Could Brexit be Defeated?

_ David Lane, Fellow, Academy of Social Sciences (UK); Emeritus Fellow, Emmanuel College, Cambridge University. London, 27 February 2018.

On 23 June 2016, the British referendum on the European Union gave a majority of four per cent (52 to 48 per cent) to those who voted to leave.  This was a defeat for the British political class which had strongly backed the ‘remain’ campaign. The policy of all the major electoral parties – Conservatives, Labour, Liberal-Democrats, Scottish Nationalists and 74 per cent of the members of the UK Parliament supported remaining in the European Union. The British academic and economic elites also fell into the Remain (in the EU) camp.  Before the referendum, calamity was widely predicted if a vote to leave succeeded. The Director General of the Confederation of British Industries, Carolyn Fairbairn, warned that leaving the EU would potentially cost the UK economy £100 billion and 950,000 jobs by 2020 and the head of the Bank of England predicted financial disaster if the UK left.

Despite these reservations, following the referendum the leaders of the major parties (Labour and Conservatives) accepted the result. Theresa May (a ‘Remainer’) who became Prime Minister declared: ‘Brexit means Brexit’.  However, opponents have fought a rearguard action. The Scottish Nationalists, relying on the majority vote in Scotland to ‘remain’, and the Liberal Democrats have campaigned for a second referendum. The binding nature of the referendum on the government was also called into question and, following a legal challenge, the UK Supreme Court of Justice ruled that the government had to refer the matter to a parliamentary vote.  This ploy to reverse the referendum result failed when the two Houses of Parliament backed the government with substantial support. Notably the Labour Party, under the leadership of Jeremy Corbyn, supported the decision to leave.  

Triggering Article 50

Consequently on 29 March 2017, Theresa May declared in her letter to President (of the EU) Donald Tusk, that ‘The referendum was a vote to restore our national self-determination’ and duly invoked Article 50 of the Treaty of European Union. Thus she started the formal process for the UK to leave, with the departing country having two years to negotiate an exit settlement.  The terms of Britain’s withdrawal have to be negotiated between the UK and the EU’s remaining 27 member states; each state (as well as required ratification by national parliaments) has a veto over the conditions following the proposed departure. .

The Movement against Brexit

The negotiations have been fraught with internal political divisions within the Conservative Party leadership and have attracted severe criticism of the government’s conduct of the negotiations. Opponents have called for Article 50 to be revoked with more predictions of economic downfall. ‘Expert opinion’ has been pessimistic about the consequences of Brexit. During the negotiation discussions, economists took the lead in predicting dire effects, even in the first year of transition.

However, an academic examination of the short term predictions of eight influential economic forecasts of the effects of the declaration to leave has found that they are all seriously faulted. All the predictions were much more negative than warranted by the actual consequences. The authors conclude ‘that much of this work contains flaws of analysis, and a treatment of evidence that leads to exaggerated costs of Brexit’. (K. Coutts, G.Gudgin, J. Buchanan, How the Economics Profession Got it Wrong on Brexit. Centre for Business Research, University of Cambridge Working Paper No. 493). 

To take but one example: the British government’s Treasury estimates when closely examined were found to be particularly inaccurate.  ‘Writing more than eighteen months after the referendum result, only one of the Treasury’s expectations has been clearly realized. This is the fall in the value of sterling, and the consequential rise in inflation. ..  No recession materialised over the 12 months following the referendum. Nor has unemployment risen. In autumn 2017, fifteen months after the referendum, unemployment has fallen to its lowest level for 33 years, and shows little sign of rising. The UK Treasury expectation that equity risk premia would rise, leading to lower equity prices, has thus proved wrong. The sterling depreciation instead led to higher UK equity prices as corporate earnings from abroad became worth more in sterling’ (K. Coutts et al). 

One common fault in current economic theorising is that the supposed link between free trade and economic growth is overstated.  Studies show that Britain’s rate of growth did not increase significantly with membership of the EU compared to its pre-EU position. Other advantages of UK economic sovereignty – such as greater state investment in infrastructure and vocational education, a more effective policy of regional development, government procurement of British produced goods and services, and enterprise promoting domestic employment, are also overlooked.

Nevertheless, the prevailing views of economists buttress the claims of significant and well-financed pressure groups advocating the reversal of Brexit. The campaign to ‘keep Britain in’ the EU is still a live issue. As the chief executive (Eloise Todd) of ‘Best for Britain’ is reported to have said: ‘The UK’s future with the EU is not a done deal, there is still a vote to come and people across the country deserve to know the truth about the options on the table, one of which is staying and leading in the EU’  ‘Best for Britain’, founded by Mark Malloch-Brown a former UK government minister and former deputy UN secretary-general and Gina Miller (who brought the original legal case against the UK government) received in February 2018  over 400,000 Euros alone from George Soros’s Open Society Foundation. He has also given over 300,000 Euros to other anti-Brexit Groups, such as the European Movement UK and Scientists for EU. Cross party working groups in Parliament have been formed to reverse Brexit and to influence the course of negotiations.

The EU’s Response

The EU leadership was psychologically and politically surprised, even devastated, with the unexpected vote to leave. In February 2018 EU President, Donald Tusk, has said that Britain still has time to ‘change its mind’ and stop Brexit. The EU’s ‘hearts are still open’ to ‘their British friends’.  The EU also has a lot to lose. Not only in terms of the balance of power in the EU, but also the hard fact that the EU is a large net exporter to the UK (currently the UK has a 100 billion Euro trade deficit with the EU); the EU is also a major beneficiary of a net 10 to 15 billion Euros per annum from the UK’s financial contribution.

Donald Tusk however cannot speak for the member states of the EU or on the legality of stopping the withdrawal process.  Whether the EU would accept the reversal of Article 50 is extremely doubtful as the member states would have to be convinced of the political commitment of the UK.  Even before the referendum, the UK was neither part of the Euro zone nor the Schengen visa-free area.  It rather considered itself as a major participant in the Atlantic Alliance and cherished strong cultural and social ties with the English speaking world. It had much stronger trade and commercial links outside the Union than other EU member states. The UK has always been a somewhat reluctant member of the Union. Moreover, for the EU to move forward to a more unitary state, along lines favoured by President Macron of France, Britain would be an unwelcome brake on movements which are ascendant in the European Union.

A second referendum is unlikely. Domestically, it would be a defeat for parliamentary democracy. It would undermine pledges given by the leaders of the major political parties (Labour and Conservative) that the UK will leave the EU. Calls for a second referendum, by the Scottish Nationalists and the Liberal-Democrats (who lost credibility following defeats at the last parliamentary election) are likely to go unheeded. In the improbable event of a successful second round, ironically it would be up to the European Court of Justice to decide whether the UK could revoke Article 50 after the process has been started. 

 What Kind of UK-EU Relationship?

Currently, the real political argument is over the terms of negotiation and here rest possibilities for maintaining many of the EU linkages. For those opposing Brexit, the most practical political course would be to accept a place outside the EU but to preserve many of the existing agreements with the EU. This option is supported by a powerful group of cross party members of Parliament. Advocates of keeping the UK in the Customs Union or the single market, if successful, would negate the objectives of Brexit. The UK would remain subject to the European courts; it would have to contribute to EU funds; membership of the single market would require conforming to the EU’s rules on the unrestricted movement of labour and capital; in addition, membership of the Customs Union would preclude an independent trade policy. This kind of settlement is precisely what is feared by its opponents – a defeat for Brexit. 


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