Public Policy

January 23, 2017

United we stand, divided we fall


“United we stand; divided we fall; union is strength” – old Flemish Proverb

Whilst some commentators are citing Theresa May’s speech as a turning point in our understanding of Brexit, here at Instinctif Partners, we feel that the speech alone, is not enough. There are 27 other EU member state Governments to take into account, 28 EU Commissioners, 751 MEPs, and countless trade bodies and national interest groups. What they think and how they will respond to the UK’s position will critically shape what Brexit looks like.

In this week’s email, we will be looking at what our colleagues in London, Dublin, Berlin and Brussels made of the speech and how we see things shaping up.

The View from London
Much of what Theresa May said at her Lancaster House speech was, to those who had been listening, to be expected. As Instinctif has suggested over past editions, there will be no membership of the single market, the UK is seeking a bespoke trade deal, there will be no budgetary contributions, and there will be no freedom of movement.

For the first time, the UK Government acknowledged that it cannot change the European Union – the single market’s four pillars are inseparable. Mrs May for the first time also ruled out membership of the Customs Union. She did, however, leave open the possibility of associate membership or a new-style relationship. Undoubtedly this will form a key part of future negotiations.

However, it was May’s tone and ending which possibly revealed more than the main bulk of the speech. As if wielding an invisible handbag, May invoked the memory of Margaret Thatcher, coming out firing all guns blazing and on the offensive. This was a speech that set out Britain’s red-lines more than it set out its aspirations. Brussels should know that May means business. No more, ‘Theresa Maybe’.

Nobody enters a trade negotiation with a ‘softly, softly’ approach. And so May declared that Europe had more to lose than Britain. She referenced the UK’s security and military input on common issues. And, in her final remarks, she underlined that Britain is prepared to walk away – no deal is better than a bad deal. And not just walk away, but establish itself as a ‘Singapore with less sun’ – a low-tax, low regulation global powerhouse off the shores of the European Union.

The View from Brussels
Initially there was indignation from MEPs who warned the British leader that they would not tolerate any threats or blackmail in their negotiations. Leader of the EPP Group Manfred Weber said “we have never spoken of punishing but we will not allow ourselves to be threatened”. Guy Verhofstadt, the European Parliament’s negotiator on Brexit, took a tougher line and reiterated his calls that the UK must not be allowed to cherry pick. “It can’t work like that”.

And whilst most MEPs went on the defensive, the newly elected President of the European Parliament, Antonio Tajani (of Eurosceptic Berlusconi’s party) pledged to take a fair-minded  approach to the upcoming EU-UK divorce talks: “We’ll need to be very balanced here — we’ll need to defend the rights of Europe, but I think that in the future the UK will be an important partner of ours”, he said.

It was clear however that the Council are prepared to take a yet more conciliatory approach. Maltese Prime Minister Joseph Muscat said that he did not think there was any “declaration of war” in May’s comments.

European Commission President Jean-Claude Juncker welcomed the UK leader moving “beyond the very vague  landscape” of her initial position. He repeated that negotiations would only begin once the “farewell letter”, the triggering of Article 50, had been received from London.

All of this only serves to underline our thinking that the UK is not only negotiating with one person, but with a variety of different states and institutions. For all the grandstanding of some MEPs, the key EU decision-makers kept their cards close to their chest.

The View from Berlin
Both the Federal Minister of Foreign Affairs, Frank-Walter Steinmeier (SPD), and the Federal Minister of Economic Affairs and Energy, Sigmar Gabriel (SPD), welcomed that May’s speech finally provided “a bit more clarity” on the British Brexit plans. Steinmeier, however, repeated that the German position remains unchanged: “Negotiations will only begin once the UK officially submits its wish to leave the EU”.

Echoing the words of the European Commission, Sigmar Gabriel said: “there will be no cherry-picking” and emphasised the need for a “fast and orderly procedure”. Germany’s business leaders carried the same line as its politicians, making comments more associated with elected representatives. Dieter Kempf, president of the German Business Association BDI, stated that German industry is united in its wish for clear new rules between the EU and the UK; that the EU has to demonstrate unity vis-à-vis the UK; and that policy-makers in Brussels and Berlin should make sure Europe stands together. “The four freedoms of the EU are set in stone,” Kempf reiterated.

Interestingly, the German Chancellor Angela Merkel waited a couple of days before commenting to May’s speech. When Merkel did, she was keeping her cards close to her chest and merely reiterated Steinmeier’s and Gabriel’s statements, calling for Euopean unity and urging her European partners not to let themselves be divided.

The View from Dublin
But while Merkel (and German industry) sought order and conformity, one member state – that with the most to lose from Brexit in the Republic of Ireland – appeared to break cover for the first time with a clear sense of panic from policy-makers and businesses alike.

A mere 15 minutes after May’s speech, the Irish Government’s press team had hammered out a confident and reassuring statement, welcoming the clarity the speech provided and reiterating that Ireland’s position and priorities have not changed: our economic and trading arrangements, the Northern Ireland Peace Process including border issues, the common travel area, and the future of the European Union.

While Taoiseach Enda Kenny later confirmed that the common travel area between Britain and Ireland “will be preserved”, this optimism was not widespread with Opposition party Fianna Fáil Leader Micheál Martin issuing a candid view: “She (Theresa May) will speak softly to the Taoiseach and Britain is speaking softly but they will behave and act differently.”

However, business organisations, such as IBEC, went on the offensive for the first time, speaking of their deep concern “at the increasingly definitive and hard-line position of the UK Government to Brexit” and went on to call the UK Governments plans “an aggressive move” that could potentially damage UK-Irish relations. With the weak sterling and the significance of UK markets for Irish exporters, the original ‘it’ll be alright on the night’ narrative is changing, and changing fast.

United we stand… for now
Whilst the most publically-recognised and commonly reported of the European institutions – the European Parliament – has taken a combative stance, the reaction of the leading European decision-makers has been united and measured. While Ireland has veered off message, the European Council, Commission and even the European Parliament’s President, have all followed Berlin’s line. And it is these institutions, not the democratically elected Chamber, that will ultimately have the main say – ironically one of the reasons the UK voted to leave the European Union…

Theresa May did not stand up and explain what she will get from Brexit, but how she will shape the negotiations. These negotiations will also be shaped by policy-makers across Europe, currently united, and indeed by those from further afield – think Donald Trump and a US-UK free-trade deal. If we are to gain a better understanding of the direction of travel, we need to take account of all of these influences. And so, here at Instinctif Partners, we will continue to bring you the inside track on where Brexit is headed and hope that by sharing our insights, we will help you make sense of and shape an uncertain world.