The government must prepare for the worst possible outcome of Britain’s withdrawal from the EU.
Yesterday Theresa May, the British prime minister, outlined the meaning of Brexit and her priorities for the forthcoming negotiations. As had been expected, she will take Britain out of the single market. Less straightforward was her approach to the EU customs union. She said that Britain would look for associate membership, an arrangement that does not at present exist with any other country. It is extremely doubtful that she will find the political will among the remaining EU member states to grant the UK such status.
Mrs May also said she wanted as much access as possible to the single market, through a comprehensive bilateral trade agreement with the EU. Britain will no longer accept the free movement of people, pay contributions to the EU budget or accept the jurisdiction of the European Court of Justice.
She did make one concession, however: in return for access to the single market she would consider making payments to some EU programmes. She stressed the mutual benefits of an open trade agreement for both Britain and the EU. She also outlined, in language that was not terribly subtle, the retaliatory measures she would deploy if the European Commission or the EU leaders failed to appreciate what was being offered.
The British negotiating position is not quite that of having cake and eating it, but it is extremely self-serving. It is, in effect, cherry picking the benefits of EU membership while walking away from the obligations.
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What was postulated in London yesterday is one set of demands in a negotiating process that is likely to be prolonged and complex. Possibly the most interesting part in Mrs May’s speech was her statement that she was willing to walk away with no deal at all if Britain did not achieve a satisfactory deal by the end of the two-year time frame.
If that were to happen, then there would be a huge disruption to trade between Britain and the EU. Ireland would have the most to lose in such a scenario. In fact, there were a number of points in yesterday’s speech that should cause alarm in this country.
Mrs May said she wanted to maintain the common travel area between Britain and Ireland, but it is not clear how this is possible. The border between the south and the north of the country will also be the border between the EU and Britain. If, as it now seems highly likely, the UK leaves both the single market and the customs union, it is difficult to see how a hard border will be avoided.
The House of Lords released a report before Christmas recommending that the British and Irish governments negotiate a bilateral agreement to preserve the common travel area, which would then be presented to the European Commission for ratification as part of a final settlement. The taoiseach and Michael Noonan, the finance minister, dismissed the report and said that the government would negotiate in unison with the other 27 member states.
This was a mistake. At least if there was a separate agreement between Britain and Ireland, the government could use it as leverage in negotiations. If, as it seems likely, talks between the Britain and the EU descend into brinkmanship over the next few years, the status of the Irish border will become a secondary consideration.
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Ireland exports 15 per cent of its goods and services to Britain and 30 per cent of imports come from the UK. Some 200,000 jobs are dependent on trade with the UK, and most of these are in SMEs and the food and drink sector.
If there is a hard Brexit, the domestic economy will take a disproportionate hit. The planning that is needed to help companies prepare for a trade cliff edge cannot be overstated. That is why a Brexit department within the government is needed — at a very minimum.