Brexit: Will mutual benefit prevail?

01 Mar 2017

With the Government’s deadline for the service of Article 50 notice getting nearer, and as the passage of the Brexit Bill moves to the Lords, the scale of the task ahead becomes ever clearer. In the words of Sir Ivan Rogers it is a “humungous” challenge. Co-head of our Brexit taskforce, Mark Curtis shares his views.

The Government's stated aim is to negotiate both the terms of the UK's exit and an agreement about its future partnership with the EU by the time the two-year Article 50 process has concluded. In reality that will mean less than two years and will need to be achieved by late 2018 to allow time for final approvals of the exit package both in the UK and the EU within the two year time period. Yet to do so and to achieve a successful outcome will require the process to withstand factors of dizzying complexity.

Within Parliament the debate on the Brexit Bill has already exposed divisions within the Labour Party. Although Conservative party unity has largely held firm during the debate, it can be expected that as negotiations commence, and the position of the Government and the EU27 become apparent under intense and possibly febrile media spotlight, cracks within the Conservative party may well emerge. That is before adding in any inter-party political point scoring which it may be impossible for the political parties to resist in advance of an election due by 2020 at the latest (and not inconceivably before conclusion of the Article 50 process).

Outside Westminster, as details emerge of the terms of the negotiation the divisions in society which underpinned the leave vote will not be far from the surface as the public scrutinises the deal. In particular, some of the more exaggerated promises made during the Referendum campaign will be watched closely as will signs of any inequality in the vigour with which the Government seeks to protect different stakeholders, geographically, socially and economically within the UK.

Add to that domestic political uncertainty arising from elections in France, Germany, Italy and the Netherlands. In addition to internal debate within the EU about the future state shape of Europe and the status of the EU project, concern as to the relationship of the EU and the UK with the newly protectionist US and economic headwinds (such as a potentially re-emergent Greek crisis), all of which will impact upon the negotiating position of the EU27. It is a heady mix indeed.

One might hope a sense of inclusive national unity might prevail in shaping the UK's position and approach to the negotiations, and that the principle of mutual benefit would drive thinking on both sides of the Channel. It is not fanciful however to imagine a scenario where this is wishful thinking and cold hard politics in the interests of different national and domestic interest groups prevails, rendering a middle ground solution of mutual benefit impossible to achieve within the timescale. In this scenario we would presumably be forced into the “no deal” the government has warned is preferable to a bad deal: Whatever that may mean given the uncertainties inherent in falling back on WTO rules.

Against this background large, complex international multiservice financial organisations have to plan how they might organise themselves to continue to serve their customers lawfully under whatever scenario might emerge. It is an un-enviable task indeed, and unsurprising that we have seen a number of such institutions announce plans to move jobs to other centres. There are likely to be more. That should not be seen as surprising or a statement of a lack of faith in whatever arrangements could ultimately emerge. Rather, it is a position of practical expediency and recognition of the difficulty of achieving an outcome of sufficient certainty within the time horizons, which such organisations require to act.


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