Written on August 28th 2017:

Commenting on the Irish insurrection against the UK in 1916, the poet W.B. Yeats penned the words:

All is changed, changed utterly
A terrible beauty is born

The announcement on Sunday August 27, by way of an article in The Observer, that the Labour Party now backed a transition arrangement for the UK after it leaves the EU in March 2019 changes everything, utterly.

Writing in The Observer, Keir Starmer (photo), the Labour spokesperson on Brexit said:

Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU. That means we would seek to remain in a customs union with the EU and within the single market during this period. It means we would abide by the common rules of both.

If Labour can push this through it restores for business the vital prospect of greater stability in trading terms with the EU and labour market free movement for at least 3 or 4 years ahead.

How this is to be achieved is not stated but if it involves the complete acceptance of all EU rules, including free movement and the jurisdiction of the European Court of Justice, then finding a way to do this should not be that difficult. The full article can be found here. Presumably, Labour also accepts that after 2019 the UK will no longer have any involvement in EU governance, no commissioner, no MEPs and no European court judge.

Starmer’s article also left open the possibility of remaining in the EU’s customs union and single market after the transition. Starmer still has concerns about free movement within the EU but from now to the end of a possible transition arrangement, five years from today, is a long time in politics and by then immigration may not be the hot button issue in the UK that it is today.

As many commentators have pointed out, a large part of the pro-Brexit vote in last year’s referendum came from the elderly, while many “remain” young people failed to vote. This year’s general election saw multitudes of those young people vote against Theresa May’s hard Brexit policy. Pro-Brexit may be a dying demographic. Young remainers are “taking back control”. How much control will they have taken back in five years’ time?

How will they want to use that control?

Labour’s new position, were it to become UK policy, also has the benefit of taking the Irish “border” issue off the immediate agenda. Were the UK to remain in the single market and the customs union for a 3-4 years transition period then that would allow time for this deeply political and emotional issue to be discussed in a calm and balanced manner. The past two weeks have seen suggestions in the UK press that it is the EU, not the UK, which wants to reimpose a border in Ireland. With Labour’s policy move it would now appear that the Conservatives insistence on leaving the single market and the customs union, even during a transition period, is what will see a border reappearing in Ireland.

Labour’s policy clarification raises a number of questions.

First, is there now a majority in the House of Commons for the government’s policy of quitting the single market and the customs union in March 2019, while mimicking the single market and customs union processes in a yet to be negotiated transition agreement? Probably not. The government has a razor-thin majority of just 13, including the votes of the Ulster Democrat Unionist Party. It is an open secret that there are many in the Conservative Party who fear that crashing out of the EU in March 2019 without a transition deal would do untold damage to the UK economy. They will be attracted by Labour’s de facto, maybe even, de jure, customs union and single market membership.

What will intensify pressure on Conservatives, traditionally the pro-business party, is that Starmer’s article articulates exactly the policy that practically all major employers’ organisations have been calling for. Expect to see these organisations saying that Labour’s position makes sense. Not to be taken as any kind of general endorsement of Labour, as employers’ organisation would all still recoil in horror at the thought of a Corbyn-led government.

More importantly, Labour’s announcement changes the negotiating dynamics between the UK and the EU. A recent article in The Economist noted:

“Brussels is also keenly aware of the shifting political ground in Britain. The EU knows that getting Parliament to agree to a hard Brexit, outside the single market and customs union, has become more difficult since the election. One pro-European Tory, Anna Soubry, has already talked of putting country above party.”

As noted above, Labour’s clarified policy stance puts this beyond doubt.

Given this, why would the EU consider, if it ever did, offering the UK any sort of “bespoke” transition deal when it knows that, more than likely, there is a majority in the House of Commons which would support Labour’s single market and customs union option? Further, there is now next to no chance of the government getting its Brexit strategy through the House of Lords. So why, given this, would the EU craft a special deal for a UK Conservative government? When the other side knows that your side is deeply split, it has little incentive to help you out. Especially when Brexit cheerleaders have spent 40 or so years doing nothing but denigrating the other side. Name calling can come back to haunt you.

While today’s developments are good for business, which needs certainly and continuity in trading relationships between the UK and the EU, it is likely to alarm those who want the UK to cut all ties with the EU. With Labour now backing a sensible transition deal and leaving future options open, “hard Brexiteers” may see their best chance of getting what they want in collapsing the “Article 50” exit negotiations, especially over the issues of the UK’s financial obligations. Labour’s strategy would effectively “park” the Irish and citizens’ right issues, as both can be dealt with during the transition period when all options are still open, leaving, for now, just the financial issue on the table. “Hard Brexiters” may see their best chance in kicking over the table at this time.

But business should be under no illusion. A “transition arrangement”, no matter how structured, will mean that the UK will be outside the EU’s governance processes, impacted by rules which it will have no hand in influencing. During the transition the UK will effectively be negotiating a long-term relationship that will be even worse that the “transition arrangement”, because the EU has made it clear that being outside the bloc will always be worse than being a member.

There are times where you just don’t know what to say.

At all times the EU will be in the driving seat. It will decide what “transition arrangements” are on offer to the UK. During the transition it will determine what long-term deal it is prepared to offer to the UK. After all, what leverage will the UK have in the negotiations? Threaten to leave?