LoCall: 1890 304 004
Telephone:+353 1 618 6911
On Tuesday, Prime Minister Theresa May delivered what is arguably her most comprehensive assessment of what the post-Brexit future might look like for the UK. The Prime Minister is quite clear that the UK will leave the EU. She is also quite clear in her desire to create a new and equal partnership between the UK and the EU. She ruled out the possibility of partial membership of the EU or a ‘half-in, half-out’ situation. She does not want the type of model adopted by other countries, presumably meaning countries such as Norway and Switzerland, who have access to the single European market, but at a price.
She is adamant that the UK will not be part of the Single European market (SEM), but that it will be able to do a trade deal with the EU. She does not envisage that the UK will remain a full member of the Customs Union, as this would mean having to apply the EU’s Common External Tariff, and would prevent the UK from being able to independently negotiate a trade deal with non-EU countries.
The Prime Minister laid out 12 objectives in the negotiation process, of which the following are the most significant:
The Prime Minister went out of her way to convince her EU partners that the UK decision to leave the EU is not borne out of a desire to become more distant from the member countries, but rather to maintain close relations with the EU. However, she also wants to build closer relationships with the rest of the world, free from the shackles of the EU.
In contrast to Donald Trump, who has used a lot of protectionist rhetoric to date, her vision is of a Britain that will remain outward looking and whose people will desire to ‘travel to, study in, trade with countries not just in Europe but beyond the borders of our continent’.
I am not sure that many of the EU members will actually take this assertion at face value or that her speech will smooth troubled waters. The instinct in the EU remains one of negativity in relation to the UK decision and this will make the negotiations over the next 18 months or so very difficult and potentially fractious. Regardless of how important the UK is to the EU the reality is that a relatively painless exit for the UK is not something that all EU leaders would be enamoured with.
While the Prime Minister has laid out quite clearly what she wants to achieve, it is important to remember that much of this could well be at odds with what the EU will want to achieve. The period of negotiation will be difficult; compromises will have to be made; but from an Irish perspective it has to be hoped that the Prime Minister will achieve her objective of creating a free trade relationship between the UK and the EU.
The Prime Minister was also categoric in her suggestion that no deal would be better than a bad deal for the UK, suggesting that if a ‘good’ deal cannot be agreed, the UK would be willing to rely on World Trade Organisation (WTO) rules. This would not be good news for the Irish agri-food sector in particular. Furthermore, she threatened that in such an eventuality, the UK could change its economic model, with a sharp cut in the corporation tax rate a distinct possibility in order to attract foreign direct investment (FDI).
The markets have reacted positively to the speech to date, with sterling stronger against the euro and the dollar. The markets had built in considerable bad news over the past couple of weeks, and have reacted positively to a less bad outcome than was possible.
We now know a lot more about the UK’s intentions, but the EU’s intentions are a lot less certain. The next couple of years promise to be incredibly interesting.
The views and opinions expressed in this article are those of the author.
(This publication is based on data available up to 9am on 18th January 2017.)