Reality Check

Sunday 4th March

We have had a couple of days to digest the latest Brexit speech from Theresa May.  So, what do we think of it?  The papers were mostly positive.  But it wasn’t really about the content (where there really were no surprises) but the tone.  She appeared less strident, more grounded in the real world, less confrontational – all of which was indeed welcome.  She spoke of hard choices, and that no-one, neither the EU, or us, would get everything they wanted.

But she still fudged the hard decisions; we still do not know her real end-game.  Sometimes she blows hot and sometimes she blows cold.  At times she appears to be at the mercy of the mad Brexiteers, at others a more reasonable face is worn.

She did trot out the usual stuff about wanting a frictionless border, especially between Northern Ireland and the South.  She repeated that she wanted no Single Market or Customs Union (but did mention a possible Customs Arrangement, whatever that may be) and some small involvement of the dreaded (and for some unknown reason) ECJ in certain sectors.

So, some sort of a reality check.

It all depends now on how this is received by the EU.  I suspect that they will simply sit and wait.  Not exactly stonewalling, but waiting for concrete proposals from us about the exact nature of our desired relationship with Europe after we leave.  And this is where the real reality check will happen.  It is all very well to spray your speeches with sweet words about a close relationship – but, we have decided to leave, we are causing the remaining EU problems, in trade and for their future budgets.  But….we must not forget that much as they would have preferred for us to have stayed, or stayed at least in the Single Market or the Customs Union; they are reconciled to us going.   And…their main priority will be to maintain the cohesion of the remaining 27 nations.  They will not give us anything like as good a deal as we have now (and even Theresa May hinted at this in her speech).  They will not want to be seen to be punishing the UK, but they will be sending a signal to possible other leavers.  I think that we will have to end up in some sort of a Customs Union (call it an arrangement, if you will) whereby goods can pass freely between us and them.  But there will be a cost attached; it may be possible to (eventually) electronically track goods but some paperwork will undoubtedly be required and some tariffs too (despite what everyone says).  The real problem is with Services and Finances, which at the moment are covered by the Single Market – not the Customs Union, as no physical goods cross borders.  And most of our trade with Europe is in these sectors.  I don’t think that the EU will blink first.  After all, only a few years ago Germany went through a painful process of re-integrating the East with the more successful West; the EU have managed to keep things going despite the Greek crisis.  They are resilient, and, I believe, that they will be prepared to take a hit in the short term in order to maintain their integrity and their rules.

This will be the hardest reality check for Mrs. May – and she already knows it.  I am still of the opinion that if things get tough she may cut and run with no deal at all.  Immediately dissolve Parliament and call a general election, hoping that the Tory party and the press will rally round.  Then, of course, all bets are off, except that Labour will say that they will go back and re-negotiate, an option Mrs May will have thrown away.