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24 September 2017

Theresa May’s new Brexit strategy is already falling apart

And worse may yet be to come.

By Stephen Bush

Well, that didn’t take long. Theresa May’s big Brexit speech is already coming under pressure from Conservative Brexiteers who are worried over the length and manner of her planned transition period from the European Union.

Boris Johnson is insisting that there be no payments made to the EU during the transition period and that the United Kingdom is not subject to any new European regulation during the two-year stint in the waiting room. In plain English, these demands would effectively mean that there would be no transition period at all and the United Kingdom would tumble out on 30 March 2019. As I explained recently, the government is simply not prepared for any form of Brexit – good deal, bad deal, or no deal at all – on that date.

More worrying for Downing Street is that among the most devout pro-Brexit Conservative MPs, there doesn’t seem to be a great deal of understanding about what May actually conceded in her Florence speech. Iain Duncan Smith, in a piece welcoming the speech, appears to believe that the United Kingdom will be immediately free of the strictures of the EU’s rules. One Brexit ultra who has already understood the speech’s contents, Jacob Rees-Mogg, has already made his opposition clear. 

Adding to the government’s headache: May’s proposed transition period is almost certainly already too short. The government has essentially rejected the two existing models of relating to the EU: declaring that membership of the European Economic Area would be too destructive of sovereignty while an arrangement on the style of the EU’s trade deal with Canada would be too ruinous economically. May instead believes that it is in the interest of both parties to find a third way: a bespoke trade deal between the European Union and the United Kingdom.

As far as the political and economic hurdles in the United Kingdom go, this is probably about right. The difficulty is that it takes a long time to negotiate trade agreements, and the deal May is seeking would be the deepest trade arrangement in existence anywhere in the world, ever. (With the obvious exception of the trade agreement the United Kingdom is currently trying to remove itself from, aka EU membership.)

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The UK and the EU have the advantage that they start from a period where they already have regulatory convergence and a large body of treaties to work from, but it would be a remarkable feat of negotiation and statecraft if May’s proposed bespoke deal were reached within the three years envisaged by her planned two-year transition. The problem is that the sensible arrangement would be for a transition to take as long as needed to negotiate a new trade deal, but the fear Brexiteers have is that an indefinite transition would become an eternal one. 

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The bad news for May isn’t just that support for her new approach couldn’t even last the weekend. The really, really bad news for May is that she is quite probably going to have to have this fight again when it becomes clear that two years is not enough to negotiate a bespoke deal.