The Investor 94 Asia

THE INVESTOR

Getty Images. Sources: 1 electoralcommission.org.uk, June 2016; 2 ons.gov.uk, May and June 2017; 3 uk.reuters.com, May 2017; 4 ec.europa.eu, May 2017; 5 cer.eu, May 2017; 6 ons.gov.uk, June 2017; 7 uk.reuters.com, June 2017; 8 gov.uk, May 2017; 9 britishchambers.org.uk,

February 2017; 10 ConservativeHome.com, May 2017; 11 cer.org.uk, May 2017

BREXIT

and it is not clear whether May’s

government has the political strength

to drive through difficult compromises.

Among other considerations, it will

need to pass 10 to 15 bills over the next

few years to set up regulatory bodies

and create rules to replace EU regimes

That said, threats by pro-Remain

MPs to impose conditions on May’s

negotiating mandate have so far proved

empty. In March, the Commons

meekly passed the Article 50 bill,

allowing the government to trigger a

two-year countdown to Brexit, with

no real strings attached.

Amid all this, UK business leaders

have been trying to reassert some

influence. Five lobby groups, including

the British Chambers of Commerce

and Confederation of British Industry,

made a joint plea to the government to

put the economy first in Brexit talks

and secure a transitional deal that

preserves access to the single market.

This has been a tough time for the

UK’s business establishment. Its voice

was muted in the EU referendum, in

part because business was itself divided:

most leaders backed Remain but a

significant minority, mainly owners of

small companies, supported Leave.

Since the referendum, business leaders

have felt excluded from the Brexit

decision-making process in Number 10

and frustrated about a lack of detail

on the post-Brexit immigration

regime, which they fear could hamper

economic growth.

A striking feature of the election

campaign was the extent to which

both main parties proposed more state

intervention in the economy, a retreat

from the market liberalism that began

under Margaret Thatcher and marked

the 1980-2016 era.

The Tories, seeking to attract former

Labour voters, proposed a cap on

energy prices, further employment

rights, tighter immigration controls

and curbs on executive pay.

for UK businesses, mindful of the fact

that Europe will remain a key market’.

Despite an election result interpreted

by some as a rejection of a ‘hard’ Brexit,

Theresa May has stuck to her priorities:

a free-trade agreement in which the UK

gives up formal membership of the

single market and the customs union.

She wants to secure tariff-free trade and

ensure freedom to provide financial

services across EU borders.While

leaving the customs union, she wants a

bespoke pact allowing frictionless trade.

The EU has insisted that the UK

cannot cherry-pick bits of the single

market it likes and ensured that

agreement on the ‘divorce bill’ comes

before trade talks.The overall hope

for agreement depends greatly on

issues such as the UK’s exit bill, the

degree of control over immigration, a

judicial body to oversee trade disputes

and the length of transition. May’s aim

to agree a complex deal within two

years looks decidedly ambitious.

Failure would leave the UK relying on

WorldTrade Organization (WTO) rules,

a scenario many business leaders fear.

The ConservativeHome website argues

that this would be ‘less like falling off a

cliff than a walk to a beach’ because

WTO terms could be supplemented by

sectoral arrangements to provide legal

stability and a smooth flow of goods.

However, the Centre for European

Reform think tank disagrees, warning

that a ‘cliff edge’ Brexit would severely

damage the UK economy. It would

introduce tariffs and time-consuming

rules to determine the national origin

of products; it would also create a

regulatory no man’s land in which many

British products would no longer be

accredited for sale across the Continent.

It seems as if it is the UK, more

than the EU, that is heading into an

unknown future.

Brian Groom was until recently Assistant

Editor at the

Financial Times

Commitments on topics of business

concern such as skills, infrastructure

and industrial strategy were decidedly

vague. Labour meanwhile pledged

nationalisation in sectors such as rail,

higher taxes and regulation.

However, political pressure from

business groups is growing.The British

Chambers of Commerce has set out its

priorities as it asked the government to

negotiate ‘the best deal it can with the EU

There is scope for

agreement, but only if

there is compromise on

the UK’s ‘divorce bill’