The belief that the UK can go it alone defies economics, geography and the lawby Philippe Legrain / November 16, 2016 / Leave a comment
The pound in your pocket has lost 15 per cent of its foreign purchasing power since the Brexit vote on 23rd June. This is now pushing up the price of Marmite, Apple Macs and much else. While the economy slowed by less than expected in the three months to September, Britons are already decisively poorer, because currency markets believe the UK is headed for a very harmful hard Brexit in 2019.
While prime minister Theresa May glibly insists that “Brexit means Brexit,” Britain’s future relationship with the European Union could take different forms. Much depends on how brutally, or not, the UK severs itself from European Union trading arrangements, such as the customs union and the single market. “Hard Brexit” means something very specific—tearing ourselves apart from all of this.
While Conservative Brexiteers profess to be fervent free-traders, their zealotry is driving them towards a monumental act of trade vandalism. Within the EU’s single market and customs union, Britain enjoys the freest trade that exists among independent countries anywhere. Trade with the other 27 EU countries in goods and most services is unimpeded by customs controls, import duties or foreign regulatory standards. But in 2019 immigration controls and other trade barriers could suddenly sunder UK markets from EU ones, hitting nearly half of Britain’s trade.
The prime minister insists that her post-Brexit priority is controlling immigration. Yet cutting net migration by more than two-thirds to “tens of thousands a year” would damage public services and wreak havoc across migrant-dependent sectors as diverse as farming, food processing and finance. Controlling EU migration would also entail leaving the single market, since EU governments rightly insist that free movement is an essential element of it. Preventing Polish plumbers from selling their services in the UK will, inescapably, have consequences for British bankers selling theirs across the EU.
Losing the “passports” that enable UK-based services providers—such as accountants, architects and advertising agencies—to sell seamlessly across the continent would be a huge blow. Bigger companies might relocate their EU business; smaller ones might stop exporting. Some financial firms, it is true, may retain market access by being deemed to comply with EU-equivalent regulations. But that would depend precariously on a political judgement by the European Commission which can take years…