg, ‘customs arrangement’ in reality Mrs May’s Chequers Plan is morphing into continued membership of the EEA and customs union.   Readers of this blog will not be at all surprised by this direction of travel.   It has always been the view of those with expertise in this area that the country would pay a heavy economic price if it was prepared to settle for a Canada type FTA.   Although the government has outrageously attempted to keep the details of its ‘impact assessments’ secret there have been leaks and the enormous costs, particularly for already disadvantaged regions that voted heavily to leave, confirmed by independent studies – the most recent from the NIESR.   Government thinking has been confirmed by the Treasury’s top civil servant, Tom Scholar, who told the Commons Treasury committee that it was ‘absolutely essential’ that the UK remains closely tied to the EU.  


At some stage it dawned on Mrs May that the reality of Brexit for UK living standards would be the polar opposite of the zealots’ ‘sunny uplands’ fantasies.   Moreover, if she fails to conclude a withdrawal agreement and the UK crashes out of the EU without a transitional period for negotiating a UK-EU post-Brexit relationship, 2019 would be a year of undreamt chaos.   For example, the Dover-Calais route could be running at only 25 percent of its normal capacity; hence, the mooted farcical plan to charter ships to avoid food and medicines shortages.   No responsible government – or Parliament – could accept the short-term chaos or the longer term economic costs of a ‘no-deal’ Brexit which in any event would be incompatible with the UK’s commitment on Northern Ireland.  


The logic is that the government must accept the UK’s continued membership of both the customs union and the EEA until it can negotiate a relationship that minimises the damage.    But the UK’s transitional status as a non-voting, rule-taking member of the EU would need to persist for as long as it takes to negotiate a final trading relationship.   Experts believe this would take longer than the 21 months currently pencilled in for the transitional period.   Mrs May’s claim that this would, at most, be a matter of months is as vacuous as her red lines.   Even a basic Canada type FTA could take several years to conclude, let alone the government’s vague plus, plus additions which suggest the UK would even then remain a rule taker.   Post March, the realpolitik is that the EU will exert even greater control over the scope and pace of negotiations.   Meanwhile, the UK would continue to make payments to the EU, businesses would have no clarity as to the final outcome and investment and scientific research would continue to drain away.   Thus, the choices facing UK voters are: the economic chaos and reduced living standards of ‘no-deal;’ becoming a vassal state for an indefinite number of years; or remaining in the EU.   As Parliament is deadlocked only a ‘Peoples’ vote offers the opportunity to reverse the egregious decision to leave the EU.  


T A K I N G  B A C K  C O N T R O L :  J U S T  A N O T H E R  

B R E X I T  F A L L A C Y

27th November 2018


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