Four months on: the phoney Brexit?

The birds sang and life went on during the summer of 1939; today’s post-referendum lull feels a bit like a phoney war too, albeit without the threat of bombs.

24 October 2016

For all the rhetoric and furore, once the Brexit vote had been declared – just like the UK joining the war – it seemed like nothing had happened. It was business as usual.

During the referendum campaign, we had the closest thing to a civil war since the poll tax debate in the 1980/90s. Divisions over EU membership cleaved our society in many ways: across age groups, towns versus the country, and even right through families.

In the aftermath of the result, many Remainers had difficulty accepting the result, worrying that the future is now some bleak period akin to 1950s isolationism and austerity. Of course, this could be right. But it does not have to be.

Regardless, this willingness to forecast doom – and the constant threats of overturning the result – is not helpful. There is a real danger we talk ourselves into a lengthy recession.

Likewise, the Brexiteers will not get all they want. Despite the recent headlines and posturing from Prime Minister Theresa May, I think there will almost certainly be an agreement on migration and Europe will send us a bill for the privilege of market access. However, there will be less regulatory intervention by the EU in areas like labour directives, and benefits won’t be paid to EU citizens moving to the UK. Prime Minister Theresa May has to give Brexiteers some of what they desire, but the full package many were sold is impossible.

We now know that negotiations with Europe will begin in earnest in March, with the government enacting article 50 of the Lisbon Treaty.

What have we learned about the potential for free trade with Europe in a post-Brexit world? Not a lot, if you listen to the rhetoric on the Continent. And during the latest G20 talks, Japan and the US made very clear warnings that Europe and the Pacific were a greater trade priority. So much for our special relationship!

As always, it pays to avoid the noise in the media and look for answers in the real world. I remain convinced that the UK and the EU will agree a trade deal. Why? Because both sides will enter negotiations wanting the same result. Yes, there will be lots of walk-outs and insults to keep domestic audiences happy, but don’t be fooled. The EU does not want to lose a G7 economy from Europe and the UK can not afford to lose access to the single market.

My prediction: a ‘Eurofudge’.

In my pre-Brexit blog, I tried to identify the policies needed to counteract the shock of a leave vote to the UK economy. The Autumn Statement will be crucial. The UK has to become an even more attractive location to do business. That means less corporate and personal taxes, more flexible – but fair – labour laws, and more investment in infrastructure.

I suspect EU-based companies would like to tender for some of that!