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16 Aug 2016

Five Reasons to Stall Brexit

Theresa May has assured the public that Whitehall is moving ‘full steam ahead’ with Brexit. She ought to stall until as late as 2020. Critics who urge her to pull the trigger on Article 50 are unwisely demanding haste given the scope of the tasks ahead. This will be the most complex series of negotiations the UK has ever undertaken.

With elections coming up in France, Germany and the Netherlands, referendums on EU migration policy in Hungary and Italy’s constitutional reform looming, the EU isn’t in a position to commit to early alliance-making efforts. Waiting for them to organise themselves before beginning the process is vital. The perils of rushing ahead aren’t worth the risk of returning with treaties that cobble the UK, who must take as much time as possible to prepare before the many negotiations that lie ahead with the Eurozone.

1. Get Brexit Done and Dusted?

The first reason not to rush into triggering Article 50 is that the UK has little experience in these complex processes, not having negotiated a trade deal since 1973. The essential first step is creating teams that are fully prepared to face the EU’s 596 experienced trade negotiators with multiple, highly detailed plans in place.

“I’ve absolutely no doubt Theresa May will want this done and dusted as quickly as possible,” said Brexit-backer Tory MP Peter Bone, simplifying a critically complex process into a good tidy up.

It’s a profound challenge, assembling expert negotiating teams who are up-to-speed on the details of thousands of different topics in the current EU trade agreements, crafted over 43 years of negotiating. Perhaps Peter Bone would like to assist International Trade Department head Liam Fox in finding another 900 trade policy experts? He has only 100 and needs nearly 1,000 highly skilled trade specialists in total. Or he might be better employed arranging more staff for Brexit head David Davis who has only half of the 250 personnel he requires? These newly-created departments will have to unpick the currently interwoven tapestry of British and EU laws and then craft unprecedented agreements that will make or break the UK’s long-term prospects for growth.

2. Repair Immediate Brexit Impact

Brexit didn’t occur at a time when the UK could afford market uncertainty, the referendum roiled global markets still clawing back from the financial crisis. The Bank of England’s historic interest rate slash-in an effort to stimulate an economy that had only been fitfully growing prior to the referendum-has had a positive effect on the bonds market, there is more work ahead.

Emphasis on keeping the UK “open for business” will go a long way, and there’s no reason why May shouldn’t stall Brexit and prioritise these projects.

3. Maintaining European Economic Area (EEA) Financial Passporting

However anxious he may be to secure single market access, London’s mayor, Sadiq Khan, is in favour of delaying triggering Article 50 until the autumn of 2017, appreciating the challenges of negotiating with the EU. The challenges of limiting free movement of labour while trying to “get the best of both worlds” is all too clear to him; he’s willing to wait for a team of negotiators that have the best chance of securing access to the single market.

London’s reliance on EU financial passporting-which currently allows the City’s financial firms access to the single market-is, famously, an essential aspect of the upcoming negotiations. Should the UK lose access to the EU single market, London’s position as a global finance leader is in jeopardy. Given how important the City is to the UK’s economy, this is a critical aspect of the negotiations, but hardly the only one jostling for prominence on the Brexit agenda.

4. Untangling and Crafting New European Free Trade Agreements (EFTA)

An example of how complex and time consuming trade agreements with EU are can be seen in the Comprehensive Economic and Trade Agreement (Ceta). Canada’s trade deal with the EU is a 1,600-page document that has taken seven years to hammer out and has yet to be ratified. It is touted by David Davis as the “perfect starting point for our discussions with the commission”, one illustration of how much the UK’s negotiators need a template going ahead. The UK will have much less time and good will when striking a deal with their largest trading partner. In 2014, the EU accounted for 45% of UK’s exported goods and services and 53% of all imports.

Failure to secure EU free trade agreements would put the UK in the unpalatable position of trading with the established World Trade Organisation rules. The Institute for Fiscal Studies August 9 report projected a cost to the UK of £39bn to £31bn due to exports 6% to 2.5% lower than those currently in place under EU membership.

The UK will hope to join EFTA, which was set up for the free trade and economic integration of Iceland, Liechtenstein, Norway and Switzerland. Norway’s European Affairs minister, concerned that a large country like the UK would dominate the organisation, has already said her government could block the UK from joining.

  5.  Another Passporting Negotiation yet to Take Flight: Aviation

As if the EEA and trade deals aren’t enough to for these 900 yet-to be-hired trade experts to grapple with, there is another important EU deal to be struck-that of aviation passporting. As with other existing EU arrangements, many industry insiders hope future Brexit deals mirror those currently in place. Peter Morris, chief economist at Ascend Flightglobal Consultancy has written that “the UK aviation market was indeed one of the stand-out beneficiaries of the EU framework and market, and will now be the one most impacted by the referendum decision.”

The concern is that the UK, after years of benefitting from inclusion in the European Common Aviation Area, might fail to negotiate permission to continue operating on established intra EU routes. EasyJet has already started the process of acquiring an air operator’s certificate (AOC) in an EU country. The implications for the UK’s aviation industry go beyond passenger carriers, including vital cargo aircraft which benefit from the lack of tariffs.

Take as Much Time as Possible to Prepare

Negotiation is 80% preparation and 20% execution. Anyone urging a hasty Brexit is unaware of the many critical agreements to be drafted, discussed, argued at length, redacted, redrafted, renegotiated and agreed upon ahead. Unless we’re prepared to join that band of (usually quite boring) policy wonks, we ought not second guess how long it must necessarily take to form such an army.

We should leave them to the task of locating the UK’s most important talent in quiet confidence that once these teams have been formed, they are equal to the Olympian challenges Brexit poses.