It is now just over 12 months since the UK voted to leave the European Union. What’s happened in that time? What will our future post-Brexit look like? And who are the main players making the decisions?
Last Friday was a significant day: the first anniversary of the UK’s Referendum on our continuing membership of the European Union. As the world now knows, the UK voted to leave the EU, David Cameron resigned and Theresa May became Prime Minister, announcing to all and sundry that “Brexit means Brexit.”
Having done not very much at all for nine months – except end the political career of the now-vengeful George Osborne – Mrs May finally triggered Article 50 of the Lisbon Treaty on March 29th and began the formal process of the UK’s divorce.
Armed with record approval ratings and facing a leader of the opposition who no-one outside his own party took seriously, Mrs May then called an election, promised ‘strong and stable’ government and looked forward to a Commons majority of somewhere around 100.
Not for the first time, Mrs May was wrong and Nigel Farage was right. “The PM is a vote loser,” he wrote in the Telegraph. “The more you see of her the less you like her.” Meanwhile, the more people saw of Jeremy Corbyn the more they liked him. The result was not an overwhelming majority but a hung parliament. Theresa May limped back into Downing Street, still muttering that “Brexit must mean Brexit” but to all intents and purposes hanging outside her castle, twisting in the breeze until the Lannisters of the Tory party decide who will replace her.
And then, just eleven days after the General Election, the negotiations to leave the European Union formally began on Monday, June 19th.
What happened in the first week?
Very little. The UK made an offer regarding the rights of EU citizens resident in the UK: the European Union poured scorn on it. But that was only to be expected: as that astute political commentator Macbeth would have said, the first week was “full of sound and fury, signifying nothing.”
Who is in charge of the ‘sound and fury?’
You are going to hear an awful lot about these two gentlemen over the coming years. Let us introduce them.
In the red, the white and blue corner is David Davis, the Secretary of State for Exiting the European Union. Davis is an interesting man: he is far from your typical Conservative, having been born to a single mother and then – when she re-married – being brought up in a ‘slum’ in Wandsworth and then on a council estate in Tooting. Having worked in the sugar industry and been a member of the Territorial Army, Davis entered parliament as the MP for Boothferry at the age of 38. When he was defeated for the leadership in 2005 by David Cameron he must have thought his career was over – but Theresa May brought him back to lead the Brexit negotiations in her Cabinet changes of July last year.
His principal ‘opponent’ will be Frenchman Michel Barnier whose main claim to fame –until now – was being instrumental in France staging the 1992 Winter Olympics. In theory, Barnier is a top European Union official but – as Politico points out – he is at heart a politician, having been elected as a centre-right pro-Europe MP in the 1970s. He has a reputation as a tough negotiator who knows what he wants – and what he wants is to preserve the unity of the EU27, not what is fair, amicable or reasonable for the UK. Barnier is 66, two years younger than David Davis.
Has Brexit been good news or bad news so far?
Let us try and be even-handed: there has been good and bad news for the economy and for jobs. What is clear is that “Project Fear” – your house will plummet in value, businesses will queue up to leave the UK – has not happened. Simply put, the stock market has risen since Brexit, the pound has fallen, GDP growth has remained above the gloomy predictions, the number of people in work has gone up – but so has inflation, which means most people have suffered a fall in real wages.
‘Stocks tumble after Brexit’ reported the BBC on 24th June last year. After a ‘wild day of trading,’ the FTSE-100 index of leading shares ‘ended 3% lower at 6,138.’ Last Friday the FTSE closed at 7,424 – up 21%. That is good news if you have investments, or if your pension is invested in the UK stock market.
The pound, though, has gone in the opposite direction. ‘Pounds tumbles to 31 year low after Brexit’ said the Guardian, reporting that it had fallen from $1.50 to $1.33 after the vote. The pound has continued to drift lower over the past year, and at the time of writing stands at $1.27. A falling pound is great news for exporters – their goods are cheaper for foreign countries to buy – and this was reflected in last week’s news that manufacturers’ order books were at a 29 year high. But a falling pound is bad news for prices. The cost of imported goods (such as food) goes up and foreign holidays also become more expensive – and you have less money to spend when you get there.
The number of people in work has continued to rise since the Referendum, with a recent Government statement showing 31.95m people in work – the highest figure ever recorded. However, the same statement also confirmed that wages had risen by 2.1% including bonuses. Unfortunately, inflation in May reached 2.9% and is expected to go above 3% later this year. This means that in real terms most people have seen their wages fall. If you do not receive bonuses, or you are in the public sector and subject to a 1% wage cap then your wages will have fallen even more sharply.
What are the UK’s options now?
Hard Brexit, soft Brexit, now Boris Johnson is talking of an ‘open Brexit…’ There seems to be a new option each week and the definition of each option seems to change on a daily basis. But as far as trade goes, the UK seems to have four options at this stage. Let us briefly consider each of them:
Stay in the Single Market
This option involves leaving the EU Customs Union but staying in the Single Market – the European Economic Area. This option comes with huge political challenges – the role of the European Court of Justice, what to do about free movement and the question of continuing UK contributions to the EU budget, but it would allow the UK to have bilateral free trade agreements outside the Customs Union.
Stay in the Customs Union
Or, we could do the exact opposite: stay in the Customs Union but leave the Single Market. This option does not look likely, as it does not give the UK the advantages of trading at lower world prices outside the EU’s common external tariff.
Leave both, and do a deal with the European Union
This option would involve leaving both the Customs Union and the Single Market, but still striking a trade deal with the EU. We are now moving into ‘hard Brexit territory’ and Theresa May has repeatedly said that the UK will leave the Single Market.
Leave both; do not do a deal with the EU
This is the ultimate ‘hard Brexit.’ Essentially it means the UK simply says, “We’re off.” Trade would then be conducted under World Trade Organisation rules, with the UK completely free to negotiate deals and trading arrangements with the rest of the world.
If these options seem complex, it is because they are. If the negotiations were conducted on the KISS principle – Keep it Simple, Stupid – then the UK would go for option four. After all, not only has Theresa May ruled out the Single Market, she has also said that the UK wants to “establish bold and ambitious free trade agreements with old friends and new allies [and be] free to establish our own trade schedule at the WTO.”
But as we wrote above, Theresa May is almost a prisoner of her own party. The question is not just ‘what does the PM want?’ it is also ‘what do the competing factions within the Conservative party want?’ The next two years – both in Westminster and around the negotiating table – will be long, drawn-out and messy. And you suspect that the behind the scenes skulduggery will make Game of Thrones look like the proverbial vicarage tea-party…