Letter from London – BREXIT: Yesterday’s news… but tomorrow’s too?

June 27, 2023

Seven years have now passed since the momentous referendum which heralded the UK’s departure from the European Union.

Time enough, if opinion polls are to be believed, for an intensifying sense of buyers’ remorse. Indeed after a series of false dawns – from an overwhelming desire to ‘get Brexit done (at virtually any cost)’ in response to an initial three years of political stalemate, to the current seven year itch of discontent – since 2016 the issue has never been far from the forefront of our political discourse. More recently it has been the proverbial elephant in the room – political leaders have dared not speak openly to the voters about it, lest they are accused of wishing to open up an issue that was supposed to have been settled.

For the Conservatives any admission from the leadership that recovery from economic stagnation requires an engaged, working relationship with the EU, risks infuriating the Ultras and prompting accusations of betrayal. Meanwhile Labour walks a tightrope between pacifying its unrepentant Remain graduate activist base and avoiding any action that dissuades Red Wall Brexit supporters from returning to the fold, having voted Leave in 2016 and then backing Boris Johnson’s Tories in 2019. Even the Liberal Democrats remember all too well the outcome of the last election when having positioned themselves as the Party of Re-joining the EU in order to appeal exclusively (or so they hoped) to the 48% who had voted Remain they ended up losing ground from an already very low base.

Even amidst their current travails, the Scottish Nationalists know in their hearts that an unaltered Brexit decision is a crucial part of their case for independence. Sixty-two percent of Scots voted Remain so the fact that they were bounced into Brexit by the votes of the English (and Welsh) plays to a sense of grievance that is a mainstay of the SNP’s appeal. This will only be enhanced by a sense that the recent adaptation of the Northern Ireland protocol has given that part of the UK its own “very special position” within the EU custom union and single market set-up.

In short, the universally expedient position across the political spectrum is to claim that the Brexit question is now settled. Instead, the clarion call on matters European seems to be “Let’s move on….”

Slowly, however, over these years it has dawned on the general public that the form of Brexit we have finally ended up with has sacrificed our economic welfare at the altar of sovereignty and the notional freedoms to strike trade deals. In the meantime, our borders seem as elusive to effective control as ever they were when we were members of the EU.

Always much overplayed during our half-century membership of what began as a common market and developed into the EU was the persistent irritation expressed by UK businesses, large and small, at the imposition of ever more ‘European regulation’. In truth most of this blizzard of new rules of compliance came about as a direct consequence of the creation of a single market and customs union (of which the UK was both a leading advocate and beneficiary) by definition requiring regulatory alignment. This harmonisation worked in UK exporters’ interests as it allowed British goods to flow unimpeded across the single market.

The consequences of leaving the customs union and single market have been as harsh as they were inevitable. Any business exporting to the EU (and naturally this has been especially onerous for small enterprises lacking the administrative capacity to deal with the increased regulatory burden) has experienced a marked increase in the level of paperwork and bureaucracy. Accordingly small, relatively insignificant derogation from EU rules makes little sense. Better either to maintain total equivalence (and accept that outside the EU we have become a rule-taking supplicant) or seek the benefits, and take the potential risks to reputation, that arise from root and branch deregulation.

Even the current government recognises that the rather obsessive idea that as a matter of urgency we need to purge the UK statute book of all remaining EU legislation would cause damage to international minded UK businesses. lnward investment will scarcely be enhanced at the prospect of replacing EU standards with British ones, not least as it will likely impose an obligation on companies trading across Europe to comply with two parallel sets of rules.

This reflects one of the unspoken truths about Brexit – namely, the inherent imbalance in power between the UK and the neighbouring 27-nation bloc, still making up a single market of almost 500 million people.

It was – perhaps still is – fashionable to dismiss the EU as being an institution in decline. Indeed, to many the central premise of Brexit was that Europe was falling apart and that our exit would either precipitate its final collapse or enable us to escape whilst we still had the chance. This has also turned out to be a fallacy – along with the assertion that the act of leaving would signal the end of hostilities with the EU. A quick glance at the Swiss experience should have dispelled that myth. As we have seen over small boat migration, the Northern Ireland protocol and euro-denominated City trading, ‘leaving’ the EU has simply meant starting a whole new set of disputes and arguments with our closest economic neighbours.

