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20 December 2016

What are the chances of the UK abandoning Brexit?

If the EU begins on a path of reform, and withdrawal looks unattractive, Britain could pull back.

By Richard Mylles

Theresa May’s interest is served by keeping Brexit to a series of binary questions in which the alternative to acceding to her will means abandoning withdrawal. Will Parliament treat the referendum result as binding though it was technically advisory? Will it approve the triggering of Article 50? Will it legislate to end the primacy of EU law (the Great Repeal Bill)? The moral force of the referendum result, and the self-preservation instincts of the majority of MPs whose constituencies voted Leave, mean the answer to such questions is always likely to be yes.

But more awkward questions, such as what kind of Brexit the British people voted for; whether Brexit implies withdrawal from the Single Market; and whether the UK should remain a part of the Customs Union, are to be avoided at all costs, because there is no coherent position on which a majority in Parliament, or more importantly for May, her own Conservative Party, agrees. Most MPs want full, unimpeded access to the Single Market, the re-establishment of border controls and freedom from the jurisdiction of the European Court of Justice (ECJ). In other words, they want the benefits of EU membership without the responsibilities.

But the EU 27 is unwilling to compromise the integrity of the four freedoms (free movement of goods, capital, services and people), and the authority of the ECJ is required to ensure that the rules of the Single Market are adhered to. So the positions of the UK and the EU 27 are in inherent contradiction, a non-overlapping Venn diagram, which, as long as it persists, will make efforts to find a compromise futile.

This is our central view. It is a story which ends with the UK falling back on WTO rules, cross-Channel supply chains being disrupted, and non-tariff barriers being re-erected to the cost of UK-based firms. All the available evidence suggests the two key premises on which this narrative is based (that the EU will not compromise on the four freedoms and that the UK will insist on ‘taking back control’ of its borders and laws) are sound. But if they are not, there may be a different story to tell.

Why this scenario is more plausible than generally perceived

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We don’t adhere to the view that the EU is ‘bluffing’, or that their repeatedly-stated position is an opening bid in negotiations. A ‘sweetheart deal’, in which the UK enjoys better terms as a non-member than it could as a member is not possible in our view – the stability of the project for the remaining EU 27 is the top priority. But we also believe that the quest to ensure the stability of the EU could ultimately undermine the case for Brexit itself.

Key EU countries are facing similar populist pressures that have led the UK to Brexit and the US to Donald Trump. Disillusionment with the EU and its strictures is finding an outlet in the domestic politics of countries typically thought to make up the ‘core’ of the eurozone and the EU. Of the three major EU elections next year, eurosceptic parties lead in the Netherlands, lie second in France and in third place in Germany. Angela Merkel’s announcement that she intends to ban the wearing of the burkha “wherever possible” was a striking indication that Alternative für Deutschland, Germany’s right-wing eurosceptic party, is influencing her policy platform.

Francois Fillon, favourite to win the French presidency next year, has also spoken of the need to reform the EU and tighten the controls on Schengen’s external border to reduce immigration. The need to reconnect with the voters who object to the change that has accompanied globalisation and mass immigration, the kind of voters who chose Brexit, appears to have reached the top echelons of European politics.

So could the EU embark on a path of reform? Potentially yes. Could that involve changes to free movement rules? That is more of a stretch, the key stumbling block being that any substantive changes would require treaty change, which in turn requires unanimity among member states. Eastern European states, many of whose citizens work abroad and whose economies benefit from remittances they send home, would be likely to object.

In all likelihood next year will see Merkel re-elected and Marine Le Pen defeated, but eurosceptic, anti-system parties may not have to take power in those countries to convince their leaders that the EU’s current path is unsustainable.

The potential consequences

If, for the sake of argument an EU reform process looks to be in the offing, and, as the UK edges nearer to the precipice of a hard Brexit, with negotiations yielding little to cushion the blow (as we expect will be the case) the urge to pull back from the edge may start to grow stronger. What, if suggested now, would be dismissed as denying the referendum result, could start to look more a credible option as the realities of a hard Brexit and its potential impact are explored by the media.

Until that point is reached, public opinion seems unlikely to turn, meaning the UK will have to be well on the path to Brexit before it can consider changing course. “Pulling back from the edge” will likely require the withdrawal of the UK’s Article 50 notification. Whether this is possible is a legal question, which may ultimately be decided by the ECJ, assuming the European Council does not agree an interpretative guideline. For the ECJ to rule, a reference must be sought by a lower court. Reports indicate a case may be brought in Ireland within weeks with a view to inducing such a reference. In our non-learned opinion, based on the publicly stated views of various politicians and lawyers, and more cynically on the basic interest that the EU would serve by allowing those countries that wish to stay to do so rather than forcing them out, the ECJ is likely to rule that notification can be withdrawn.

The final binary question served up by May seems likely to be: deal or no deal? If in two or so years the EU has started on a path to reform, the possibility of withdrawing an Article 50 notification has been confirmed, and the exit terms look singularly unattractive, will the answer be an inevitable yes? Perhaps not.

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