Given how long it has taken the Conservatives and DUP to agree how the coalition government will look does perhaps not bode well for the far more complex process of untangling Britain from the EU.
Best of both worlds
So what is the government aiming for if it does not want to remain in the single market?
Neil Williams, chief economist at Hermes Investment Management, explains: “[Prime minister] Mrs May says no other countries’ membership models will be sought, which seems to rule out Norway and Switzerland’s associate memberships.
“Yet her desire to ‘pursue a bold and ambitious free trade agreement’ with the EU suggests she will negotiate to maintain access to – but no longer full membership of – a tariff-free system (akin to Canada’s deal), and/or a customs union (similar to Turkey’s).”
He observes access to a tariff-free system or customs union could be the best of both worlds but it would still need parliamentary approval.
“Second, the UK is relying on a cooperative sign-off by its 27 EU peers,” he adds. “The only real precedent we have is Greenland’s ‘exit’ in 1985. This was a ‘soft’ exit, but it took three years.
“We, larger and 44 years entwined in the EU, will need longer. Canada’s EU deal last year came after seven years of negotiation, and was toward the end stalled by the Belgian state of Wallonia.”
It is true most assessments of the UK economy are quick to point out the negative impact.
But the economy may find itself in a position of strength post-Brexit. If that were the case, what might this look like?
Professor Chris Rowley, at Kellogg College at the University of Oxford, asserts any analysis of a post-Brexit economy requires less of the ‘gloom and doom’ type predictions that focus only on the costs and negatives, ignoring the counter-factual and possible benefits.
“Rather it could look like an economy that is better balanced with more exports given more competitive British goods and less reliant on credit and consumer spending, maybe even less reliant on financial services – not a bad thing given the 2008 financial crisis – and dealing more with those more dynamic and faster growing areas of the global economy in Asia,” he notes.
“You never know, it may even ‘jump-start’ the UK economy into a different trajectory and help reduce its over-reliance on cheap labour and the commensurate low investment/innovation/low value-added and ‘sweating the assets’ route to competition – as witnessed by the rise of much of the ‘gig economy’ and zero hour contracts.”
