David Cameron has indicated that he will resign as British Prime Minister on 13 July, with Theresa May due to take over following her victory in the Conservative Party leadership contest. Gavin Barrett writes that the new Prime Minister will be faced with an exceptional challenge in handling the fallout from the EU referendum. He suggests that any attempt to rerun the vote would be problematic, but that it is highly unlikely she will be able to secure a deal that restricts EU free movement of persons while retaining access to the single market.
Theresa May will now become Britain’s next Prime Minister, following the decision of Andrea Leadsom to pull out of the Conservative leadership contest. But when she enters office, she will face a pressing question: how should an elected government react when its own electorate votes in a referendum to walk off a political and economic cliff – as, arguably, occurred in the referendum on 23 June.
The intervening days have seen sterling plummet to a 31-year low – experiencing the biggest two-day drop since the post-World War II Bretton Woods arrangements disintegrated in 1971. Share values worldwide plummeted a stunning $3 trillion on the Friday and Monday after the vote: that Friday’s $2.1 trillion losses were the heaviest ever suffered in a single market day, wiping colossal sums off savings, income and pensions.
The UK has seen its credit rating downgraded. Recession threatens (notwithstanding the efforts of the Bank of England’s Mark Carney) and the British property market is in trouble. Inflation also lurks and instead of the ‘Brexit bonus’ promised by Brexiteers, an austerity budget has been promised. Until the lengthy negotiation period finishes, an investment-freezing fog of uncertainty will grip the UK.
Nor are the Brexit negotiations themselves guaranteed to end well. They threaten to be long and difficult. The UK cannot possibly emerge from them in a situation equivalent to or better than membership. At best, it will end up like Norway, with access to the single market retained, but Britain’s influence destroyed: a shocking, if economically survivable outcome for a state previously one of the EU’s three most influential regarding single market laws.
At worst the UK will end up locked out of the single market (and given the probable need for an agreement on the UK’s future relationship with the UK to be ratified and approved by parliaments in all 27 other states, it remains to be seen whether this fate can be avoided). In a worst-case scenario, the City of London’s future as Europe’s financial centre would come under sustained assault from cities like Frankfurt and Paris.
Two choices
Faced with all of this, what should Britain’s new political leadership do? Like any government in such a position, the UK government has two logical choices. One is to do what Denmark, Ireland (twice), France and Holland have all done, and that is to seek to reverse a potentially catastrophic referendum result. The other is to make the best of a bad lot, and seek to maximise UK access to the single market, with its 500 million consumers.
To be democratically acceptable, reversing the referendum would require either the election of a government on a ‘Bremain’ platform, or a further referendum. Post-referendum elections in France and Holland played a key role in allowing their respective governments to ratify the Lisbon Treaty after their electorates rejected the Constitutional Treaty in plebiscites in 2004 and 2005. An early UK general election, however, seems unlikely (and Theresa May, like other Conservative leadership candidates, was asked by anxious Tory MPs to ensure this remains the case).
Even if a general election occurs, Labour is in disarray and the Conservatives split over Brexit. The election of a pro-Bremain regime before Article 50 exit negotiations end is improbable. A pro-Bremain government before Britain’s permanent new relationship with Europe is negotiated (a process expected to take ten years) on the other hand, seems quite likely. But by then it may be too late, since the exit date may have passed.
The option of holdng a second referendum also raises challenges. Notwithstanding the wishes of four million online signatories seeking a second poll, one cannot simply re-hold a referendum in the absence of any clear justification for doing so. A new bespoke deal – which is what Ireland got in 2009 (with reassurances on, for instance, corporate taxation and the promise to retain a commissioner from each state) and Denmark in 1993 has previously provided justification for EU member states to hold second referendums. However, the UK obtained a special deal last February, before its referendum and still voted for Brexit. That bolt has thus probably been shot.
The only possible prospect of a second referendum seems therefore to be a poll on the ultimate deal obtained by the UK in Brexit negotiations (an option suggested by Health Secretary Jeremy Hunt). That deal is guaranteed to be worse than what the UK has now. It would confront the UK electorate with what it really voted for on 23 June, rather than what can now be seen to have been the ‘pie in the sky’ promises made to voters by Brexit campaigners.
But even this option would require both the other member states (and, possibly, the Court of Justice too) to take the view that the Article 50 process can be stopped once it commences. Notwithstanding this (and a recent British government description of June’s referendum as a “once in a generation vote”), this possibility should be explored, as it may well offer the only prospect of protecting the interests of the British people at their current level.
Whether or not it avails of such a choice, the UK government must now negotiate the Brexit terms and its future relationship with the EU – which, absent future votes, will become permanent arrangements. The top British priority in such negotiations has to be the retention of access to the single market, thereby safeguarding the UK industrial base and its services industry (particularly London’s crucial financial services industry).
Going by the precedents of Norway and Switzerland; the explicit statements of France’s President Hollande, Germany’s Chancellor Merkel and several eastern EU member state governments; and the need to show domestic mainland electorates that exit doesn’t pay, the UK will have to sacrifice its desire for the imposition of migration restrictions in order to obtain full market access.
