Wednesday, 21 September 2016

Brexit rune reading today picks up on something we have known for some time. Business would rather have regulatory stability than sweeping deregulation. Stability guarantees little change in their existing transaction infrastructure and they don't have to plan or train for a new regime. This runs counter to the classic Eurosceptic narrative that business doesn't like regulation.

And this tells us a lot about what we can expect Brexit to look like. As much as influential sources are telling Mrs May that things need to stay the same, we haven't got a replacement regime ready and de-regulatory moves at this point could cause as many problems as the resolve. Meanwhile, when we look at banking and finance regulation we see that much is dictated by global conventions and there is a broad desire to maintain equivalence with the EU. Embedded contractual quasi-legislation may make any divergence impossible.

And so we are back to that basic question again. What is the point of leaving the single market? Business is asking for regulatory continuity and Japan has made it clear that Authorised Economic Operator agreements are important for them along with the European Medicines Agency. One by one we see the demands pile up and the options closed down. Leaving the single market would only serve a function is there were significant parts of it we were looking to ditch but that list is turning out to be quite a short one.

The issue of passporting has become something of a talking point with some sources claiming it essential while others disagree. This has become the linchpin on which the single market debate turns. I have seen estimates that passporting is potentially worth one percent of GDP which is not insignificant - but if push comes to shove we can live without it. The remaining question is whether we gain much in other areas by losing it. Given that eurosceptic theories on trade are at best piss weak, Mrs May is likely to err on the side of caution.

It seems to me that if we are going to leave the single market then it will be for one reason only. To control borders. If that be the case then we're looking at major headaches, long periods of uncertainty and major delays. And given that we will want to see some open agreement on visas on the whole we are looking at only marginal "gains" in that respect.

In this it seems unlikely that Mrs May is willing to inflict a considerable damage on the country simply to appease the lunatic fringe. There are already signs that she has sidelined them. Boris Johnson appears to be getting on with the soft diplomacy and only David Davis is directly involved. Mrs May has him on a tight leash.

So if you were wondering why those grim Brexit prognostications are not coming true its because business has done roughly the same calculations. Single market divergence is barely practical, time consuming and not worth the bother. So it is now a question of whether we will use the EEA mechanism or whether Mrs May will seek to save face by cloning it and calling it something else. She will need to be persuasive in order to get concessions on freedom of movement but as far as most people are concerned, if good sense wins out, then day one of Brexit will be business as usual.

Meanwhile, in the media bubble, the clique of Open Europe, LSE and FT wonks seem to believe that a hard Brexit is the most likely outcome on the basis that nothing else will be politically acceptable. This is more assertion than observable fact. It's difficult to tell if it's political mischief making or sheer spite. There is no evidence to suggest that Mrs May is going to bow to her crackpot eurosceptics and there is no pressure to do so. Labour is no threat and Ukip is yesterday's news. The crackpot fringe are in no position to be making demands.

In the end, the Brexiteers are going to be the disappointed ones. They will get their blue passports and their scraps from the table - but if they wanted it some other way they should have had a plan - and something more substantive than twenty year old free trade mantras. They can't say they were not warned.

No comments:

Post a Comment