Finding the exit: the future of UK-EU relations

By on 21/07/2016
British Prime Minister Theresa May

What happens when an unknown prime minister ventures into the unknown? Matt Ross explores the options facing Britain’s new PM as she contemplates the unprecedented task of extracting an EU member from the union

Theresa May, Britain’s new prime minister, is in an odd position. Haven taken over the premiership mid-term, she didn’t write the general election manifesto she’s now charged with delivering. Having campaigned – albeit quietly – for the UK to remain in the EU, she didn’t support the Brexit mandate she must now discharge. And having won the Tory party leadership without going through a full contest, she hasn’t had to set out what she thinks Brexit looks like. As a result, we’ve very little idea of her policy platform or how she’ll approach the task of taking Britain out of the EU.

In the circumstances, though, this ambiguity could be quite helpful – both for the UK, and for its new PM.

May’s main opponent for the party leadership, Andrea Leadsom, was appealing directly to the pro-Brexit party base – and promising to move with a speed, and within a position on immigration, that would have left UK negotiators unprepared and with little chance of agreeing a single market solution. To win the Tory leadership race, May would have had to explain the kind of EU relationship she envisaged, including making firm commitments about timescales and red lines – particularly on free movement of labour.

So May’s early victory has permitted her to retain some leeway in what she can offer the EU, and some ambiguity around her own red lines. That puts her in a good position as she begins negotiations with the EU.

As she’s said, though, ‘Brexit means Brexit’ – and May has put leading Leave campaigners in charge of negotiating Brexit. That’s politically astute, because if they can’t get a decent exit deal and line up new trade deals with non-EU members, it will be clear to Conservative Brexiteers that the problem was that the task was impossible rather than the execution half-hearted. So what happens next?

Any wriggle room?

The referendum is non-binding and has no status in EU law, so the UK remains a full member until Britain gives the European Commission notification of its intention to leave under Article 50 of the Treaty of Lisbon. That triggers a two-year negotiation period, within which the UK and the EU must agree their future relationship. The period can only be extended by the unanimous consent of all 27 remaining member states; and at its end, the UK exits the EU, agreement or no agreement.

One of the few comments that May has made is that she doesn’t envisage pressing that Article 50 button until next year. That’s a great relief for her civil servants, who’re just beginning the vast amount of work required to develop a set of negotiating positions. But it seems highly likely that she will press the button.

Before she does so, there will be discussions within Parliament. A petition in favour of Remain has gathered 4m signatures – prompting a Commons debate scheduled for 5 September. And some people have challenged the PM’s right to trigger Article 50 by Royal Prerogative without recourse to Parliament: the Lisbon Treaty says only that the decision must be made in accordance with the relevant state’s constitutional requirements.

The Royal Prerogative doesn’t allow the PM to change the law, so there are currently three judicial reviews underway, arguing that because giving Article 50 notice will create a requirement to repeal the 1972 European Communities Act, the Commons must approve notification by passing a law or a substantive motion.

However, it’s very difficult to imagine Parliament blocking an Article 50 notification. Many people voted Leave in protest at an establishment they see as remote and undemocratic – and if Parliament was seen to be blocking the will of the people, there would be a very hostile reaction. Given that pretty much the whole Conservative parliamentary party has accepted the referendum result, a vote against Brexit would require the support of the vast majority of Labour MPs – and many of them know they have a flank dangerously exposed to the insurgent, anti-EU party UKIP at the next general election.

Sir Paul Jenkins, the government’s former chief legal adviser and now at Matrix Chambers, comments that the “House of Commons might seek to lay down some tricky red lines for May – such as full access to the single market – but even that would be risky.” It’s likely that even if May does require a Commons vote, she’ll win it.

When two sides go to talks…

Before triggering Article 50, May will need to get her negotiating position lined up. European leaders have made it very clear both that there will be no substantive talks until the UK gives notification, and that May should do so as quickly as possible. So the new PM’s emerging ‘Brexit department’ is trying to forge a position as quickly as possible.