Worryingly, Theresa May remains committed to immigration restrictions. Such a position, unless retreated from, will probably see Britain pay with reduced single market access. It is a stance which could prove economically damaging to the UK – but it would be far from the first time that the UK’s strategic needs at European level have been sacrificed in the Brexit debate for domestic political reasons.
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Note: This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.
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Gavin Barrett – University College Dublin
Gavin Barrett is Jean Monnet Professor of European Constitutional and Economic Law in UCD Sutherland School of Law.
There is a third way: to work for the dismantlement of the rest of the EU from the outside, creating more and more trouble for Brussels until it collapses. Once the EU is in tatters (which will happen in one way or the other, it is just a matter of time), there will be no in or out anymore.
Ignoring your rather atrocious brain-storming of how to overturn the result of this referendum, you correctly point out that a Norway style (EFTA/EEA) outcome is very likely to occur as a result of the article 50 negotiations.
Yet you do not grasp that such a deal is not the end point of our relations with the EU, only the transitional option. This is the position of the ‘Flexcit’ paper, by Dr Richard North, and is also the hinted position of Theresa May, when she spoke of a ‘initial deal’. This may well have something to do with the reports during and after the referendum that the civil service have been reviewing Dr North’s paper. Perhaps Mrs May knows of the paper.
You then incorrectly smear the EFTA/EEA states, and then paint it for us as being the only end point, assuming that leave voters would be so repulsed at the prospect of being ‘like Norway’ that they would swiftly change their mind to the ‘right’ opinion.
We have been in this organisation 43 years. We will not leave it overnight, and a EFTA/EEA deal is a good half-way house to leaving completely, which may well take well over a decade. Yet this very fact demonstrates the extend to which this country has given up its independence as a member of the EU, and thus shows the lie of the remain campaign when they sought to pretend that the EU has only a limited impact on our lives. A limited organisation wouldn’t take so long to disentangle from. You really should admit that.
Furthermore sir , if the next cabinet fails to deliver a brexit that is for the people ,it will completely undermine the whole referendum and create social unrest up and down the country.So a Norway + style trade deal is completely out of the question.
If that is what does happen and austerity becomes common place I will be very seriously considering not paying into a country that fails to listen to its people has no sense of democracy. A country where the government is knowingly destroying the Social ,Democratic way of life in the UK who allow criminals and terrorists into the country by there thousands.
We should take this opportunity to regain our sovereignty, our borders our laws for the good of the people that live and work here and create a britain for the people and a common example to the rest of Europe how it can be.
A rather pessimistic view surely? One could argue one-dimensional as there is no allowance for other EU states joining in to leave also? No allowance either for a further euro crisis triggered perhaps in Italy, not forgetting Greece is hardly stable.I personally take a view that rather like the Hotel California we have checked out but we will never leave,however it will be a very different Europe that we remain in, possibly 2 tier, hard and soft or north and south. I may be wildly optimistic but BMW will still be wanting to access our market and don’t forget we buy more from ‘them’ than they do from ‘us’.
The above comments really make me not believe in humanity! Haters.
A rational analysis, but doesn’t really consider the EU’s negotiating strategy.
The problem is that if the EU believes the UK can be persuaded to remain at a second post negotiation referendum, then (assuming they want the UK to remain), they would have a clear motivation to offer the UK terrible exit terms that would damage their own economy but cripple ours. If they believe the UK is certain to leave then their motivation will be protecting their own economies at all costs.
So Theresa May’s best plan would be:
1) Seek further concessions so that the UK can remain in the EU but with some token concessions around restricting free movement – perhaps some form of regional emergency brake. Given how close the initial vote was, the short term economic damage that will become more and more apparent over the next weeks and months, and the evidence that a number of leavers already regret their vote, this only needs to be enough to give cover for a second referendum, rather than having to be something that will sway large numbers of voters. Ideally this would be presented as an offer from the EU rather than something the UK had to beg for.
2) If the UK cannot get any concessions to remain (either because the other member states refuse to budge on freedom of movement, or because they don’t want other countries trying the same thing), then Theresa May should negotiate on the basis that the UK is definitely leaving (Brexit is Brexit), but then announce a referendum at the end of the deal. This would need careful presentation to avoid looking to much like a U-Turn – perhaps she could simply be honest and say she had to protect her negotiating position!
Interesting times.
Tallpaul, interesting times I totally agree. The flaw I feel to your argument is the assumption that the 27 remaining (perhaps temporarily) EU countries can agree and negotiate as a single entity?
There in lies one of the principal reasons I voted leave in the first place, our best interests are not in accord with many other member countries in many areas!
Once the other countries start to try to negotiate they willi believe realise the conflicting interests that exist and massive change, not token concession, is very likely to occur in the Union.
I agree that it will be a challenge to get the 27 remaining member states to agree to anything.
This is one reason why I voted remain … the mechanics of leaving are massively stacked against us. There is a very strong possibility that nothing will be agreed in the 2 years after Article 50 is invoked, and the treaties will simply cease to apply.
This will be devastating for the economy in the short-medium term, as not only will we have no trade agreement with the EU, we will have no trade agreement with any other country (all the trade deals that we are currently party to are bilateral deals between the EU and 3rd country), and no visa waiver agreement for travel to any EU member state, which will make it very difficult to do business even under WTO rules.