Following the Brexit Referendum in which Britain voted to leave the EU, David Cameron has made it clear that it will be up to his successor as Prime Minister to decide when to trigger Article 50 – the mechanism via which the UK formally leaves the EU. Once triggered, the UK then has 2 years to negotiate a new arrangement with the EU. If no deal can be reached within that time frame, then the UK then either leaves without a deal or the remaining 27 countries within the EU have to agree on a formal extension to the 2 year negotiating period.
There is highly unlikely to be much change, if any, to employment law whilst negotiations with the EU remain ongoing.
At the heart of the negotiations will be the fact that the UK’s priority will be to remain in the single market, as this is an economic necessity. One of the key reasons why countries such as Japan, China, the USA, Australia, Canada, etc invest so much money into the British economy, is that this country has access to the EU single market. Should the UK lose that access, then much of that investment will move to other EU countries. There are many other advantages to the single market beyond this, which the UK stands to lose should it end up outside the single market. Hence, the adverse economic consequences of leaving the single market would be considerable.
Nevertheless, as Norway and Switzerland ultimately discovered, the EU will almost certainly insist upon the UK agreeing to retain free movement and abiding by EU rules and regulations in return for remaining within the single market. And herein lies the conundrum, because if the UK ultimately determines that leaving the single market is a step too far and the EU will not compromise on the conditions that other countries such as Norway and Switzerland have had to accept, then what is the point of leaving the EU in the first place? One of the principal advantages of staying in the EU is that the UK would get a say on EU rules and regulations, and would be in a far better position to change them in the future. The problem with the position that Norway and Switzerland are in, is that they have no say whatsoever on those rules and regulations, and like full EU members, they have to make a financial contribution to the EU as one of the conditions of having access to the single market. Indeed, the only real advantage that countries like Switzerland have in terms of their arrangements with the EU, is that they have scope to negotiate separate trade deals with other countries outside the EU. Nevertheless, the EU is negotiating its own deals with non-EU countries, which its members will benefit from, and one of the advantages of being part of the EU is that its members are likely to end up with better trade deals, as its members are in a stronger bargaining position being part of a larger bloc, as opposed to negotiating by themselves individually.
One option which is now being discussed is the potential for negotiating a better deal than the one that David Cameron negotiated earlier this year to remain within the EU, once Article 50 is finally triggered. Any new agreement that is reached would obviously have to go to a 2nd Referendum. In the week that has elapsed since the Referendum, the British people have gained a much better insight into the negative economic consequences of leaving the EU than during the campaign itself. On the other hand, the power brokers within the EU now have a greater appreciation regarding the concerns about the direction in which the EU is heading (and of the economic consequences for them of the UK outside the EU), and that those concerns are growing within other EU countries who could potentially follow the UK out of the EU. Accordingly, it is very possible that during the negotiations, the EU could offer the UK a better deal to remain within the EU by addressing the concerns of those who voted out. This would then go to a 2nd Referendum.
Should it be concluded, as we anticipate that it will be, that it is essential that the UK remain in the single market, then it is far better to remain within the EU than outside it, as it is better to have a say in what the rules and regulations that the UK has to adhere to are, than not. Outside of leaving the single market altogether (which would be an economic disaster for both the UK and the EU), ending up in the same boat as Norway and Switzerland would the worst of all worlds. Like both of those countries, the UK would continue to contribute financially to the EU and would continue to have to follow its rules and regulations as conditions of staying in the single market, without having any say whatsoever on those rules and regulations. Hence, once it is accepted that the UK should remain in the single market, then the focus should be on negotiating a better deal for the UK that allows the country to remain within the EU, which can then be put to a 2nd Referendum. Nevertheless, for this to happen, the EU would need to show a genuine willingness to compromsie on the concerns that led to the outcome of the Brexit Referendum. If it is willing to compromise, then not only could this lead to Britain remaining in the EU, but it would also reduce the chances of other countries leaving the EU as well.
The 3 most likely scenarios are as follows:-
- The UK leaves both the EU and the single market. This would be a lose lose situation for both the UK and the EU, as both will end up permanently poorer relative to other countries outside the EU. The UK would lose out in terms of economies of scale, inward investment, opening up global markets on better terms, reducing skills shortages, the stronger bargaining position overall that comes with being part of a larger economic bloc, access to European supply chains, and in so many other ways.
- The UK remains in the single market but leaves the EU. Like Norway and Switzerland, the conditions for remaining in the single market will be that the UK continues to contribute financially to the EU (estimated to be around 94% of its current contribution as a full member), continues to allow free movement, and continues to follow all the rules and regulations of the EU. This outcome would be a ludicrous farce, as it would have completely defeated the whole purpose of leaving the EU in the first place. Technically, the UK would no longer be a member of the EU, but for all intents and purposes it would de facto be part of the EU. The ludicrous and farcical element would be that as the country would no longer be a member of the EU, it would have no say whatsoever in the rules and regulations that it is obliged to comply with. It would be like being locked into a car as a passenger without any say over the direction the car was heading in.
- The UK remains within the EU, but with a better deal. This would have to go to a 2nd Referendum, but if the UK accepts that it is a imperative that it remains within the single market, then this would undoubtedly be the best outcome.
It is unfortunate that the remain campaign failed to properly convey this message to the British people. It is also unfortunate that the Government failed to make the EU power brokers understand the seriousness of the very real concerns that the British people had about the direction in which the EU is going. Had they done more to make them understand and had come away with a much better deal that could have been presented to the British people, then everything that has occurred could have been avoided.
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