Public Policy

January 16, 2017

A “Brexit Failure Insurance Policy”

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“The most successful people are those who are good at plan B.” – James A. Yorke

As we enter week 3 of the New Year, ‘Brexit’ could actually begin to mean more than ‘Brexit’. UK Prime Minister Theresa May, it has been widely briefed, will deliver her much-anticipated Brexit speech next Tuesday, allegedly to set out more detail about her government’s approach to the negotiations. Likewise, the European Parliament, to name but one of Britain’s counterparts, is expected to draw up its red lines next month. But while impending written documents might firm up, if not confirm, parties’ positions in greater detail, there is nothing like an election season to bring out sharp opinions.

When Maltese Prime Minister Joseph Muscat speaks of an unbreakable solidarity amongst the 27 Member States as they head towards Brexit negotiations, the bet is how long this will last, not that it will. The word on the street in Brussels is that the politics is back in policy and last year’s casualties (Renzi) and near misses (Rajoy) are just a precursor to the fireworks we can expect in what looks like a transformative year across Europe. And it will all come together as the official Brexit negotiation period is launched in March.

The most visible example of this is the continued fascination and horror expressed around the idea of populism. Last year populism was a dirty word, this year it is transforming into the word of the people. Every time Macron and Fillon take a tumble in the French electoral polls (raising up Le Pen’s numbers) hearts in Brussels skip a beat. Elections in the Netherlands, France and Germany will all attempt to steal the clothes of populism to marginalise its candidates. An election in Italy would reinforce that further. The result is that issues are becoming more and more localised in those jurisdictions and the EU becomes more and more an example of the failed elites. The simmering demands for reform are now finding their voice and make for a difficult Brexit chorus between Member States.

This could be positive for the UK in that the common theme that it must be punished for its transgression is fraying around the fringes. Reform ideas of a multi-speed Europe, a secondary form of membership offering specialised access to the Customs Union, equivalent standards, preferential trade treaties on selected sectors, paid-in access to research and training schemes and shared intelligence and defence functions are becoming a distinct possibility.

If this is indeed the direction of travel in Europe, how much does the British government need to push in the opposite direction? The reality of the intricate complexity – and the related risk of failure – is starting to hit home in the UK. Government sources are acknowledging that it would indeed be time and complexity that defeats its ability to deliver a good outcome. And there is a seemingly more considered and pragmatic approach (beyond the upfront bravado of taking back control of the UK’s borders, laws and destiny) that takes account of Europe’s sensitivities, advocates a practical approach and strikes more conciliatory tones of Britain’s responsibility as a global citizen.

That’s not to say that there isn’t still much optimism regarding post-Brexit opportunities – global trade and greater domestic regulatory agility, for example. But there seems to be a growing recognition that the UK Government might not be able to maximise the influence of those wanting reform that aligns with its own interests, and minimise the reach of the punishment camp.  Despite all Brexit-related mockery about Plan A and Plan B (or lack thereof), however, it could be argued that there has, in fact, been a Plan B to cushion against the failure of Brexit negotiations all along. Half-jokingly called the ‘Brexit Failure Insurance Policy’ by a colleague, Theresa May called it “a proper Industrial Strategy”.

Now, there is always a certain nervousness or cynicism that arises when governments come up with big, promising titles to describe their vision for the future of the country – Tony Blair’s Third Way, David Cameron’s Big Society come to mind. But driven, not least, by desperate necessity, the Industrial Strategy is different. Beyond enshrining the May government’s vision of a country that works for everyone, its purpose is to offer industry the reassurance of a safety net if time and complexity – and political dynamics – conspire to make Brexit one of its next victims. The Government has repeatedly asked the industry sectors it is consulting with on Brexit to make clear what they want should the UK fail to get what it wants from the negotiations. It is also demanding sustained interaction and a much stronger relationship with business to determine future drivers of growth and create a stable and predictable environment much of which will be built on science, research and innovation. So our call to industry remains to be mindful that its future UK operating environment is about more than Brexit, and that the complexity of European dynamics and the implications this has for the outcome of the Brexit negotiations, makes it more important than ever for business to heed calls closely to work with Government to shape its Plan B.

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