Time to get unilateral: what London needs from the Brexit negotiations

Well, this is awkward. Image: Getty.

Article 50 marks the moment when the UK’s departure from the European Union turned from distant prospect to dogged process. However you voted in the referendum last year, Brexit just got real.

And with that reality, there is the promise of clarity. All of these terms – customs union, free trade area, the four freedoms, the acquis communautaire – that have become part of public debate in recent months will start to become the raw material of negotiation. Ironically, we have begun to understand the intricacies of the European Union just as we start disentangling ourselves from its treaties, its regulations and its institutions. 

At long last, we will know where we stand. But clarity will take time, despite Prime Minister Theresa May’s emphasis, in her letter to European Council president Donald Tusk, on the importance of providing certainty. Fewer and fewer politicians and pundits seem optimistic that we can both achieve a separation agreement and a comprehensive negotiation of a new relationship in the space of 18 months, allowing for six months for agreements at the end of the process, and with French and German elections adding complexity.

What happens in airless Brussels committee rooms over the next 18 months will be important to the future of everyone in London and the UK. But we mustn’t overlook what will be happening in our towns and cities before then, where the decisions of hundreds of firms and thousands of individuals may be just as important to our future as the machinations of mandarins.

In London, hardly a day goes by without media reports of companies gently testing out the possibility of setting up in other European capitals, maybe sending a few staff over to Frankfurt, Dublin or Paris, maybe taking out an option on offices.  Aside from a few pre-planned moves that were opportunistically badged as the “consequences of Brexit”, most London employers have so far been taking a cautious “wait and see” approach to future plans.

But as they consider the possibility of leaving the EU without a trade deal – and contemplate the small but vocal posse of politicians who regard that as a wholly desirable outcome – the calculus of risk begins to shift.  As a recent House of Lords report set out, World Trade Organisation rules are very unattractive for many of the service sectors in which London excels.  The problem for these sectors is not so much the tariffs that will hit manufacturing and agricultural exports, but regulations that seek to ensure that services provided across European boundaries meet common standards.

UK broadcasters could be barred from distributing content aboard; banks could find themselves locked out of EU markets; tech firms could be unable to share data across borders. UK airlines could be prevented from running passenger services within the EU, and lawyers, accountants and other professionals could find their qualifications were no longer recognised overseas.

Many of these restrictions would be almost as damaging to other EU countries as to the UK, and with time and goodwill new trading arrangements can be put in place.  But time is in short supply, and goodwill may be tested in coming months. In these circumstances, a lose-lose outcome is a real possibility. In the meantime, uncertainty may force the issue.


European workers in the UK will also be thinking about their options.  The more that the status of EU citizens living in the UK is left uncertain (and the more stories of people being refused leave to remain by an overwhelmed Home Office), the more likely they are to consider relocation. This is a particularly important issue for London, where more than 12 per cent of workers are from elsewhere in Europe, but it also matters for employers in the agricultural heartlands of the East Midlands. 

And it is mirrored by anecdotes of lawyers and scientists turning down jobs in London because of the uncertainty about their future status and their families’, and by statistics showing a slowdown in migration of higher skilled workers from the continent. If uncertainty means that employers can’t attract the high-skilled European workers they need, the balance will tip further against London.

The Centre for London’s forthcoming report on the implications of Brexit for the capital argues that London – and other UK nations and regions – urgently need short-term clarity, to prevent the trickle of relocations from turning into a flood, making Brexit look like a failure before it has even happened.

There needs to be a clear statement, unilateral if necessary, that current EU residents can stay, and a clear interim position on trade. Membership of the European Free Trade Area might be sought as an interim measure, enabling continued access to the single market in current terms while new ones were negotiated.

This would mean the UK was still bound by EU regulations, but this will only mirror the provisions of the proposed Great Repeal Bill that will adopt current EU regulations wholesale.  It would probably be greeted by jeers of “Betrayal!” by Ukippers and their fellow-travellers in the Conservative Party – but the Prime Minister will need to face down these fringe elements sooner or later, unless she wants to lead us to the harshest of hard Brexits.

London leads the world in services from banking to restaurants to pop music to advertising.  These clusters of expertise have proved remarkably resilient, and it will take more than a few departures to weaken them. But it would be catastrophic if uncertainty led to London losing its edge while the details of Brexit were still being hammered out.

Richard Brown is Research Director at Centre for London. He tweets as @MinorPlaces.

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Quiz: Can you name the UK city from a map of its public transport?

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Come on, this is an easy one.

 

 

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