This is a huge job. Exit talks will have to agree how all the current areas of EU competence will be repatriated to the UK; and what to do about all the matters that will have no legal foundation once the UK repeals the 1972 Act, which gives EU directives legal force in Britain. So every team in every department is currently putting together its goals and requirements to feed into the central negotiating team, as well as thinking about how to replace EU systems such as the Common Agricultural Policy and procurement law; ultimately, a vast amount of legislation will be required to put all these new systems on a legal footing.

Obviously, departments can’t decide how to move forward until new ministers have worked up their own policy positions. Another huge benefit of resolving the Tory leadership question so quickly is that departments can get stuck into this work over the summer, rather than waiting till mid-September.

That gives the civil service a bit of breathing space before May gives notification to the EU. They’ll need it; this is such uncharted territory that it’s not yet clear even whether the talks will cover a UK/EU trade deal as well as the bare exit arrangements.

Trade transactions

Under EU law, the EU can’t hold trade talks with a member state, and nor can any of its member states hold trade talks with a non-member – so officially, the UK can’t start trade talks with either the EU or any other country until after it has left. The EU trade commissioner has already said: “First you exit, then you negotiate” – and if she means it, the UK will have to trade under World Trade Organisation rules until it can agree a new treaty.

EU leaders have also said that full freedom of movement is an absolute requirement of unrestricted access to the single market. There may be some flexibility on both these points: the new minister for Brexit David Davis will be hoping so, as on Monday he mapped out a strategy for international trade that is entirely dependent on our beginning trade talks with non-EU countries almost immediately.

However, Davis has always had a poor relationship with EU officials and leaders: a longstanding Eurosceptic, whilst working as minister for Europe in John Major’s government he was widely known in Brussels as ‘Monsieur Non’. And age has not mellowed him. Last week he pledged to forge ahead with trade talks with non-EU countries, asking: “What are they going to do, throw us out?” So his attitude delights the UK’s right-wing tabloids, but is unlikely to create much sympathy and flexibility among EU negotiators.

Anyway, we won’t find out until after next year’s German and French general elections quite how far Europe is willing to bend its rules to keep the UK in the single market, because EU leaders – who face their own domestic Eurosceptic and nationalist movements – are determined to show their own populations that leaving the EU is a painful and destructive experience. As Jenkins put it, “they will be horrid to us until France has seen off [Front National leader Marine] le Pen and [German chancellor Angela] Merkel has won” – and that’s not guaranteed, of course.

The awkward mechanics

Assuming that moderates do win those elections, EU leaders will have a bit more freedom to offer concessions. But the system for negotiations puts the UK at a significant disadvantage. Larger EU nations or coalitions of smaller members have an effective veto on any deal: the agreement will need to be approved both by the European Parliament, and by a ‘super qualified majority’ of states – meaning at least 20 of the 27 countries, comprising at least 65% of the EU’s population. So any deal that, for example, constrained EU citizens’ rights to live and work in the UK, could be blocked by Eastern European members – who aren’t that bothered about sending the UK goods, but very much want to keep on sending it people.

There’s also that two-year deadline, which makes the talks vulnerable to delaying tactics. EU members could slow things down by throwing in their own demands – around the status of Gibraltar, for example – and the UK would find itself under pressure to give ground or risk exiting without an agreement. And that outcome would create big problems for May around, for example, the status of UK citizens living and working on the Continent.

However, assuming that the EU changes its own rules to permit simultaneous trade and exit talks, it is possible to imagine outcomes that leave the UK within the single market. The most likely is what’s being called ‘EEA+’, meaning a tweaked version of the European Economic Area arrangements under which Norway has access to the single market.

The chances of ‘Brexit light’

Norway isn’t an EU member, and remaining in the EEA would comply with the referendum’s mandate to leave. However, the Nordic nation does pay contributions to the EU and permits freedom of movement – two of the biggest bugbears of the Leave campaign. So May couldn’t accept a Norway-style deal without experiencing the same internal party strife that wrecked the premierships of the last two Conservative prime ministers. Which brings us to the ‘+’ bit.

It’s possible to imagine an EEA+ arrangement in which May gets some limitations on freedom of movement. And although she’s developed a reputation at the Home Office for taking a hard line on immigration, it was probably her biggest job as home secretary to deliver on former PM David Cameron’s pledge to keep net immigration below 100,000 – so it shouldn’t necessarily be seen as her own top priority.

