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A very European Brexit

It wasn’t meant to be like this.  Although Margaret Thatcher was supposedly anti-EU, when it came down to it, her scepticism was primarily a negotiating ploy.  Thatcher understood that the threat of a referendum was powerful.  It bought Britain its rebate, its opt out from the social chapter, and fortuitously prevented Britain from being shackled to the single currency.  Ironically, Thatcher had also used the threat of a referendum to force through the expansion of the EU to incorporate the newly independent Eastern European states from which the supposed migration crisis stemmed.

Nevertheless, Thatcher was hostile to government by plebiscite.  An in-out EU referendum was a nuclear option only to be used in the event of the EU moving in a direction so abhorrent to a democratic Britain that no alternative course of action was possible.  It was an option from which there could be no going back.

That reality is just beginning to dawn on Brexiteers and Remoaners alike.  As Wolfgang Münchau in the Financial Times notes:

“There is no excuse for clinging on to the serial delusions about the EU that are so widespread in the UK. My favourite is the prediction that the other member states will eventually see the light and stop free movement of labour. Another persistent delusion is that Brexit will be revoked.

“Any UK parliamentarians who think they can stop Brexit have either not read, or not understood, the Article 50 exit clause in the Lisbon treaty. After passing the EU (Notification of Withdrawal) Act this year, the UK parliament has no tools left to engineer a reversal.  The Brexiters are no less delusional when they believe that they will end up with a good trade agreement.”

Next to the decision to hold a referendum in the first place, the decision to trigger Article 50 without fully understanding what it means will go down in history as the moment Britain lost any pretention to world power status.  The moment Article 50 was triggered, the UK government handed all of its negotiating cards to the EU27; who can just sit back and watch Britain suffer as it becomes apparent that a no-deal Brexit is the only thing on offer.

Münchau argues that short of reversing the decision to leave the single market and the customs union, the best the UK can expect is an off-the-shelf trade deal similar to the recent Canadian agreement:

“And no, there will be no such thing as single market access for financial services. And yes, there will be a hard border between Northern Ireland and the Republic. It will be the external border of the EU and the customs union.”

But even this is merely the beginning of Britain’s coming woes:

“People find it more comfortable to cling to delusions than to discuss the realities of a post-Brexit UK. Leaving the EU has more than just commercial implications: it renders the business model that the UK has pursued since the 1980s obsolete.”

As I write, the European financial bodies around which the City of London has built its prosperity are leaving for the continent.  The banks are relocating too.  Sixteen months from now, when the extremists on the right of the Tory Party achieve their cherished dream of a “hard Brexit” that is supposed to allow Britain to become the world’s money launderer; the City of London will itself have become an artefact of a bygone age:

“The symbols of that period were buy-to-let housing schemes or privately owned Airbnb hostels. Those with property assets, final salary pension schemes and inherited wealth benefited at the expense of a growing underclass. One way of looking at Brexit is as a transition past the point where the median voter was either on the losing side of that model, or in fear of landing there.”

If Münchau is correct, then it is Britain’s growing underclass – those who tipped the vote so dramatically in favour of Brexit – that is going to be Brexit’s biggest winner.  No longer able to centre the economy around the financial institutions of London, the choice for Britain’s elite will be between the left-wing socialism of a Corbyn government or a centrist (Blairite?) revolution similar to that being attempted by Macron in France.  Either way, to survive in the harsh trading climate away from the shelter of the EU, Britain will need to “embrace a more entrepreneurial and innovative economy” – one in which banking and finance take aback seat while the state and industry work far more cooperatively.

As Münchau notes, “herein lies the ultimate irony of Brexit” – in order to survive and compete outside Europe, Britain will be forced to develop the manufacturing and trading base that its position as the EU’s banker allowed it to neglect.  That is, in leaving the European Union, Britain will be forced to become less Thatcherite and more European.

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