Ten years on from the self-inflicted wound that was Britain’s vote to leave the European Union, it’s become fashionable to say we should just go ahead and cancel it. Most voters agree it was a bad idea, and the promised nirvana of unfettered free trade looks laughable today in a Trumpian world. Here at Bloomberg, we estimate Brexit has knocked between 2% and 4% off the UK’s gross domestic product.
Sadly, there is little agreement about what a “reunion” would involve or much straight talk about the trade-offs needed to put Humpty back together again.
Grandees in the ruling Labour Party speak of a new EU relationship. But what does that mean? What scenarios might be acceptable politically, both in the UK and in Brussels? While some recalibration feels inevitable given the regrets on both sides, we need clarity about what hitting the reset button entails.
Fortunately, the UK in a Changing Europe think tank has run the numbers on what the various versions of closer ties would look like, both in terms of economic gain and reduced sovereignty. As ever with Brexit, it’s impossible to forecast exact numbers. It is a good guide nonetheless. Put simply, the closer we get, the better for business and trade and the worse for self-determination.
Despite the rise of “Regrexit,” the political calculations remain torturous. Any perception of an undemocratic plot to circumnavigate the 2016 result would deepen the political divide between the post-industrial regions and benighted coastal towns that voted leave and the prosperous cities and smaller Europhile UK nations that wanted to stay. Immigration is still a toxic issue.
It’s little wonder that Andy Burnham, the Labour usurper who wants to dethrone Prime Minister Keir Starmer, is treading carefully as he tries to win a by-election this week that would return him to Parliament. He’s up against a candidate from Reform UK, the party that’s ahead in national polls and led by the chief Brexiteer Nigel Farage. It’s shaping up as a rerun of the referendum in microcosm 10 years after the event.
Whoever prevails, the argument will carry on about the depth or shallowness of the UK’s future relationship with its neighbor and biggest trading partner by far — as it will among EU member states, some of which would like to penalize a repentant Britain that wants to return to the fold.
UKICE has helpfully provided a broad estimate of how much each arrangement could boost Britain’s GDP. And it includes scenarios from Farage’s Reform and the Conservative Party to go further on the EU split, which would do more economic harm. Below I weigh up the various possibilities, their political likelihood and what trade-offs the country might have to swallow in search of greater prosperity and the elusive growth promised by Starmer.
No matter who leads it, Labour will almost certainly go into the next election promising an EU reset. In this new world of multi-party politics, its likely coalition partners are also all pro-EU. Any politician who wants to make that case, be it Burnham or Starmer, must be transparent about exactly what they intend and what would be the cost. The country cannot afford a repeat of the referendum itself, which foolishly offered a binary choice between stay and leave and left the details of what that meant to be agonized over for eternity.
Only when this debate is done will Britain be ready to, if not fully reverse Brexit, then to properly ameliorate it.
Rejoining the EU
GDP: +3%-+5%
Sovereignty: Subject to all EU laws, with voting rights.
Immigration: Free movement of people within bloc.
Defense: Access to the €150 billion ($173 billion) Security Action For Europe defense fund.
Couldn’t we just rejoin? I’m calling this option the “Bobby in the shower” scenario: Producers on the long-running 1980s soap opera Dallas realized they’d made a mistake killing off the popular character Bobby Ewing, so a season later portrayed the intervening events as simply his wife’s bad dream.
Why not just pretend Brexit never happened and rejoin as a full EU member? UKICE estimates this would boost British GDP by up to 5%. The EU would probably support a reverse-Brexit too, albeit with caveats. Germany would welcome London’s input on defense, while France may demand a penalty. Brussels is ever wary of UK “cherry picking.”
But, but, but, it’s also the option that most triggers leave voters and areas already attracted to Reform, making it the least politically palatable — for now, anyway. Given the instability around the Labour government, Brussels could try to extract a “Reform premium” for a meaningfully closer relationship. This would bind the UK to try to ensure a future Farage administration couldn’t simply depart again. Some reckon this could even involve Britain having to join the euro as the price of reentry.
Whatever the penalty, Britain is unlikely to be back on the same favorable terms enjoyed last time. That’s a problem, given a new poll for YouGov shows anything short of keeping those “opt outs” would be viewed poorly by UK voters. Support for rejoining stands at 55% in this survey, and drops to 35% without those membership perks.
Rejoining the Single Market (or European Economic Area)
GDP:+ 2%-+3%
Sovereignty: Taking almost all EU law with little say over it.
