Four months after the UK referendum we know one thing. The Brexiteers had no idea how to exit the European Union. What is more, having said ‘Brexit means Brexit’, Prime Minister Theresa May has also indicated that no one in David Cameron’s cabinet made the slightest preparation for the contingent possibility that the Leave vote might win.
Speeches at the Conservative party conference held in Birmingham at the beginning of October panicked markets into dumping sterling. Even if we pretend that sterling depreciations under Labour – 1949, 1967,1976 – are bad, but under Tory regimes – 1992, 2016 – they are fantastic opportunities, sterling nervousness is not yet over.
Uncertainty about the negotiating strategy is a disturbance for the real economy, whether in finance or manufacturing. It has affected foreign investors, universities and research centres alike. The priority now is to minimise the negative consequences of the No vote.
The UK economy has surmounted the first post-referendum months in better shape than some expected. GDP rose 0.5% in the third quarter compared with three months earlier – the Treasury had predicted it would shrink 0.1% – but shocks may still lie ahead.
The British economy is flexible and innovative enough to thrive if it is clear about its place in the global environment. Wishful thinking that Europeans need us more than we need them, the EU will break up or that the euro will implode are fantasies. Brexit means ‘Quick Brexit’.
The government must firmly entrench the objective of invoking Article 50 – the mechanism for leaving the EU, which also lays down a framework for the future – before the end of March 2017. If possible May should specify the date. The government must create clarity, too, about the destination.
Once we insist on control of migration, which means refusing to allow freedom of movement for workers of the remaining 27 EU countries, we should abandon illusions about solutions per the Swiss or Norwegian models, or some ideal ‘bespoke’ exit.
It will be a long haul after the exit. Britain would have to join the World Trade Organization and negotiate various free trade agreements. This will take longer than the two years to process Article 50. It could be five years before the British are on the other side of that tunnel.
The aim should be to minimise the delay before we know the shape of the post-EU economy. It is no good waiting for the French presidency to change or for the German elections. Britain’s EU interlocutors have been appointed. The European Commission and the European parliament will not change. The task is to speed up procedures and see if Britain can complete Brexit in less than two years.
Britain cannot hang around seeking various single market concessions – something that rules out a truly ‘bespoke’ Brexit.
Several other important factors must be acknowledged which require urgent attention. The City is important because of its range and efficiency. It will be able to adapt to the post-Brexit world. Britain must quickly negotiate on further issues such as its future financial liabilities, university research co-operation, anti-terrorism measures, and climate change initiatives. These fields are vital and detachable from the four EU freedoms.
Visas for skilled Europeans are of great importance. Britain allows skilled professionals from other countries to come and work. EU27 members will be just like anyone else. There is no need to fix quantitative limits or bring in rules on identifying foreign workers in UK companies.
Above all, Britain needs to expedite Brexit so it can take its place in the WTO as soon as possible. This will be crucial to the UK’s future. The sooner Britain gets going, the better.
Lord Meghnad Desai is emeritus professor of economics at the London School of Economics and Political Science, and chairman of the OMFIF Advisory Board.