As London fears 'no deal' Brexit, May finds it difficult to keep hard-liners in the fold

Thursday, 30 August 2018

On Thursday 23rd August, the Minister for Exiting the European Union, Dominic Raab, released a series of documents outlining the implications of a 'no deal' Brexit. Although the Minister claimed that 'getting a good deal [was], by far, the most likely outcome', the content of these papers, which underlines the negative economic impact of a 'no deal' situation, seems to be evidence of the incumbent government's self-doubt.

While the papers reaffirm the government's commitment to the funding of ongoing EU projects under the structural funds and the Horizon 2020 framework programme, it issues several warnings regarding the cost of a 'no deal' Brexit. In the event of such a scenario, EU-UK trade relations would have no regulatory framework to revert to other than the one offered by the World Trade Organisation. Hence, leaving the single market would impose significant practical constraints on bilateral trade and would by no means alleviate the administrative burden borne by companies engaging with European markets. For instance, businesses importing from and/or exporting to the EU might consider it necessary to engage a customs broker. Banking and financial services would face similar disruption. For example, the cost of making payments in euros could increase, should the UK lose access to the Single Euro Payments Area (SEPA).

There is more to these papers than a mere attempt to warn businesses about the implications of one possible Brexit scenario. The fact that the incumbent government chose to release these advice papers is evidence of the Conservative party's discord over the exact nature of a desirable Brexit. While Theresa May does not advocate for all ties with the EU to be severed, the July Brexit plan shows she is trying to strike a balance between the demands of Tory remainers and the aspirations of backbench, hard-line Brexiteers such as Jacob Rees-Mogg. Coincidentally, on the very day the advice papers were published, a letter from Rees-Mogg to other MPs and local constituency association chairmen attracted wide media attention. The letter was openly critical of the Prime Minister's handling of the Brexit negotiations and leaves no doubt as to the deplorable state of Mrs. May's legitimacy within her own party. Such intra-party competitition is bound to be detrimental to the ongoing negotiations, as it casts doubt regarding the UK's intentions. The looming threat of a leadership challenge also means that Michel Barnier, the EU's chief negotiator, might eventually be speaking with a very different type of interlocutor.

The Conservative party is currently riven by dissent, as it has been since the start of the Brexit campaign. It is no surprise that a party which was then unable to adopt a common stance on whether or not to exit the EU now shows little support for a Prime Minister who seems to be trying to bridge the gap between diverging aspirations as to the viable shape of Brexit.  While warning about the adverse economic impact of a 'no deal' scenario should foster support for a softer version of Brexit, even remotely considering the 'no deal' scenario might simply endow hard-liners' demands with additional credibility.