Immigration: Free movement.
Defense: Full participation in SAFE.
Simply reentering the single market rather than full EU membership would allow unrestricted trade within the bloc and the other EEA nations Norway, Iceland and Liechtenstein. Yet this would mean Westminster having to automatically accept any new EU market legislation into domestic law.
Being a rule taker is OK for smaller nations, but it’d be hard to stomach for the world’s sixth-largest economy. And voter fears about open borders would go unaddressed. Eastern European states eager to include Britain in the continent’s defense architecture would be keen on this scenario.
The Swiss Model
GDP: +1%-+2%
Sovereignty: Rule taking in most areas relating to goods trade.
Immigration: Free movement.
Defense: Little change from current arrangements.Let’s call this the cherry picker’s charter. The Swiss model relies on a complex, constantly evolving series of agreements relating to specific sectors. That’s beneficial in many areas, given that accords can be flexible, but it’s byzantine and bureaucratic. Think there are too many civil servants in Whitehall now? Wait till you see how many more would be needed for this.
On the plus side, free movement and free goods trade could boost GDP a bit, while leaving cherished British industries such as services and finance — including the City of London — beyond Brussels’ grip. There’s less interaction with EU institutions and courts in this model compared with full membership. Alignment would probably be confined to security, science, education, farming and food. But is extra growth of just 1%-2% worth the hassle?
Customs Union
GDP: +0.5-+1%
Sovereignty: Some limits on an independent trade policy.
Immigration: UK control over its borders.
Defense: No change.A customs union is favored by Britain’s centrist Liberal Democrats. It would allow smoother trade and impose much less red tape, while the UK would still decide who crosses its borders. The downside is the paltry impact on GDP, and the limits to Britain forging new trading ties beyond Europe.
Still, post-Brexit trade deals with Australia and India have hardly set the world alight. This might be the most painless route to a minor growth boost. Every little helps.
The Starmer Trajectory
GDP: +0.1%-+0.5%
Sovereignty: Some dynamic alignment in some areas.
Immigration: Some form of youth access scheme.
Defense: Possible participation in SAFE.The Starmer government’s current plans to draw closer to Europe are constrained by his so-called “red lines,” included in Labour’s last election manifesto, which rule out freedom of movement or rejoining the single market or customs union.
So far negotiations haven’t been smooth. The latest summit was delayed after talks stalled over whether European students could enjoy lower university fees in Britain. Plans to include the UK in the SAFE program were torpedoed by the French, who demanded billions of pounds for the privilege of joining.
The government hopes to align in areas such as agriculture, food and medicines and, eventually perhaps, energy. Some adherents of this approach suggest the UK could help shape future EU policy, although how remains vague. Ultimately the logic of cooperation means sticking points will be overcome — but at what financial cost to Britain? Again, is it worth it for a minuscule growth dividend?
The Status Quo
GDP: 0
Sovereignty: No dynamic alignment.
Immigration: No freedom of movement.
Defence: Cooperation as part of NATO.Arguably the worst of all worlds is where we find ourselves today: Isolated from our friends and neighbors across the Channel, with businesses hoping to trade beyond these shores throttled by red tape. We may have theoretical control of our borders, but the small boats keep coming.
Brexit Redoubled
GDP: -0.5 % to -3%
Sovereignty: Withdrawal from the European Convention on Human Rights.
Immigration: Potential for a minor reduction from cancelling youth mobility scheme and increased deportations.
Defense: Undermines current commitments and makes informal cooperation more difficult.
Is the answer to the problems of Brexit… more Brexit? UKICE has run the rule over Reform’s suggestion that Britain entirely blow up its Brussels relationship by junking the EU-UK Trade and Cooperation Agreement, which governs our current trade and security arrangements. Reform and the Tories also propose leaving the European Convention on Human Rights, in order to stop people applying to the Strasbourg court to thwart deportation.
The think tank forecasts that the economic hit from doing both would be severe, with the EU likely to impose further trade barriers. No matter what Labour and the other left and centrist parties put forward on the future European relationship at the next general election, Farage’s ascendancy means this pathway to yet more self-harm will be on the ballot.
This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Rosa Prince is a Bloomberg Opinion columnist covering UK politics and policy. She was formerly an editor and writer at Politico and the Daily Telegraph, and is the author of “Comrade Corbyn” and “Theresa May: The Enigmatic Prime Minister.”
This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.
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