“We are not leaving the European Union only to give up control of immigration all over again. And we are not leaving only to return to the jurisdiction of the European Court of Justice. That’s not going to happen.”
– UK Prime Minister Theresa May at this week’s annual Conservative Party Conference
So, now we know. Article 50 triggered no later than the end of March 2017. The UK Government seeking a bespoke bilateral arrangement with the EU within clear parameters set out by Prime Minister Theresa May and her leading ministers, not just in the main conference hall, but on the fringe too. We know that there will be a Great Repeal Bill introduced in the next Parliamentary session to revoke the European Communities Act and transpose 40 years of EU law into UK legislation; so that the UK Parliament can decide to keep, amend or revoke those laws at its leisure and as it sees fit in the best interests of the UK.
We don’t know what that bespoke bilateral arrangement will look like. We do know that the UK Government is taking a sector by sector approach beginning with a review of the six sectors identified as priorities because of their importance for the UK economy: the same six sectors that the Prime Minister identified as priorities for the UK’s new industrial strategy – Financial Services, Life Sciences, Technology, Aerospace, Automotive and Creative Industries. We know that, even in a sector by sector approach, ministers understand that there probably won’t be a final deal until a package is agreed, including on free movement of people.
We know that Article 50’s two year negotiating window refers to agreement on the terms on which the UK leaves the EU, and not the future relationship. We infer that the terms of leaving could provide for a longer period to agree some of the details of the future relationship. We know that such an arrangement can be agreed by a simple majority of the European Parliament and a Qualified Majority of the Council (15 out of 27 member states representing at least 65% of the population), rather than requiring unanimous agreement of the Council to extend the two year negotiating period of Article 50. So that sort of arrangement would be less open to being held to hostage by one or a few other member states. Watch this space on how this thinking develops.
We know better the mood of the ruling Conservative Party having joined its members at their extended prayer meeting. We now know that, as a group, they understood the risks of leaving the EU, but found the risk worth taking against the principle of “taking back control”. We heard ministers explain – at least one using our own analysis – that they understood the political significance of the EU for the other member states who joined after periods of political turmoil, compared with the UK joining a trading bloc after years of political stability.
Against this, we heard an overwhelming degree of confidence from the front bench that, in the end, the other member states, if not the European Commission and Parliament, would understand the economic benefit of a mutually beneficial arrangement with the UK and agree that the UK can have our cake and eat it to quote Foreign Secretary Boris Johnson. We heard the argument from the back benches that, if the other member states didn’t take this view of putting the economy before the project, then the UK’s decision to leave would be vindicated.
We understood that the Prime Minister’s statements – as did her comments on the doorstep of No 10 upon taking office – effectively rule out an EEA solution and make future membership of, as opposed to access to, the single market untenable. We know that the reaction of other European leaders has been to restate in stronger terms, and maybe with broader support including from some in business, that there can be no free access to the single market without freedom of movement of people. We continue to see the possibility of limited access to the single market, maybe on a sector by sector basis, in return for limited movement of people, maybe based on those people having a job or otherwise not being an economic burden on the state
We don’t know yet, if that possibility comes to pass, what limited access to the single market will look like. The rhetoric tends to focus on the customs union or tariffs, or on standards when, in reality, the single market is a function of both. There has been discussion of equivalence of standards but, even in the financial services field where this is most readily understood, the concept applies differently to different products and is even then not a single concept. We don’t know in which sectors it might be easier to strike a limited deal, though we can opine that they are likely to include those where there is a greater coincidence of interest between the 27 and the one.
So we know more than we did; but there is still much in play. Business needs to come together, at least by sector, to put forward a single proposition to the UK and EU governments and to the EU negotiators. Only if each side realistically understands the priorities and red lines of the others is there likely to be a good agreement. Business can help facilitate that by being clear to all sides on its desired outcome. And, as we have said before, business needs to be clear to the UK Government on what sort of regulatory and trading environment is wishes to see if there is no deal with the EU. That remains a distinct possibility: the odds remain in favor of some sort of compromise deal being reached but they have, in our view, lengthened this week.