Without a Brexit deal, we could find that we’ve walked off a cliffby George Magnus / March 29, 2017 / Leave a comment
The British government has now formally given notice under Article 50 of the Lisbon Treaty of its intent to leave the European Union—the most important economic and international relations decision since the end of the second world war. After the nine months of post-referendum hiatus, Prime Minister Theresa May’s government now has to negotiate the terms of our exit from and future relationship with the EU, prevent the disintegration of the UK—especially now that Nicola Sturgeon has called for a second independence referendum—decide which laws to keep, modify or reject, and keep the economy out of recession while mitigating the adverse consequences of Brexit on living standards.
Nothing is pre-ordained, but the chances are high that it will be a hard Brexit or even a Wile E Coyote moment—that is, the UK will tumble out of the EU as off a cliff, without an agreement about a future relationship and possibly without an agreed divorce settlement. If that were to happen, then the economic outlook would be markedly worse, despite what many Brexit cheerleaders have been asserting without rhyme or reason.
Article 50 (aka divorce) negotiations have to be concluded within two years, or else the UK will leave the EU without agreement regardless. This hard Brexit becomes all the more likely because, realistically, there is little more than a year to get things done.
France will hold presidential and National Assembly elections in May and June, and therefore won’t have a government that can negotiate until the summer. Germany will then hold national elections at the end of September and might not have a coalition government in place until the end of November. Moreover, EU negotiators have said that the approval process of any deal by the European Parliament and by member governments means that there has to be something on the table before October 2018.
The starting point is complicated further by a difference in approach. The UK wants to negotiate the divorce in parallel with a new free trade agreement (FTA), while the EU insists that the former must precede the latter. Though there may be some scope to compromise on procedural issues, there is no possible way that an FTA can be negotiated by 2019, let alone…