By Tim Focas
Former Canadian Prime Minister Pierre Trudeau once said that the “essential ingredient of politics is timing”. With less than 24 months to go until Britain official exits from Brussels, one can’t help but feel that the Prime Minister’s snap election is underpinned by her desire to buy herself more time to renegotiate Britain’s new trading relationship with Europe.
With French and German elections in the same year, it is not hard to see why she and the rest of Europe may be thinking along these lines. After all, despite noises emanating from European officials, what meaningful discussions can really take place in a year that sees the three biggest net EU contributors all go to the polls. This is not what the those 51 per cent of Brexiteers want to hear. And should the meat of the negotiations only being next year, it is simply not realistic to think that the UK’s divorce terms, let alone new trade agreements, can be agreed in line with the Lisbon Treaty’s timescales.
The truth is that one of the key political factors lurking underneath the campaigning rhetoric over the coming weeks is the government’s desire to strike transitional agreements. In short, although far more complex in practice, these agreements mean that the UK would avoid what certain businesses call an economic “cliff edge” by immediately entering close EU trading relationships as part of the European Economic Area (EEA). While this process should, in theory, be relatively uncomplicated, the vast scale and complexity of the agreements could mean that this transitional period lasts for up to two years, at the very least.
So why exactly, despite her tough negotiation objectives, might May be quietly wanting a transitional deal? The answer: “it’s the economy stupid”. For starters, it would mean Britain would have unfettered access to the single market, so Britain could continue to sell its services unrestricted. This would be particularly beneficial to financial services, which accounts for over 10 per cent of UK GDP, as banks would retain passporting rights, meaning that staff would not have to immediately relocate to Frankfurt or Paris. And for those who think this sounds a lot like being in the EU, think again. The UK would not have any say or be bound by the rules of Single Market, although it would have to make budget payments.
But while this all makes short to medium term economic sense, these agreements represent a political ticking time bomb. During this period, and who knows how long it will be, the UK would remain under the full jurisdiction of the European court of justice and hard Breixteers look away now, free movement would need to continue for a while longer. Given the fact that many voted Brexit to put a stop to free movement as soon as possible, this is unlikely to sit well with vast sections of the electorate. Calling snap elections always means time of the essence, and while extending the timeframe for Brexit may be economically favourable, over beyond June 8th, it could prove to be Theresa May’s long term political downfall.
Tim Focas is Director of Financial Services for Parliament Street