Yet the British public was assured that the real prize of Brexit would be our ability to strike trade deals on our own terms with economic powers further afield, especially in Asia and the Pacific. For sure we have swiftly been able to cut and paste trade agreements that had already been recently finalised when we were at the EU table with countries such as Japan, South Korea, and Vietnam – although ominously in the former case there were delays when Japanese trade associations sought to exploit the opportunity to re-negotiate clauses to their own benefit.

The US have repeatedly made it clear that they have no current interest in commencing what would be tortuously long negotiations. Presumably they will only do so when it suits them to drive a hard bargain with the UK in order to use this as a precedent for a US-EU deal.

Meanwhile the agricultural aspects of the rapidly negotiated UK-Australian trade deal were disowned not only by the UK farming lobby but by the hardline Eurosceptic former Secretary of State for the Environment – needless to say, only after he had left office. It is welcome that we have secured Dialogue Partner status with ASEAN and the CPTPP, but this is more a post-Brexit diplomatic and geopolitical triumph than any significant boost to trade.

Another misapprehension was that the UK would be able to retain all the benefits of the single market because high-end EU businesses would lobby to retain access to UK consumers. I remember well an almost comical conversation I had with one of Mrs May’s three Brexit secretaries who sought ever more bombastically to insist that Mercedes and BMW simply would not allow the German government to risk cutting off the British market for their cars in our Brexit negotiations. Predictably what actually transpired was that the UK customers of these up-market global brands have been forced to grin and bear the imposition of tariffs after we left the EU.

But how does this all play out? Is a UK return to the EU on the cards?

In truth, despite all the problems outlined above I still regard this outcome as highly unlikely. After all, as EU members we already had a bespoke deal that was tailored to our interests. The UK’s substantial budgetary rebate, amply reflecting our relatively small and industrialised agricultural sector, was entrenched along with opt outs on the single currency, the Schengen common visa arrangements and elements of social legislation. Undoubtedly the starting point of any attempt to re-join the EU would be sacrificing these special arrangements – in short, the UK public would be offered a considerably worse deal than the terms on which we left.

Rather more important – would the EU really want us back? As members we were never fully committed or engaged (having stepped aside from the continental co-operation that led to the Treaty of Rome in 1957, we only joined sixteen years later in the second wave of membership). Thereafter we increasingly became semi-detached. Unless and until there is cross-party agreement in the UK in favour of rejoining the EU, it is highly unlikely that it would even commence discussions.

Lest we forget the UK was also comprehensively outmanoeuvred in the exit negotiations. As we now know those UK politicians who promoted Vote Leave had no plan or strategy from the outset – nor arguably ever since – as to what Britain really wanted from those tortuous discussions. By contrast the EU played a blinder – its negotiators were determined above all that Brexit should not serve as a precedent. Any other EU nation contemplating withdrawal had to be left in no doubt that walking away from the club would leave it worse off. So, it has proved for the UK – all the more ironic since we were always rather skilled at negotiating our own best interests when we were members (as that list of historic opt-outs amply attests).

One other great paradox of recent years has come to light more recently with the Windsor Framework that made the hastily and poorly negotiated Northern Ireland protocol more fit for purpose. Suddenly it is apparent that the EU Commission had much more discretion to accept our wishes than we had been led to believe after Article 50 was invoked. Their insistence that the rigmarole of getting permission from all 27 Member states was a roadblock to progress turned out to have been simply a ploy – when it suited them, the EU was able to use plenty of discretion to act quickly and decisively. Previously under PMs May and Johnson the EU had shown little inclination to make life easier for a UK government especially whilst it pursued a campaign of public hostility in the media. However, under new leadership, at a time when the UK’s NATO support over Ukraine was at the forefront of continental priorities, decisive and rapid progress was made.

Small wonder so few of the UK’s diplomatic corps have any appetite to go back the negotiating table with their EU counterparts. Brexit will not be reversed any time soon.

Written on 23 June 2023 by The Rt Hon Mark Field, former Member of Parliament (MP) for Cities of London and Westminster and Consultant at Buchler Phillips, an independent boutique firm with an impeccable Mayfair London heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.






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