The Whitehouse Consultancy

By Chenoa Geerts, Associate Political Consultant

Tuesday 17th January. The day UK Prime Minister Theresa May explained what “Brexit means Brexit” means. The long-awaited speech was held in London’s Lancaster House, where Margaret Thatcher welcomed the creation of a single market in 1988. You could only imagine what this symbolic gesture meant, as Mrs May presented her 12 Brexit negotiating principles.

Not beating about the bush, Mrs May revealed she wants to pull the UK out of the single market, opting for what we now refer to as a “hard Brexit”. She had received the message so often conveyed by European leaders that the UK would not be able to ‘cherry-pick’ remaining in the single market while not respecting the free movement of people. Instead, the PM said she aims to control immigration, stop contributing vastly to the EU budget, negotiate free trade agreements with the EU and other partners, and make sure the UK will no longer be subject to the European Court of Justice.

The Prime Minister’s message was clear. She will not try to wriggle her way through the complicated maze of EU legislation, treaties and institutions to perhaps only partly leave the EU at the end of the ride. “No deal for Britain is better than a bad deal for Britain,” she said. So, based on these determined words, what can we expect to happen now?

The pound has endured a rollercoaster ride since the referendum and surged hugely following May’s speech. As it becomes clearer where the UK is headed, we might see greater stability in financial markets. Some took Mrs May’s strong message to heart though, as Goldman Sachs announced it might move staff from London to Frankfurt as part of a post-Brexit reorganisation and HSBC and UBS, two of the largest investment banks in the City of London, also warned they could be moving jobs to Paris and Frankfurt respectively. This will reduce government tax receipts and result in a loss of income tax from well-paid investment bankers. Anticipating this, Chancellor of the Exchequer Philip Hammond suggested previously the Government might reform its economic model and make the UK Europe’s new tax haven to attract more business. This move, however, won’t sit well with domestic or European partners, nor does it present a sustainable solution to fill the gap that will be left by the European single market.

Mrs May’s “hard-Brexit” line also prompted strong language from partners she sought to come closer to. Nicola Sturgeon, First Minister of Scotland and pro-Scottish independence campaigner, said that plans to take the UK out of the single market have increased the chances of a second independence referendum. Nevertheless, she will remain cautious as her SNP lost their Assembly majority in last year’s Scottish Assembly elections and a referendum victory is anything but certain, knowing as well that a defeat will push back independence for a long time.

For European partners, Mrs May’s speech could not have come at a worse time. Presenting her Brexit plan two days after Trump revealed he thought NATO was obsolete, Brexit was good and he did not care if the EU fell apart, the PM addressed an anxious group of EU ambassadors, only to confirm their worst fear. She wasn’t bluffing. Brussels responded diplomatically with Michel Barnier, the European Commission’s Brexit negotiator, saying that an “Agreement on orderly exit is prerequisite for future partnership.” This was echoed by his boss, Jean-Claude Juncker, who says he’ll be looking for a “balanced solution”. But is the EU-bubble really as relaxed as it seems?

If you go to Brussels you feel people are united on the issue of Brexit and display an easy-going, confident attitude in entering the negotiations. They know the UK is not able to negotiate any other trade agreements until it has officially left the bloc and they press on the fact the UK will lose a lot of business by leaving. Furthermore, elections in increasing Eurosceptic Netherlands, France and Germany will see important EU leaders take a hard stand Brexit to show their own electorate the down-side to leaving. This could make the UK’s position in the negotiations challenging in the months after the Article 50 notification. In the longer run, however, the EU’s mood might change. As we have seen with the Euro crisis, the refugee crisis and the war in Syria, the EU is often unable to stand united on crucial issues and is frequently seen paralysed in its decision-making processes. In the end, the UK might actually find itself having the upper hand in negotiations in which their partner is tangled in internal conflicts and disagreements. Only time will tell…

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