DGB Brexit: UK To Leave Customs Union And Parliament To Get A Vote

Late on Tuesday morning Prime Minister Theresa May’s long awaited speech on her Brexit approach was unveiled. As is pretty much customary, much of the detail was “leaked” over the weekend and Monday. But was there any new news which was worth taking notice of?

The main points:

There is a lot to discuss, and I will attempt to cover it as concisely as possible. These are the main bullet points:

• Theresa May confirms the UK will leave the single market and seek a new trade deal with the rest of the EU
• She wants to seek a new customs union deal, which will mean leaving the existing one
• New EU immigration controls to the UK – a number of models are apparently under consideration
• Both houses of Parliament will get a vote on the final deal
• The UK will no longer be bound by the European Court of Justice
• Any Brexit deal is to be phased in, designed to give businesses and institutions time to adjust
• Article 50 will still be triggered before the end of March, despite the new Northern Ireland difficulties and whatever decision the Supreme Court rules
• Theresa May confirmed that she will not sign a bad deal for Britain, hinting that the alternative route for the UK was to take a number of economic steps which will be designed to compete with the trading bloc

There’s a fair bit in those bullet points, and they’re only bullet points!

I’ll try and be brief with my thoughts and analysis.

Both houses to get a vote

I want to start with this quite significant point as this was actually new news. This was something that was not known until today. It had not been leaked as other points had been.

The fact Parliament and the House of Lords will get a vote on the deal will please many in both houses. As a result, Sterling versus the Dollar got a pretty big boost. As it stands at the time of writing this post the Pound stands at $1.24. This is a rise of 4 cents from the lows of Monday morning.

Fat forward two years and assume we have a decent deal to vote on. It is highly unlikely, after symbolic votes just a few months ago promising to back Brexit, that MPs would vote the deal down. It would cost many their jobs at the next election and would cause some severe reaction and friction from the general public. The only possibility of them not voting for the deal is if it was a terrible option. I cannot see Theresa May allowing that to happen. And even if our options were negative, she has already said in her speech that no deal is better than a bad deal. But more on that in a moment.

As for the House of Lords, it is also very unlikely they would vote against Parliament should they vote it through. It happens only very rarely, and given that Chamber’s very low popularity, a vote against the EU Referendum result could end up seeing that Chamber dissolved if public reaction is strong enough.

So I think it is safe to assume that so long as the proposed Brexit deal doesn’t stink, it’s going to be voted and enacted.

UK will leave the single market

The EU made it clear that controls on immigration to the UK will result in the UK not being able to be part of the single market. Theresa May stuck to her guns on this front, and confirmed that the UK will implement new immigration reforms, meaning the UK will leave the EU single market.

She confirmed that she wants to seek a new trading arrangement with the bloc. She outlined that she still wants tariff-free trade with the EU and indeed the rest of the world. Achieving that with the rest of the world may be easier than it will be to agree with the EU on that.

Part of this also means leaving the customs union. This is something different to the single market. The customs union is the agreement between countries to not impose taxes on each other. The single market is the infrastructure for EU countries to trade easier with each other, with free movement of goods, people and capital.

May explained that being part of it stopped the UK from agreeing it’s own trade agreements with other countries from around the world. So if the UK is to become a global trading power, as May has targeted, it would mean leaving the customs union. She said that she would seek a new agreement on the union, be it to become an associate member, a completely new agreement or “remain a signatory” to some parts of it. The difficulty here is how willing the other 27 EU nations will be to this.

Brexit deal to be phased in

With this, Theresa May aims to ensure that upon leaving the EU, the UK economy is not driven off a cliff, as some claim it could be.

No details of how long this implementation period will be. I suspect it won’t be for all that long. The next General Election won’t be far away by the time we leave. Will May want to have to be dealing with a transition period during a General Election campaign?

This should serve as good news, at least initially, for UK businesses that deal with Europe. They will at least get some warning and some time to adjust their business models. It might not be all that long, so they’re going to have to be nimble in their approaches.

