Edition: International | Greek

Home » Europe

Four Brexit scenarios

An eleventh-hour deal on the UK’s withdrawal from the EU might be hammered out by the end of the year. But the risks are rising that it won’t

By: EBR - Posted: Tuesday, July 24, 2018

text size [–] [+]
The chances are rising that Brexit talks between the UK and EU will break down. With time running out, the two sides remain far apart. Theresa May has published her latest compromise plan and sees little space for further concessions. Michel Barnier, the EU’s chief negotiator, has equally little room for manoeuver. Maybe some eleventh-hour accord will be agreed by the Council of Ministers later this year; but risks are rising that it won’t.
The chances are rising that Brexit talks between the UK and EU will break down. With time running out, the two sides remain far apart. Theresa May has published her latest compromise plan and sees little space for further concessions. Michel Barnier, the EU’s chief negotiator, has equally little room for manoeuver. Maybe some eleventh-hour accord will be agreed by the Council of Ministers later this year; but risks are rising that it won’t.

MORE ON Europe

by Peter Kellner

It is often the hardest question, and sometimes the most important: “And then what?”

The chances are rising that Brexit talks between the UK and EU will break down. With time running out, the two sides remain far apart. Theresa May has published her latest compromise plan and sees little space for further concessions. Michel Barnier, the EU’s chief negotiator, has equally little room for manoeuver. Maybe some eleventh-hour accord will be agreed by the Council of Ministers later this year; but risks are rising that it won’t.

And then what?

Here are four ways in which the crisis could unfold.

Scenario One: The Deadlock Persists

The UK says it will not pay the “divorce fee” of around €50 billion that it agreed to last December as part of a withdrawal agreement. Without such an agreement, UK ministers say, why should the UK pay anything? The EU retorts that there will be no “implementation phase” (under which day-to-day arrangements—for example, at the UK’s borders—would continue until the end of 2020); for this, too, assumes a withdrawal agreement.

As a result, on March 29 next year, the UK would tumble over the cliff edge feared by business and many others. Trade with the EU would be subject to tariffs and border controls. Lorries would pile up around Dover and Calais. Food destined for British supermarket shelves would rot. The Irish border would also need customs posts—or become a smugglers’ paradise. British factories—including almost all of the motor and aviation industries—would soon have to cut production and lay off workers, for many rely on frictionless, just-in-time, trans-European supply chains, which will no longer work. The UK will have less access to vital medicines, and also chemicals used for everyday items such as shampoo and toothpaste. In the most extreme no-deal scenarios, British airlines will lose the right to fly to Europe’s mainland.

Doubtless deals will be done over time to clear up the mess. Ways will be found to revive trade. British patients will be treated and holidaymakers able to fly once again to vacation spots in the Mediterranean. But meanwhile, the disruption would be huge, and the economy unlikely to recover completely for many years. What is more, the government’s own budgetary watchdog, the Office for Budgetary Responsibility, warns that the cost of Brexit to public finances will far outweigh the savings from the UK no longer paying into the EU budget, whatever the long-term arrangements. That promise by the Leave campaign two years ago that Brexit would free an extra £350 million (€400 million) a week for the UK’s National Health Service? Forget it.

Scenario Two: “Hotel California”

Precisely because crashing out of the EU without a deal would be so catastrophic, attempts are made to prevent it. The first option would be for the UK still to leave the EU next March, but with both sides agreeing to maintain, for the time being, the status quo in terms of trade and all the other day-to-day arrangements. In other words, the “implementation phase” would go ahead even in the absence of a full withdrawal agreement, and the UK would abide by its agreement to pay into the EU while fresh attempts are made to negotiate a long-term relationship.

This appears politically tempting, but is not as easy as it looks. What if no agreement is reached next year or the year after? Will this short-term arrangement become permanent—just as Norway’s relationship with the EU, designed to last just a few months in 1994, is still in force? Within the UK, this would store up problems for the future, with the UK continuing to abide by EU rules and continuing to pay into the EU budget—but with no say in how new rules are set or EU money is spent. This would horrify pro-Brexit politicians, who already fear a “Hotel California” departure, echoing the 1977 song by The Eagles, in which the UK checks out but never really leaves.

Scenario Three: Delay Tactics

The UK asks the EU to delay Brexit while further attempts are made to secure a withdrawal agreement. Under Article 50 of the Lisbon Treaty, such a delay requires the unanimous consent of the other 27 EU members. This may not be forthcoming. But if the UK does clear this hurdle, then (as with scenario two) day-to-day life continues unchanged; but this time, the UK retains its voice as an EU member state in decisions taken in Brussels.

Once again, difficulties lurk. British pro-Brexit politicians will suspect that a temporary arrangement would become permanent. On the other hand, multinational companies, unsure of how long membership will be extended, will be reluctant to build new factories and create new jobs in the UK. They require greater long-term certainty.

Scenario Four: No Brexit

The UK decides to remain in the EU after all. The government withdraws its letter notifying the EU of its decision to leave the union. According to Lord Kerr, the British author of Article 50, the UK can decide this for itself; it does not need the permission of other member states. There are lawyers who disagree with Kerr, but in practice, a British decision to avert Brexit is unlikely to meet serious resistance.

The most obvious route to Brexit being abandoned would be a new referendum in the UK. Theresa May’s government is opposed. The opposition Labour Party is hedging its bets, saying a new referendum is not current party policy, but not ruling it out.

However, a breakdown in the Brexit negotiations in Brussels would precipitate a crisis at Westminster. Already, public support for a “people’s vote” is rising. A crisis is likely to increase support still further. The choice would be stark: no Brexit or the hard, no-deal Brexit outlined in scenario one. As we all know from the June 2016 vote, nothing can be taken for granted. But recent polls signal that a new referendum, designed to end a profound domestic political crisis, would result in a vote to stay in the EU after all.

Which of these four scenarios is most likely?

Nobody can be sure. There are problems with each of them—financial, and/or legal, and/or political. Each will have its enthusiastic adherents and its angry critics. Only one thing is certain. If there is no deal between the UK and the EU this autumn, it will be not so much the end of a story as the start of a new one, which some will find exhilarating and others, quite frankly, scary.

*First published in carnegieeurope.eu

Europe

8 reasons to care about the EU’s new data-protection rules

In recent weeks, you may have noticed pop-ups appearing in your browser or emails asking you to agree to a company’s new privacy policy or terms of service

Business

How millennials became the world’s most powerful consumers

They are the biggest global generation — and their choices ??are upending business? from the US to China

Editor’s Column

A ‘Union’ in disarray

By: N. Peter Kramer

Commission President Juncker announced an ‘informal working meeting’ on Sunday June 24 to discuss the migration and asylum problems

MARKET INDICES


Live World Indices are Powered by Forexpros - The Leading Financial Portal.

Magazine

View 2/2018 2018 Digital edition

Current Issue

2/2018 2018

View past issues
Subscribe
Advertise
Digital edition

All contents © Copyright EMG Strategic Consulting Ltd. 1997-2018. All Rights Reserved   |   Home Page  |   Disclaimer  |   Website by Theratron