She has promised that “free movement cannot continue as it has up to now”, but that still gives her plenty of room to agree a set of relatively light restrictions that the Eastern Europeans could live with. And if the alternatives look very painful economically, she might just be able to get that kind of an arrangement through her own ministers and MPs – albeit at the cost of once again alienating the hardcore Brexiteers within her own party.

Nonetheless, all in all the prospects of staying within the single market look pretty narrow: as Jenkins says, on freedom of movement the EU might offer “a bit of flex, maybe, but nowhere near enough to appease the anti-immigrant lobby.”

Facing a future outside the single market

EEA+ aside, the remaining option is a bespoke trade deal. That would put the City in a difficult position: there are plenty of European cities with a strong interest in keeping the UK outside the passporting arrangements for financial and business services. And there is little chance of brokering a fresh UK-EU trade treaty inside the two years; Britain would almost certainly have to leave the single market long before it agreed a new deal on trade.

If it becomes clear that Britain is not going to be able to stay within the single market, and the alternatives look awful; if there’s substantial disinvestment and the economy’s sinking fast – then it’s possible that public opinion could shift to the point that a substantial majority clearly want to remain. And although Article 50 is set out as a one-way street, its interpretation lies with the European Court of Justice. Jenkins points out that this is “a very political court, and could easily read into Article 50 the right to withdraw the application to leave if that’s what was required.”

So it’s not completely impossible that the UK could do a ‘reverse ferret’, even after an Article 50 notification. But the EU would still have an interest in exacting a high price, otherwise other members’ electorates might think they could flirt with leaving and then come back in if things got uncomfortable; so Britain would struggle to retain advantages like its rebate and the exemption from Schengen. May would also need to have another referendum or a general election fought on that platform; and it’s hard to imagine her squaring that with her party colleagues. This option is borderline dreamland.

That leaves an exit from the EEA as the most likely outcome, although there’s some chance of securing a workable EEA+. It certainly leaves Brexit looking inevitable.

There’s one last thing worth saying, though – and, reflecting on recent events, the Tory peer Francis Maude said it on Newsnight last week. “We should all get out of the prediction business.” In this piece we’ve tried to map out the likely outcomes. But if we’ve learned one thing recently, it is this: we’re very likely to see some very unlikely outcomes.

For a more detailed explanation of the UK’s referendum result and the decisions facing its new PM, see our multi-part Brexit explainer.

For up to date government news and international best practice follow us on Twitter @globegov

See also:

Brexit minister Oliver Letwin leaves government after being branded ‘completely unsuitable’ for the job

Brexit: UK government should try to win back officials from European Commission by offering ‘more than competitive pay’, committee says

A guide to Brexit, part 1: how Britain voted to leave the EU

A guide to Brexit, part 2: What’s the process for negotiating a British exit from the EU?

A guide to Brexit, part 3: Who’ll run the negotiations?

A guide to Brexit, part 4: Is Britain’s departure from the EU inevitable?

A guide to Brexit, part 5: What is the likely outcome of Brexit?

Is the EU referendum result a wake-up call for employers?

Olly Robbins appointed head of government’s new Brexit unit

Oliver Letwin ‘completely unsuitable’ to lead Brexit unit, says former cabinet secretary

Brexit will be ‘largest legal, legislative and bureaucratic project in British history’, says former UK Treasury Solicitor

Clash over civil service advice in EU referendum

Bank of England’s independence under threat in EU referendum row

EU issues Poland with official warning over constitutional court changes

Sir Paul Jenkins, former UK Treasury Solicitor: EU Referendum interview

Managing the EU Migration Crisis

European Parliament orders Poland’s government to reverse changes to country’s top court

A family reunification dilemma for the EU

About Matt Ross

Matt is a journalist and editor specialising in public services, policymaking, government and management. He was the editor of trade title Civil Service World from 2008 to 2014, serving an audience of senior UK officials; and the features editor of weekly news magazine Regeneration & Renewal between 2002 and 2008, covering urban regeneration, economic growth and community development. He has also been a motoring and travel journalist, and now combines his role as editorial director of Global Government Forum with writing for other publications including The Guardian and Planning magazine.

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