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Bremain

Brexit poses so many practical difficulties that it will not happen

Brexit will probably never happen. The news narrative has become one of delay, with the odd Brexiteer keeping the flag flying in the Daily Telegraph but a lot of stasis. Next year, there will be many stories about the major problems that Brexit will cause. Negative economic effects will loom. Village editorialised in its last edition that no one who understands history or economics could vote Brexit and certainly it does undermine fundaments of what many regard as political imperatives.

There will be surprise at the huge range of problems involved in taking EU law out of UK law given that an integration of laws has been underway for over forty years. Gradually, a wide-ranging complex vista of Brexit problems will emerge across British social and economic life; for instance, residency, travel, employment laws, training, education, research, and also in business, whether trade, competition, employment or any of the recesses into which the EU has long delved.

The probable break-up of the UK following Brexit will inevitably continue as an issue in the media background, because, very probably if Brexit happened, Scotland would become independent and join the EU. Democrats could not ignore if 5.3 million EU citizens in a separate national area, were expelled from the EU against their collective will.

Furthermore, there must be a significant chance that the court challenges to unilateral UK Government action on Brexit will succeed and force an early vote in Parliament on the issue, causing further delay and uncertainty about Brexit.

But behind the scenes, there are other unreported factors. We don’t know what Theresa May and Angela Merkel said to each other and it would be very hard to guess.

We can be much more confident about what the current American Government from Obama to the State Department to the military are saying: don’t leave the EU. While Brexiteers will brush off the partisan advice of a lame-duck administration, the US will have a new President- elect on November 9th next. Assuming it is Clinton, she will reiterate in private the insistence of the current administration. British Government Ministers, officials and army generals will be left under no illusions by their American counterparts that Brexit is a no-no from global strategic and security perspectives and will have to be averted by whatever means.

Initial post-Brexit reporting in English language media emphasised how the UK was in a strong negotiating position because of its trade deficit with the rest of the EU and that Germany’s Angela Merkel wanted a reasonable agreement for the UK, partly because of German exports to the UK. In fact, Brits will continue to buy their BMWs. In reality, the dominant market focus of big German exporters is growth of their Asian sales, especially China. More seriously for the UK, Germany, including Chancellor Merkel herself and her closest political allies, is increasingly indicating that it will take a tough negotiating position with the UK on Brexit and that it strongly supports a united EU position towards the UK. Merkel indicated this twice recently including at a high-profile meeting with France’s Hollande and Italy’s Renzi.

Even more ominously for the UK, Merkel appears to be supporting an EU strategy to restrict the ability of City of London financial services, especially banks, to operate in the EU after Brexit. That is by far the UK’s most important exporting business. Michael Fuchs, deputy leader of Merkel’s CDU party, said recently that banks operating in the EU must be subject to EU supervision and can’t be run out of London when the UK is no longer a member. “I really think this is something that’s not negotiable, the so-called banking passport”. Germany and France greatly resent the extent of the economic gains and influence that the City of London gets from selling financial services throughout the EU. In the event of Brexit, they would try and repatriate as much financial business activity as possible to Frankfurt and Paris. Moreover, the issue makes a powerful bargaining chip.

Bremain
Bremain

There will probably be an often lengthened delay before the UK triggers Article 50 and formal Brexit negotiations, if it ever does trigger it. Even if it does, Brexit is still very unlikely; mostly because it would cause too much damage to the UK economy and disruption to social and economic life in the UK. The end result will most probably be an agreement that the UK will remain in the EU, with the UK’s best hope being to maintain the favourable agreement that David Cameron negotiated in February 2016. In reality, internal British, European and global politics all mean that Brexit is a madness that will have to be averted.

Brendan Lynch is an Economist and former stockbroker. He is the author of ‘EMU: Ireland’s Dream Start – The Political and Economic Impact of EMU on Ireland’ (2008).