Bringing Europe's Leaders Together

The UK can still stop a hard Brexit

The recent electoral chaos has left europhiles an opening. Here’s how they can take advantage, writes Philippe Legrain.

For a country that prides itself on its political stability, Britain is doing a good impression of chaos. Plunged into turmoil a year ago by the referendum decision to leave the European Union, the country seemed set for the hardest of breaks with the EU under the leadership of its seemingly impregnable prime minister, Theresa May, who replaced David Cameron last July. But in elections on June 8, which May had called to seek a mandate for herself and her vision of Brexit, voters deprived her Conservative Party of its parliamentary majority. Suddenly, the Brexit process is up in the air again. The outcome could be a car-crash exit without a deal — or a much softer break than May envisaged.

Chaotic situations are, by definition, unpredictable. For now, May hobbles on as prime minister. She is seeking to cobble together a slim parliamentary majority with the backing of the Democratic Unionist Party (DUP), a hard-line, social conservative, evangelical Protestant party in Northern Ireland. She insists that she is ready to start the Brexit negotiations as planned on June 19.

But with May living on borrowed time and no majority to pass the legislation required to implement the various steps in the Brexit process, it is hard to see how meaningful negotiations can proceed. If and when May is toppled — Foreign Secretary Boris Johnson unconvincingly denies that he is plotting to oust her — the Conservative Party will need to spend months choosing a new leader. There is also the risk of fresh elections, either because the government loses a no-confidence vote or because a new Conservative leader and prime minister will want to seek their own mandate and majority.

Meanwhile, the Brexit clock is ticking. With May having triggered the formal EU exit process on March 29, Britain is set to leave the EU two years from then, with or without a deal. While the U.K. government could seek a two-year extension, all 27 remaining EU governments (the EU-27) would need to unanimously agree to the request. That is highly unlikely, since it would reduce their negotiating leverage and they are also keen to get the Brexit process over and done with. So there is a significant risk that Britain could crash out of the EU without a deal, simply because the government lacks the time or the means to agree to one.

But there is also the possibility of a much rosier outcome. With the Conservatives deprived of both a majority and a mandate for May’s hard Brexit, extreme Brexiteers who seek a rupture with the EU at any cost can no longer impose their will on the party and thus the country (although they can still cause trouble by rebelling). Instead, the election has emboldened moderate Tories who sought to remain in the EU and now seek a softer exit. Ruth Davidson, the leader of the Scottish Conservatives, who bucked the anti-Tory swing by winning 12 more seats in Scotland, thereby keeping the Conservatives in office for now, has been quick to flex her muscles. She is demanding an “open Brexit” that “puts our country’s economic growth first.” And in her limited post-election reshuffle, May has appointed as her deputy Damian Green, one of the most Europhile Conservatives.

Most non-Conservative members of Parliament — including those of the DUP — also want a softer break with the EU that minimizes the damage to the economy. Some are now even suggesting seeking a broader, cross-party consensus on how best to proceed with Brexit. That seems hard to achieve. Labour’s hard-left leader, Jeremy Corbyn, who did better than expected in the elections, thinks he is now on the brink of power (wrongly, in my view) and is thus likely to let the Conservatives deal with the mess that they have created. Even so, the government will now have to take on board the views of some opposition MPs if it is to pass any Brexit legislation, since any rebellion would otherwise deprive it of a majority.

If a weak and divided Britain decides that it wants a softer Brexit, it isn’t guaranteed to get one, however; the EU-27, which are in a stronger position than ever, would also have to agree. In response to Prime Minister May’s letter in March setting out Britain’s negotiating position, they have agreed on their own. Their initial priorities are entrenching the rights of EU citizens in Britain after Brexit, obtaining a big financial payment for spending commitments that Britain made while it was an EU member, and avoiding a “hard” border between Northern Ireland and the Republic of Ireland that could destabilize the peace process.

To restore some goodwill, the U.K. government ought to move quickly to unilaterally guarantee EU citizens’ post-Brexit rights. The divorce bill would also loom less large if Britain committed to continue paying into the EU budget during a post-Brexit transition period during which it remained in the EU single market. As for the Irish border issue — a common priority, especially with a DUP-backed government — a transition period in which the U.K. remained in the customs union would address it temporarily. Only once the EU-27 deem that “sufficient progress” has been made on these topics are they willing to start negotiating a post-Brexit trade relationship.

Economically, both the EU-27 and Britain share an interest in the softest of Brexits: one that involves Britain remaining in both the EU single market and its customs union. Economically, both the EU-27 and Britain share an interest in the softest of Brexits: one that involves Britain remaining in both the EU single market and its customs union. Trade would scarcely be disrupted. London could remain Europe’s financial center. Cross-border supply chains could continue unimpeded. So too would the two-way free movement of people — a bugbear for many of those who voted to leave the EU and for May herself, who wants to control immigration from the EU.

Politically, however, the EU-27’s overriding interest is in ensuring that leaving the club is seen to make Britain worse off, so as to deter other restless members from leaving. Meanwhile, every financial center in the EU is also keen to grab some of London’s lucrative business. Even if Britain were to seek a softer Brexit, it might not be able to get it.

But it would unwise for the EU-27 to spurn an olive branch from a suitably chastened British government. Having to back down from its nationalist bravado about walking away without a deal would be humiliation enough. At a time when President Donald Trump is threatening a trade war with Germany (and thus the EU) and has cast doubt on his commitment to defend NATO allies, it would be foolish to alienate Britain, a valuable security ally and economic partner, if it sued for peace on EU terms — as German Chancellor Angela Merkel and other leaders ought to recognize.

A soft Brexit deal could initially consist of a transition period for several years after Britain exits the EU in 2019 during which the U.K. would remain in both the single market and the customs union. During that period, a future trading relationship would be negotiated. By then, passions may have cooled and pragmatism been restored.

Politicians ought to prepare the ground by starting to try to persuade British voters that EU migrants are not the source of all their problems — or at least convincing them that the economic price of imposing immigration controls is too great. If the U.K. were willing to retain free movement, perhaps with an emergency brake like Norway has, it could remain in the single market.

Failing that, Britain could still seek to remain in the customs union. That way, trade in goods could continue unimpeded by tariffs, customs checks, and other red tape (including on the Irish border); foreign car factories wouldn’t relocate. While this would prevent the U.K. striking trade deals with non-EU countries on goods, it could still seek to negotiate agreements on services trade, in which the U.K. specializes.

At the very least, in a constructive spirit and with goodwill, the U.K. and the EU-27 should aim to negotiate a deep and wide-ranging free trade agreement that allows people to move as freely as politically possible.
We live in times of political upheaval. Nothing is settled. That poses huge dangers, but it also offers opportunities to reverse bad decisions and make positive changes. There is still all to play for.

Philippe Legrain is a senior visiting fellow at the London of Economics’ European Institute and the founder of Open Political Economy Network (OPEN), an international think-tank. He was previously economic adviser to European Commission President José Manuel Barroso and special adviser to World Trade Organisation Director-General Mike Moore. His latest book, European Spring: Why Our Economies and Politics are in a Mess – and How to Put Them Right, was among the FT’s Best Books of 2014.

This article was first published in Foreign Policy on 12 June 2017 under the title: “Britain Has One More Shot at Stopping the Brexit Car Crash”.

Published in June 2017