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What Price Brexit?

June 14, 2017

Following the UK General Election on 8 June 2017, David Lye, Director and Fellow of SAMI, considers the options for Brexit

Where are we Starting From?

When she called the General Election in April, Prime Minister Theresa May said that she saw it as the way to “provide for stability and certainty”. Events have not worked out as she hoped. After the Election, she presides over a minority Government, reliant on the Democratic Unionist Party (DUP) of Northern Ireland. She does not have the Parliamentary majority to drive through a Brexit deal against the wishes of the other parties.

What Options are there?

Mrs May said of Brexit, in her party’s manifesto, that the UK would leave the single market and control its own borders, concluding:

“The final agreement will be subject to a vote in both houses of parliament. As we leave the European Union, we will no longer be members of the single market or customs union but we will seek a deep and special partnership including a comprehensive free trade and customs agreement. There may be specific European programmes in which we might want to participate and if so, it will be reasonable that we make a contribution. We will determine a fair settlement of the UK’s rights and obligations”

She repeated her warning that “no deal would be better than a bad deal”.

Mrs May’s failure to win a clear majority jeopardises this strategy. It is not clear whether the DUP will agree to support leaving the single market, let alone walking away from the table with no deal. They are concerned at the potentially damaging impact on trade and security in Northern Ireland if border controls are imposed once more between it and the Irish Republic. It is not even clear that Mrs May will have the full support of her party for such a strategy. Ruth Davidson, leader of the Scottish Conservatives has warned that Mrs May’s plan for Brexit needs to be “reopened”. Ms Davidson says she would like to see a focus on the economy and free trade, and does not see migration controls as a key focus.

So where do we go from here?

Scenario 1 – Press on Regardless

The Government decides to press on with its original negotiating strategy, in the belief that the majority of the UK electorate share the view that “Brexit means Brexit”. Mrs May (or her Eurosceptic successor as leader, should she be forced to resign) decides that there is no option other than to “go for broke”.

Under this scenario, it is not certain that the Government would get the support it needed to win a vote in Parliament. At which point, we would face the prospect either of putting the “deal” to a referendum, or another General Election. Were the Government to hold a referendum and lose, the Government would probably fall in any case.

Scenario 2 – Soft Brexit

The Government decides that discretion is the better part of valour, and seek a deal that enables Britain to retain access to the single market, perhaps through membership of the European Economic Area (EEA) – the member states of the EU, plus Norway, Iceland and Liechtenstein. The UK would, no doubt, try to seek a preferential deal, but it is hard to see that it would get one, if the EU felt sure that the option of “no deal” was no longer attainable for the UK Government. The Norway option is the deal on the table.

This option is easier to negotiate with the EU members, and many commentators welcome it, but it enrages a substantial group of Conservative MPs and the majority of party members, who refuse to support it, leaving the Government dependent on votes from Opposition parties to secure Parliamentary agreement. It might even, like the Repeal of the Corn Laws in 1846, split the Conservative Party in two.

The Government seeks to mitigate this risk by saying that it sees this as “unfinished business”, and will – at some point in the future – seek to achieve a better deal for Britain, in the circumstances of the time.

This causes much head-shaking and eye-rolling in the EU – the UK once more seeking special treatment. The EU refuses to offer any guarantees. So the issue is parked. There is a Soft Brexit, but still with the potential to reignite at some point in the future.

Scenario 3 – Not going anywhere

The Government recognises that Hard Brexit is no longer achievable, and that Soft Brexit would cause civil war within the Conservative Party. It therefore seeks to suspend Article 50, and thus stall negotiations until it has had time to consult with Opposition parties on an approach that all can support.

During this pause, the Government falls on a confidence vote in Parliament. There is a General Election, which sees the Labour Opposition elected. The incoming Government has said throughout the campaign that it “respects the result of the referendum”. But it also recognises that it has been propelled to power on the massive numbers of votes of the young, who overwhelmingly oppose Brexit, and have said so vociferously through online petitions, social media memes and via social media-based news forums.

The Government announces that it will consult the country on how to take things forward. After a round of public meetings, polling, and a written and online consultation, it announces that there is no longer a clear case for Brexit, and public support appears to have waned. Therefore it will not seek to reactivate the stalled negotiations.

Scenario 4 – Events, dear boy

The negotiations regarding Brexit are superseded by other events. Within the EU, proposals to accelerate integration lead to a rift between the “core” countries (the original members) and the accession countries. Or the ongoing debt crisis comes to a head, as Italy demands substantial easement of the terms of its debt.

To the EU, Brexit is now an unwelcome distraction; the dispute over integration and/or Eurozone debt are far more pressing and important. To Britain, the problems in the EU give renewed hope and encouragement to the hard brexiteers, who argue that the whole institution is facing an existential crisis, and so there is little to be gained by remaining within the EEA.

Alternatively, renewed hostilities between Russia and Western Europe, an upsurge in terrorism, and the arrival in 2020 (or before) of a pro-EU American President, persuade the UK Government that it needs to remain actively engaged with its European partners.

Conclusion

It is impossible to predict with any certainty the outcome of Brexit from where we are today. But the scenarios do support the view that the passage of time opens the way to a wider range of possibilities that simply “Hard” or “Soft” Brexit.

Written by David Lye, SAMI Fellow.

The views expressed are those of the author and not necessarily of SAMI Consulting.

If you enjoyed this blog from SAMI Consulting, the home of scenario planning, please sign up for our monthly newsletter at eSAMIsignup@samiconsulting.co.uk and/or browse our website at http://www.samiconsulting.co.uk

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