Why the road to Brexit may be as important as Brexit itself
Brexit means we are leaving the EU, to repeat the bleedin’ obvious.
But did that momentous vote tell us anything about precisely when we are leaving and the glide path to exit?
I mention this because there has been almost no public debate about the transitional arrangements for leaving. And yet these transitional arrangements could be as economically important as the long term destination.
The point is that a cabinet consensus appears to be building for the UK to negotiate perhaps 40 sectoral trade deals with the EU, to replicate our current membership of the EU single market for our most important industries.
But those negotiations could take a good decade to complete, if the experience of other countries like Switzerland are a guide.
So the question – which is troubling our big exporting companies – is what our access to the European Union’s single market will be in 2019, when our article 50 negotiations with the other 27 EU member nations will have exhausted their time limit, and we’ll have left the EU.
Would our manufacturers then face tariffs based on the World Trade Organisation’s menu on their exports to the EU (tariffs that would inflate the price of British-made cars by around 10% for example)?
Would our financial services companies face prohibitions on what they can sell to much of the rest of Europe?
It is this possible introduction into the trading system of new costs and friction in just over two years that is prompting some big companies to consider shifting investments and jobs across the Channel, to swerve those possible barriers to trade.
The point is that even if by 2027 we might have trading arrangements with the EU comparable to today’s, 2027 is another world when it comes to corporate planning horizons – and few boards would make big UK investments now when there is so little certainty about the trading framework for a decade, and even the destination in 2027 is amorphous.
Which is why there is talk about whether we could remain as temporary members of the single market, perhaps via the European Economic Area, until sectoral market-access deals are in place.
However this would prohibit us from putting in place new immigration controls for many years, and would oblige us to keep paying into Brussels’ coffers.
Or to put it another way, Brexit would not mean Brexit now, but Brexit deferred?
Is that what 17m voted for? Would the Tory Party hold together if confronted with such a long road to the exit?
Those are judgements that the prime minister has just a few weeks and months to make. And they will determine the prosperity for most of us for the foreseeable future.