The additional uncertainty created by the outcome of the UK General Election threatens to overshadow the formal negotiations on the terms of Brexit, which are due to kick off on Monday. For the sake of balance, here are four good reasons for optimism about what happens next.

For a start, the talks should still begin on time and with the UK represented by the Secretary of State for Exiting the European Union, David Davis, who has been in post since July last year. That may not seem like much to cheer about, but could not have been taken for granted just a few days ago. Of course, Monday’s opening negotiations were only ever likely to be talks about talks, with no substantial progress (except perhaps on citizens’ rights) expected until after the German federal elections in September. The aim remains to conclude the formal negotiations by October 2018, giving national parliaments six months to ratify any agreement before the UK formally leaves the EU at the end of March 2019. Crucially, though, the results of the UK election alone should not disrupt this timetable.

Second, the UK may well be better prepared for the talks than many suggest. There have been plenty of unfavourable comparisons between the ‘detailed’ guidelines for the Brexit negotiations published by the European Council and the ‘limited’ material released so far by the UK government. However, Prime Minister May did set out 12 key negotiating principles in her Lancaster House speech in January, followed by a substantial White Paper in February, and clear statements of intent in the letter triggering Article 50 in March. Viewing these side-by-side it is not so obvious that one party is any less ready than the other.

Third, and perhaps most importantly, there is already a lot of flexibility built into the positions of both sides. Again, most commentators have made much more of the differences than the similarities. For example, the parties have disagreed on the sequencing of the negotiations. EU officials initially pushed for a phased approach where the Brexit ‘divorce bill’ would need to be agreed before discussions on any future relationships could begin. This never quite made sense, as the nature of these relationships would be a key factor in deciding the UK’s financial obligations (and rights) as a departing member. But the EU’s guidelines now anticipate that the negotiations can overlap provided ‘sufficient progress’ is being made on priority areas.

What’s more, both sides have already recognised the appeal of some sort of transitional arrangement, or implementation period, to avoid a chaotic and potentially catastrophic ‘cliff-edge’ Brexit. After all, no-one can now realistically expect a bespoke free trade agreement to be finalised in time for March 2019. This is surely the right context in which to view the reigniting of the debate in the UK over membership of the Single Market, the Customs Union, and the various permutations including the ‘Norway option’. Arguably, these options have always been in play, even if only as a stop-gap.

The UK government’s White Paper, for example, had the following to say on the Customs Union – and this was back in February:

“In leaving the EU, the UK will seek a new customs arrangement with the EU, which enables us to make the most of the opportunities from trade with others and for trade between the UK and the EU to continue to be as frictionless as possible. There are a number of options for any new customs arrangement, including a completely new agreement, or for the UK to remain a signatory to some of the elements of the existing arrangements. The precise form of this new agreement will be the subject of negotiation…”

Of course, the EU may not be accommodating. Certainly, there is no sign of flexibility on the four fundamental freedoms of the Single Market: goods, services, capital and – most importantly of all – labour. The EU has also insisted that the UK should continue to honour its existing obligations (including submitting to the jurisdiction of the ECJ) during any transitional period beyond 2019. But it is surely wrong to assume that the talks will inevitably end in disaster.

Fourth, with expectations now so low, there is a good chance of some pleasant surprises as the negotiations begin. In particular, both sides have said they will prioritise reciprocal rights for UK and EU27 citizens. The details will still take some time to work out and the administrative difficulties should not be under-estimated, but a clear statement of agreed principles on citizens’ rights would set a more positive tone for other negotiations. This at least is an issue on which the Conservative government can bank on support from Labour and it could even feature in the Queen’s speech, now scheduled for Wednesday 21st.

The key message, then, is ‘don’t panic’. The talks are likely to begin on time and there is still all to play for.  Brexit provides a once-in-a-generation opportunity to create a more flexible, open and vibrant economy. The prospect of a year or more of difficult negotiations – and perhaps only a phased departure from the EU thereafter – should not blind us to this prize.

 

Julian Jessop is Chief Economist at the IEA. He has thirty years of experience as a professional economist in the public and private sectors, including senior positions at HM Treasury, HSBC and Standard Chartered Bank. Prior to joining the IEA in March he was a Director and Chief Global Economist at the leading independent consultancy, Capital Economics. Julian has a First Class degree in economics from Cambridge University and post-graduate qualifications in both economics and law.

3 thoughts on “An optimist’s view on the eve of Brexit talks”

  1. Posted 16/06/2017 at 11:35 | Permalink

    I am naturally an optimist, but I am struggling to clearly identify an upside to the UK leaving the EU, or at least an exit that leaves us largely no worse than we would otherwise be.
    Specifically what exactly are the “once-in-a-generation opportunit[ies] to create a more flexible, open and vibrant economy”? How would this work realistically? Although I am a libertarian and firmly believe in the benefits of de-regulation, I am also a realist, and recognise that no western country is lightly regulated, so struggle to understand how the UK would be any different post Brexit, from what it is now. In addition, there are reams of stupid laws and regulations imposed locally by the UK that have nothing do to with the EU – if we can’t tackle this basic home grown problem, what hope is there for anything else? In short, is the faint glimmer of some deregulation worth greater restriction of access to a large market and the less efficient labour market that will result from reduced access to a wider pool of labour (both skilled and unskilled).
    In particular, the “control immigration at any cost” approach which appears to be where we are heading – is clearly not a recipe for a “flexible, open and vibrant economy”, as I would argue open borders (for people) are just as important as openness for anything else.

  2. Posted 19/06/2017 at 17:56 | Permalink

    Immigration is a matter of demand, not supply, otherwise the population of India would have moved to the UK in the 1960’s. The morning after the Brexit vote, Dan Hannam was saying that immigration would continue, just the sources would change.

    Deregulation could I suppose allow 14 year olds back into the job market with unregulated wages and working hours. This might subdue immigration. The level of public support for this might be surprise Guardian readers. 14 year olds themselves might be quite enthusiastic.

    A TTIP could give us Chlorine washed chicken, GMO foods, pharmaceuticals at US prices in exchange for access by what services, exactly? Especially now the US has made clear that it will put things in place with the EU first. As Australia has also done.

  3. Posted 01/08/2017 at 11:18 | Permalink

    As an Englishman having lived on the ”Continent” for many years, the prevailing opinion in the Union seems to be that they will be far better off without Britain. This does not bode well for a ”soft” Brexit, and
    I agree whereas the Union has fallen over backwards to keep the U.K. in it, there has never been any reciprocity. They only wanted Europe on their – British – terms.

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