BREXIT MEANS BREXIT BUT NOT BEFORE A VOTE J A N UA RY 2 017
Despite a reputation for caution and stability, Theresa May produced a pretty major rabbit from her Brexit speech hat today. Not that Britain would be leaving the Single Market – that has been obvious for some time – but news that the final Brexit deal will be put to a vote in both the House of Commons and the House of Lords.
Theresa May stressed the importance of tariff-free, frictionless trade with the EU, so was open to several options: associate membership, being a signatory to some elements or starting a completely new customs union.
The significance of this was not lost on the markets - sterling shot up in value, from $1.20 to $1.23.
Good news for Liam Fox and his Department for International Trade: the confirmation that we would no longer be part of the common commercial policy or bound by the common external tariff – leaving us free to negotiate our own bilateral trade deals with the rest of the world.
While the House of Commons may be expected to vote for the deal, upholding the will of the British people, the House of Lords is far less clear cut. Its members were overwhelmingly Remain supporters, and some have been coordinating antiBrexit efforts for some time.
Whatever final arrangement is decided, it is important to note that WTO rules prevent a customs union that doesn’t cover “substantially all” trade. That makes it hard to see how a customs union covering only industries such as automotive and aerospace could be legally achieved.
They would stand accused of ignoring the democratic will of voters – particularly given their unelected status – but here’s their logic: No manifesto has spelt out that a vote to leave would mean leaving the Single Market. Indeed, the Conservative manifesto in 2015 stressed its importance to the UK economy: “We say: yes to the Single Market. Yes to turbo- charging free trade. Yes to working together where we are stronger together than alone.”
No cliff edge – phased transitions but piecemeal approach
Any such stand-off with the Lords could force a General Election, effectively putting the final deal to a popular vote. Edelman’s new data released this week showed UK voters to be overwhelmingly in favour of getting on with Brexit, and that if it were re-run tomorrow, the referendum would still end in a narrow Leave vote. Of course, many other factors would be at play, but both of these suggest a mandate for the negotiated deal.
Single Market – out means out The other main headline today was that we are leaving the Single Market. It was the first time the Prime Minister has spelt out in terms that it would not be possible to achieve her red lines of controlling free movement, ending ECJ jurisdiction and ending large budget contributions while remaining a member.
Customs Union – let’s see what works best We learnt that Britain will leave its current membership of the Customs Union, but that doesn’t mean a clean break.
Good news for businesses on the need for a soft landing and a “phased implementation process” while new arrangements are adopted. Less helpful, though, was the suggestion that these will be of varying lengths depending on the issue or sector. Rather than a certain time frame for all rules to bed in, it will be a rather more piecemeal process.
UK has leverage and is not afraid to play dirty The Prime Minister repeated Philip Hammond’s threat to the rest of the EU that the UK is not afraid to walk away, saying “no deal is better than a bad deal.” She also reiterated her willingness to lower taxes and make the UK hyper competitive if the EU won’t give her what she wants. Dubbed by Labour as a “bargain basement economy”, this is something the EU would very much wish to avoid.
Lucy Thomas, Associate Director Lucy was the Deputy Director of Britain Stronger In Europe, the campaign to remain in the EU.
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