Looking Down the Track of the Brexit Rollercoaster

If you think Brexit is a rollercoaster so far, we've only just started the ride. And the eerie silence you hear from Government as we supposedly gear up to the big negotiations doesn't bode well either. We're going to have to brace ourselves for turbulent times and face up to some pretty fundamental questions.
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If you think Brexit is a rollercoaster so far, we've only just started the ride. And the eerie silence you hear from Government as we supposedly gear up to the big negotiations doesn't bode well either. We're going to have to brace ourselves for turbulent times and face up to some pretty fundamental questions.

First is the matter of how long this period in limbo will actually last. If you believe EU Council President Donald Tusk and the European Commission, we'll be told strictly to complete our divorce proceedings exiting our EU commitments first, before even starting the discussions about what our new relationship will look like. That would be a disastrous scenario - which would come with a hefty purgatorial price tag.

Asking businesses to tread water for two years is bad enough. But making that uncertainty go on and on for four or five years will just push too many decision-makers beyond breaking point, with international companies likely to locate elsewhere as a means of moving on with life. So Theresa May's first task is to urgently secure a consensus that we undertake these two negotiations in parallel and not sequentially. We cannot wait until 2019 before turning to the issue of our future trading relationships.

So assuming we're able to start discussing it, we then need to decide what sort of trading relationship we want. In turn this is bound up with Britain's willingness to allow or restrain migration from Europe. Free movement of goods, services and capital are all accepted but free movement of people is not. If the UK wants to now institute limits on economic migration then this is likely to be the sticking point in the way of maximum free trade.

The Germans, Italians and French may be showing early signs that they could live with a post-Schengen settlement, adapting the principle to free 'movement of skills'. If so, this could in turn give Britain leeway to secure limitations on flows while keeping European Economic Area benefits. As the IFS rightly point out, there is a big difference between 'membership' of the single market and degrees of 'access' - something likely to be driven by the deal we strike on free movement. Merely pointing to the virtues of the Liechtenstein model won't necessarily clinch it, what with their population of all of 37,000 making it barely significant to the rest of the EU. It's not going to be as simple as cutting-and-pasting some other country's arrangements and thinking that can be the British deal. So we need to settle our red line on economic migration here in the UK - a sensitive debate but one we will have to confront in order to get seriously stuck into the wider negotiation about our trade relationship.

After that, we have to decide whether to throw in our lot with the EU on international trade treaties and go along with whatever they broker, or if we want to have freedom to strike our own bilateral deals with other countries. The EU will insist that staying part of the 'customs union' giving tariff free access to our goods must also mean harmonising with the rest of their external tariff arrangements. To do otherwise, they will argue, risks goods undercutting their businesses through a UK backdoor. We should obviously try to keep our exports flowing freely into Europe - and not just goods but services too which are of even greater significance for our economy. If we're going to get as close as we can to full access, will the EU insist that Britain can't have separate deals with the US, China, India and others? If so, we'll need to get a deal that gives us a fair voice around the table before those 27 countries sign up to terms we'll be bound into. But we can't assume we'll be able to stay in the customs union, or that the terms will be fair or will give us an adequate 'voice'. In which case we have to have contingency planning and wider conversations straight away sketching out the new web of trade agreements we'll need to weave.

There's the question too of our interim relationship in the months ahead during this (hopefully) truncated transition period - and there are bound to be angry European demands for ongoing financial contributions and acceptance of liabilities. These are going to test everyone's patience. In the longer term, Europe does need a cooperative UK too especially because we can help on foreign and security policy and we will want to maintain our friendships and alliance - which should all help. But it will be a hellish and incessant diplomatic pounding month after month as we figure out new economic terms with a bruised EU currently taking 44% of our exports.

The markets may be temporarily settling into a phase of depreciated sterling and anticipating a downturn, but UK plc is about to be pommelled again by the stark choices confronting us. Parliament and the new select committees on Brexit and on international trade have got to step up to the mark so that before the Chancellor's Autumn Statement we have a clear concept of our economic preferences on timeline and sequencing, the migration question and the customs union. Now we've set off on this ride, Ministers can't just cover their eyes and hope for the best.

Chris Leslie is the Labour MP for Nottingham East is a former Shadow Chancellor, and now chairs the PLP Treasury Committee

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