By Mitch Ilbury.
Abstract: Tumultuous events in the UK in the last few weeks have made us think of boiled eggs…
Luv, won’t ya get the Breggsit on the go?
“How long do you want it in for?”
“I dunno, what does it say on the carton?”
Not long ago, Europe was teetering on the verge of a populist revolt and the UK, looking like it had planned an escape at just the right time, was somewhat steadfast under ‘strong and stable’ leadership. The tides have turned. Having weathered the populist storm, Europe looks altogether brighter and more unified; after a snap election gamble by Prime Minister Theresa May has left her with egg on her face, the UK leadership looks less ‘strong and stable’, and more ‘weak and feeble’. Recent weeks have fundamentally altered the probabilities of the different possible scenarios that could play out in the Brexit negotiations. Here are three possible directions the negotiations could now take:
The Conservatives under Theresa May could respond with even more determination to stride on with the old hard Brexit plans of completely leaving the EU and trying to form a bold new deal with bells and whistles to match. It doesn’t take a fox to realise this is a tall order. Two of the biggest sticking points ahead are: 1) the enormous proposed divorce bill – of which the EU wants to squeeze, and the UK has little room to budge(t); and, 2) if the UK wants anything like what it enjoyed in the single market, then it will likely have to subscribe to European Court of Justice (ECJ) oversight – this mechanism is an essential ‘enforcer’ ensuring regulation harmony. This, however, would be an unforgivable concession for those that wanted to ‘take back control’.
While the potential for a deal has decreased – due to a weaker and less efficient UK minority government – the potential for the UK to crash out without any deal has increased. Our intelligence sources indicate that the Europeans smell blood. Having weathered the populist storm, they feel more united and are confident that the UK simply cannot afford to crash out of the EU without a deal. Who knows how this will influence the UK government’s strategy going forward. It will either react with dogged determination or a more concessionary character. If it’s dogged determinism, then everyone should expect to bite into a hard-boiled future.
We estimate the probability of a Harder Brexit at 40%
Previously shoved out of sight, the soft-boiled Brexit is back on the cards. The Labour party is building momentum. Their ambiguity on immigration and customs union membership was hounded, but now may prove to be just the wriggle room they need to change tack without it looking like a u-turn. If they lead the charge for a softer Brexit then the public mood may shift along with it.
Nick Timothy, Theresa May’s former joint Chief of Staff has been kicked out, and he was one of the principal driver’s behind Mrs May’s strong line on immigration. If Theresa May is ousted, which is not inconceivable (our intelligence suggests Boris has an oven-ready campaign, and Rudd’s ready for when the amber light turns green), then the Tories could rework their negotiating hand, and concede to a softer version of Brexit. It all depends on what the political incentives are. After the referendum vote, it paid to be a hard-liner on immigration, but that could change.
Arguably the best result for the UK, although less likely, would see some kind of cross-party commission. With a mix of all parties, this would almost certainly be a softer version of Brexit, with single market membership a priority. The key flag for the softening Brexit scenario is leadership – keep an eye out for who takes the reigns, and how they portray the public mood.
We estimate the probability of a Softer Brexit at 40%
This smells funny, bin it.
The talk around London has definitely shifted after the general election. Previously, few stuck out a limb saying Britain should renege on Article 50. Now, many more are getting braver. If the stumbling continues, and this becomes evident in Britain’s negotiating strategy, then there could be significant pressure on the government to revisit the matter altogether. This is a very uncertain scenario, and it could be messy, but enough people truly believe Brexit is a mistake that it remains a live one.
We estimate the probability of Britain canning Brexit altogether at 20%
Remember, while all of this is going on, time is ticking. After a long discussion with the UK’s preeminent expert on international trade, mindofafox believes that there is almost no chance of negotiating a deal in the allotted time. This means that there needs to be a transition agreement. Even this, however, will need to be agreed to, and signed off by, all other 27 EU nation states, which is no guarantee. The fox in you should connect these dots and see that the UK is in a very difficult position. Put yourself in the shoes of the UK and the Europeans and ask yourself this, how do you like your Breggsit?