Brexit Speech Briefing: Brexit means Brexit but not before a vote by Edelman

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.

STAKEHOLDER REACTION, UK POLITICIANS REMAIN Tim Farron, Liberal Democrat leader: “You can call this Brexit clean, red, white and blue, or whatever you want. But this doesn’t disguise the fact that it will be a destructive, hard Brexit and the consequences will be felt by millions of people through higher prices, greater instability and rising fuel costs…This speech could have been written by Peter Bone, delivered by Nigel Farage and will no doubt be cheered on by Jeremy Corbyn.”

Jeremy Corbyn MP, Labour Leader: “Throughout the speech there seemed to be an implied threat that somewhere along the line, if all her optimism of a deal with the European Union didn’t work, we would move into a low-tax, corporate taxation, bargain basement economy on the offshores of Europe.”

Angus Robertson, Deputy Leader of the SNP: Tweeted Good News: UK PM will consider Scottish Government priorities. Bad News: She ruled out single European Market”

Northern Ireland’s SDLP leader, Colum Eastwood, on Brexit: “ Our institutions and our Good Friday Agreement are under threat because of Brexit... we think it will be hugely damaging to the peace process in Northern Ireland. I’m not convinced that the British Government are all too concerned about that.”

Sinn Fein MLA, John O’Dowd: “Exiting the single European market, exiting the customs union, creates a hard border on the island of Ireland…warm words, soft words from Theresa May mean nothing. She has agreement with non-one in these islands in relation to how to move forward.”

Alliance Party deputy leader Stephen Farry: the speech was the “most reckless and self-defeating plan from a UK prime minister in decades” and described it as “catastrophic for Northern Ireland”. He added: “A onesize-fits-all Brexit is just not practical. There are too many factors and circumstances particular to Northern Ireland.”

Nicola Sturgeon, First Minister of Scotland: “I’m not prepared to allow Scotland’s interests to be steamrolled…Scotland can’t be taken down a path that we didn’t vote for and is against our interests”.

LEAVE Paul Nuttall, UKIP leader:

Michael Gove MP, Vote Leave campaigner

Hailed her promise to make a clean break with the EU saying, “I like what I’m hearing from her speech.”

“Being outside the customs union means that we can negotiate our own trade deals with other countries, not just economic superpowers like the United States but also emerging markets and developing nations as well.”

Nigel Farage, former UKIP leader:

Richard Tice, co-chair of Leave means Leave:

Tweeted “I can hardly believe that the PM is now using the phrases and words I’ve been mocked for using for years. Real progress” and “My worry is how long this is going to take and when we will start doing a deal with the USA and others.”

“No deal is better than a bad deal, the prime minister said today. We are delighted by this as Leave Means Leave have been saying since its formation that Britain must be prepared to walk away if the EU is not willing to secure a deal.”

BUSINESS John McGrane, director general of the British Irish Chamber of Commerce “It is clear from this statement that the UK Government’s concerns regarding immigration outweigh their need to retain membership of the EU single market and customs union. This will be alarming for businesses operating in both the UK and Ireland, many of whom rely on the bilateral trade between our two countries for the over 400,000 jobs they sustain.”

Aerospace and defence trade body, ADS: “Securing the best deal for the UK and our EU partners will take time and it is essential that there are transitional arrangements in place to avoid disrupting closely integrated supply chains and damaging the UK’s global competitiveness.”

TheCityUK “The industry has underlined the need for transitional periods and supports the phased approach outlined today…Ensuring sufficient time for highly regulated industries such as UK-based financial and related professional services to do this will be key.”

Terry Scuoler, CEO of EEF “The Government must now work tirelessly to deliver a comprehensive new trade and customs agreement with the EU. As part of that process ministers must listen to businesses and support them in building viable bridges to carry the economy through a carefully managed and orderly transition”

Mike Hawes, SMMT Chief Executive: “We need Government to deliver a deal which includes participation in the customers union to help safeguard EU trade, trade that is tariff-free and avoids the non-tariff and regulatory barriers that would jeopardise investment, growth and consumer choice…. Achieving this will not be easy and we must, at all costs, avoid a cliff-edge and reversion WTO tariffs, which would threaten the viability of the industry.”

EUROPEAN REACTION – CURIOUS BY THEIR ABSENCE? While newspapers across Europe have been quick to respond to Theresa May’s hard Brexit, governments and EU negotiators have been rather quieter, stressing that the official negotiation does not begin until the UK triggers Art. 50.

Michel Sapin, French Finance Minister: “Nobody was ready. We’re in a situation of improvisation… All of this shows how helpless the British government is in the face of a situation that some of them didn’t want.”

German newspaper, Frankfurter Allgemeine Zeitung:

Michel Barnier, Chief Negotiator for the European Commission:

The Brexit plan still appears “surprisingly vague” and is likely to “disappoint many listeners.”

“Ready as soon as UK is. Only notification can kick off negotiations. #Brexit”

Republic of Ireland, Government spokesperson:

Donald Tusk, EU Council President:

“Economic opportunities for Ireland will be pursued vigorously.”

“Sad process, surrealistic times but at least more realistic announcement on #Brexit. EU27 united and ready to negotiate after Art. 50.”

FOR MORE INFORMATION, PLEASE CONTACT Lucy Thomas

020 3047 2653, lucy.thomas@edelman.com