EU DEPARTURE LOUNGE

By John Baron

By a decisive margin, the British people clearly voted to leave the EU in last year’s referendum, and it is imperative that the Government works to implement that democratic decision and engineer a clean and decisive break from the EU. In this it has so far enjoyed the strong support of Parliament – the Article 50 legislation passed by massive Commons majorities, and the House of Lords rightly acknowledged this – and Parliamentarians, whether MPs or Peers, are duty-bound to continue to do so.

However, in recent weeks the concept of a ‘transitional phase’ has gained traction, whereby although we leave the EU as expected in March 2019, various EU measures retain their force for an unspecified period afterwards. There are different views as to which measures would linger, but supporters of a transitional phase gather around preserving freedom of movement in one form or another.

Though the siren calls for a transitional period in order to avoid so-called ‘cliff edges’ may be attractive, there are several serious problems with this approach. In the first instance, such a phase increases the risk the referendum result will not be properly honoured by playing into the hands of those who wish to build momentum to frustrate or prevent Brexit, particularly as one concession can easily lead to another. Once you have accepted the logic for the first delay to Brexit, the second delay is much harder to resist – there must be no loitering in the departure lounge.

Secondly, rather than putting their shoulders to the wheel, a transitional period may encourage both the Government and our negotiators to rest on their laurels, safe in the knowledge that the March 2019 Article 50 deadline has less immediacy. Moreover, delaying a clean Brexit leaves us more at the mercy of events. No-one can predict how the political or economic environment might change over the next few years, and a change of government or a global economic downturn could lead to further calls to halt or even abandon the Brexit process.

Big business has been the main driver behind a transitional period, despite these companies knowing about Brexit for over a year, and still having until March 2019 to adjust. They are well aware of how leaving the EU will affect their business models – not least because they supported Project Fear’s paper tigers. As for their concerns about recruiting a skilled workforce, the Government has time to introduce a controlled and fair immigration system open to the world, not just the EU. If we got our act together, this could be primed to kick in the day we exit the EU.

BMW’s welcome announcement that the Electric Mini will be constructed in Oxford was coupled with the Business Secretary’s warnings about the risks of a ‘cliff edge’. Yet BMW’s vote of confidence in Britain underlines why this country remains an excellent and attractive place to do business, and why such concerns remain misplaced.

Our relative advantages are legion – low corporation tax, high labour market flexibility, good infrastructure, a global language, and world-class higher education and research facilities, to name but a few. These factors are what really drive big businesses’ investment decisions, and so we should be wary of any pitch for transitional periods, particularly from those European companies which are in part state-owned.

In any case, in the unlikely event no Brexit deal is signed, falling back on World Trade Organisation rules and tariffs should hold no fear. Average WTO tariffs are around three to five per cent, and many countries use these to trade profitably and extensively with the EU. There is no reason why Britain should be an exception. Furthermore, leaving the Customs Union will allow us to pursue free trade deals with the faster-growing economies outside the EU, including the United States.

All in all, I hope the Government resists the calls for a transitional phase. I do not think it is necessary, and it provides unnecessary succour to those as yet unreconciled to our leaving the EU. Michel Barnier was right to remind us of the ticking clock when it comes to the March 2019 deadline – we should press ahead with Brexit sans distraction.

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