Clarity on Brexit? Or Mayday?

Theresa May’s speech yesterday provided some much needed colour to the UK’s approach to Brexit. The deliberately vague “Brexit means Brexit” soundbite, which had been trotted out to date, was clearly an unsatisfactory description of the UK Government’s intentions. The number of decisions and negotiations needed to extract Britain from the EU are huge and the binary descriptions of ‘soft Brexit’ and ‘hard Brexit’ were equally inadequate when describing such a nuanced topic.

So, what to make of the speech? Did it really provide clarity on our approach or, at least, our aspirations for a new deal with Europe and the wider world? And does it bode well for the future of the UK’s economy?

Well, yes and no… But mostly no.

The main point that was clarified is that we would not seek to remain within the European single market. This is key to beginning to understand the Government’s vision of the UK’s future in world trade. It had long been suspected that May would prioritise curbs on free movement of people as a central Brexit policy point, necessitating the UK leaving the single market, but spelling it out was welcome.

It signals a reversal in a trend that has pervaded for the past half century – one of increasing trade with our European neighbours and relatively decreasing trade with the rest of the world. This trend was driven by various factors, but notably geographical proximity and a reduction in friction/barriers within the EU.  Clearly, there is great uncertainty around the future of one of these driving factors.

The threat from this to UK trade, the economy and living standards is very real and this is implicitly acknowledged by May when she said that the UK would seek “Free trade with European markets through a bold and ambitious free trade agreement with the European Union.” To me, at least, it is clear that increasing barriers to trade with our largest trading partner is probably not the most intelligent move and is likely to threaten the UK economy, so it is not surprising that we would seek to retain the part of EU membership which is most important for our economic stability and prosperity.

However, EU leaders have repeatedly stated that the UK cannot cherry-pick which benefits of EU membership they wish to keep. As such, it is hard to believe that they will sign a free trade agreement with the UK, whilst allowing cessation of other single market principles, notably the free movement of people. Theresa May’s clarification that this is what we would seek, therefore, only leads to more questions on whether her aspirations can actually be fulfilled.

So, whilst it was necessary for these factors to be set out explicitly by the Government, in my view they (a) were not particularly different to people’s expectations and (b) represent a wish list which may or may not come true. So I’ll leave two things for you to decide:

(1)  Did May’s speech actually tell us anything we didn’t already know or suspect?

(2)  Do you consider that the 52:48 referendum result gave the Government a clear mandate to leave the single market in the first place.

I’d be interested to hear your thoughts in the comments below:

P.s. I just wanted to touch on the commonly used argument that the UK’s economy is proving resilient to Brexit by saying that this is nonsense. We haven’t left the EU yet and, secondly, do not even know the details of the form of Brexit we are going to take. So, at the moment, the UK economy is proving resilient to the concept of Brexit, nothing more. The economist Adam Posen put this best in the Independent:

“This is Wile E. Coyote logic – I ran off the cliff, but so far I haven’t hit anything and the view is nice, so the future will continue to be nice.  Splat.

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