Brexit: Hard Facts

Theresa May attempted to clarify the government’s vision of what life after Brexit would look like in her Mansion House speech on Friday.

In it, she made reference to the need for the country to face up to some “Hard Facts” about Brexit. I think that should be welcomed, as facts have been something that have been sadly missing from the Leave camp to date.

However, those hard facts were buried pretty deeply in the usual sea of platitudes and slogans. Sifting through the 6,700 words of the speech and the Q&A which followed, I have tried to extract what seem to me to be the facts that we all need to face up to in the Theresa May vision of our post Brexit future.

1. No customs union

The government has finally admitted that regaining the freedom to negotiate trade deals with the rest of the world, one of the key objectives of Brexit, means not being part of the customs union.

Brexiteers believe that other countries will be more willing to open up access to their markets to the UK than they are to the EU as a whole because we are more willing to open our markets to them than the EU is. Whether deeper access to the UK market is worth more to other countries than shallower access to the whole of the EU is hard to judge. Personally I doubt it, but only time will tell.

So the first hard fact that comes from this is that our access to EU markets will reduce. Theresa May was fairly up front about admitting this.

The second consequence is that there will be a border in Ireland, or between Northern Ireland and the rest of the UK (or perhaps both). Theresa May did a lot of dancing on the head of a pin to avoid saying this, but the graphic above demonstrates that this is unavoidable. The only question is how “soft” those borders can be. The government seems to be placing its faith in technology to solve this. Maybe with a sufficiently long implementation period that might be possible, but nobody really knows.

2. We will still need to abide by EU rules in many areas

The Brexiteers are famous for wanting “have their cake and eat it”. This was obviously never going to work, given that the other side has a stronger negotiating position. It is more likely that the UK will end up neither having nor eating the cake. To paraphrase Theresa May, we will end up with the rights of Canada and the obligations of Norway.

My take on Theresa May’s speech is that the government has made a subtle shift of strategy. Rather than trying to keep the good bits and lose the bad bits at an overall UK-EU relationship level, they are now trying to cherry pick sector by sector. Hard Brexit for agriculture, soft Brexit for the Automotive Industry and so forth. The hope seems to be that the EU will take a pragmatic approach and give the UK a continuing say in regulations for sectors where the UK is a major player, such as Pharmaceuticals, Air Transport and Financial Services.

The challenge as ever is whether the EU will play ball. Making the EU single market work is already a famously complicated business. Overlaying a bespoke set of sectoral arrangements with the UK will make this harder. In the real world of EU politics, trading off the interests of one sector against those of another is a key tool for getting to agreement amongst the member states. Allowing the UK to participate selectively is a big ask. Ironically, it might have been easier to achieve this from within the EU. In two of the most sensitive areas, monetary policy and border controls, the UK secured an opt out, participating in nether the euro nor the Schengen Agreement.

In the end, I remain of the view that the whole Brexit decision was a big mistake. As the hard facts of what is possible to negotiate become clear to people and the cake eating wishful thinking is revealed for what it always was, I hope that it is not too late to reconsider. But I am not holding my breath.