No deal better than a bad deal

This for me was a big one. Over the weekend and on Monday it was leaked that Theresa May would be prepared to walk away from a bad deal for the UK and be prepared to alter the UK business model to set it on a commercially competitive footing that would be in direct competition with the EU. This point was confirmed near the end of her speech.

It is speculated that this version of Britain’s new business model would involve slashing of UK corporation tax and other tax infrastructure that could turn the country into a haven for foreign investment. In this scenario, UK business would enjoy big tax breaks, where the Government would encourage business to use that spare cash to invest in their own growth, job creation and innovation.

Some on the other side of the argument would see that as a tax cut for those who don’t need it. However, as unfeasible as it probably is, if we had to walk away from negotiations without a deal, we would have to very quickly adapt to a world where the EU would become a competitor rather than a partner. As the fifth biggest economy, we could give it a good go.

Naturally, no one really wants this scenario to play out.

No ifs, no buts on Article 50

Theresa May confirmed that her self-imposed timetable for triggering Article 50, the legislation that officially starts the negotiations process to leave the EU, will still be enacted before the end of March. This is despite the new problems in Northern Ireland and no matter the decision the Supreme Court reaches. Which should be announced sooner rather than later.

This to me says that the Government expects to lose the trial. Personally I never saw the advantage in taking this to an appeal. MPs held a symbolic vote to say that they would allow Article 50 anyway, so long as they get their day in Parliament to debate it.

What is interesting to note is that quite a few commentators have warned that Sterling could see a violent reaction upwards if the Supreme Court rules in favour of Parliament procedure. Even though most now accept the Government will lose. A sharp rise in the value of the Pound will do damage to companies who export abroad. If we want a rise in Sterling from where we are now it needs to be controlled, steady and constant.

Given the nature of our politics at the moment, this is unlikely.

New immigration rules

As expected, Theresa May talked about the need to create new immigration controls for those wanting to come to the UK. She talked about the UK relying on migrants to boost our workforce and economy. And she is completely true.

Although no specifics were mentioned, it is reported that a points based system is being considered, but not favoured. Another option is for migrants to have a work permit before traveling. I am sure there will be others being thought about. As we get closer to leaving, details on this will become clearer.

My thoughts

As May ended her speech, comments from the rest of UK politics began to filter through. Some of those were centred around the fact she did not mention what the goals she set out would do for the UK economy. This line of questioning is a total waste of time.

We have no negotiated deal. We’re only on the cusp of triggering Article 50. How do people who want economic forecasts already based on these bullet points want them worked out? We’ve already seen that the UK economy is doing better than any of the previous forecasts projected. So the idea that we could pluck models out of thin air, based on absolutely no EU-UK negotiated framework is frankly laughable.

Instead of trying to pick apart May’s speech and dismantle some of the progress that was made today, we all now have to put aside our opinions of the referendum and the result. No matter what side we were all on, it is done. I of course still advocate opposition politicians holding Government to account. But we really are all in this together this time, so the public, our institutions, politicians across all parties need to work together to ensure the UK is ready for whatever the situation may be when it comes to the day of leaving the EU.

Division, point scoring politics and being difficult for the sake of being difficult will not get us any further forward, be it socially, economically or politically.

I am also a big believer in opportunities. And there will be new opportunities for all British businesses so long as they adapt to the new conditions and work hard enough to look for them and make them happen. Sitting on hands and hoping all will be OK is not an option.

We also have to put aside labels when we talk about it as a people. Remainers, remoaners, leavers. Not a single one of these terms and their meanings matter. We’re all British. We’re all on this journey in one capacity or another, and we have to make it work. There is no other option. So what harm can be done by all banding together and making it work for all?

There are of course financial and political complexities to overcome during the next two and a bit years. This will send markets and currencies up and down. There will be highs, lows and talking points. Brexit will encompass everything we do in this country up to the day we leave and every day thereafter.

It’s going to be a hell of a ride.

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