This could be a bitter-sweet victory for Boris Johnson and the Conservative Party.
Johnson’s gamble has paid off and the Conservatives have decisively won the UK general election . He looks like having a clear overall majority of 80. Labour has put in its worst performance since 1935, winning just over 200 seats. Corbyn and “Corbynomics” turned out not to be such a vote winner after all.
Sweet though such a victory is for Johnson, the bitterness comes with the results in Scotland and Northern Ireland. In Scotland, the pro-independence, anti-Brexit Scottish Nationalists (SNP) swept the boards. The final results were SNP: 48 (+13) Conservatives: 6 (-7) Lib Dem: 4 (-) Labour: 1 (-6). Ten years ago, Labour had over 40 seats in Scotland.
Dan Keohane notes: “Not only has Northern Ireland elected a majority of anti-Brexit MPs, it has also elected more Nationalist than Unionist MPs for the first time. Results: DUP 8 Sinn Féin 7 SDLP 2 Alliance 1”
Nationalisms, and competing nationalisms at that, have all won in England, Scotland and Northern Ireland, raising the existential question as to whether or not Johnson can hold the UK together as Brexit unfolds. Scottish independence and the future of Northern Ireland are now very much on the table and will not be taken off it anytime soon. (See our LinkedIn piece from earlier this week).
It is now certain that the UK will leave the European Union (EU) on January 31 next. Johnson will have delivered Brexit, if only in the narrow sense that as and from February 1 the UK will no longer be an EU member, but a “third country”. What remains to be determined is the nature of the future relationship between the UK and the EU.
Keep in mind that in the upcoming talks the UK will no longer be negotiating from inside the EU tent, as it has been over the past three years, but from outside. The legal basis on which the negotiations will be conducted will be Article 218 of the European Treaty.
This means that any deal will have to be approved by each and every parliament in every EU Member States, including some regional parliaments, as in Belgium. Everyone has a veto, and no one is going to roll over and “play nice” for the UK. International negotiations do not work that way. Expect the talks to be nasty and brutish and not necessarily short.
The Withdrawal Agreement that Johnson negotiated with the EU provides for a transition arrangement which runs to December 31, 2020. During this time while the UK will no longer be a de jure EU member it has agreed to act as if it were a de facto member and will follow all EU laws and rules during 2020. In effect, nothing changes in practice on February 1 next.
January 1, 2021 is an entirely different matter and what happens as and from then will be dependent on whatever deal, if any, the UK reaches with the EU. Given the complexities involved and the number of issues that have to be negotiated between the parties it is highly unlikely that anything of real substance can be achieved in a year.
The UK has the option of asking that the transition period be extended up until the end of 2022. Johnson and the Conservative manifesto have both categorically ruled out asking for any such extension and are committed to being outside the framework of EU law by the end of 2020.
But Johnson is not averse to doing a U-turn, as his ditching of the all-UK backstop and his agreeing to a Northern Ireland-only “frontstop” clearly showed. The crunch point will come next July, the deadline for asking for any transition extension.
If Johnson does not ask for an extended transition and if the EU and the UK have failed to reach an agreement by December 2020, then the UK will leave the EU on World Trade Organisation (WTO) terms. What exactly this would involve is highly disputed and open to interpretation. What is clear is that it would mean an end to frictionless trade between the UK and the EU, with the return of border checks and custom inspections. Just-in-time EU-wide supply chains would take a severe battering.
Given that the new “Conservative coalition” now contains a large number of former Labour constituencies, dependent on manufacturing and public services, Johnson´s previous embrace of “Global Britain” as an alternative to EU membership may now have to be recalibrated. Close alignment with the EUs single market and customs union could well be back on the agenda.
As Professor Simon Hix from the LSE writes:
“Well it’s not going to be a slash-redtape/libertarian Singapore-on-Thames Brexit now. Those new Tory MPs from the North and Midlands will demand a Brexit that saves manufacturing and minimizes the effect on public finances”
However, for the moment we have some clarity about events. As noted earlier, the UK will leave the EU on January 31st next. There will be no going back from that anytime soon. “Remain” as an option is dead. Whether or not there is a constituency for “Rejoin” only time will tell and will be dependent on what Brexit actually turns out to mean for the UK. As Professor John Curtice, the doyen of UK academics voting analysts, said of yesterday´s election: “Votes for Remain parties: 52% Votes for Leave parties: 48%. But that’s all over now.”
Today, Brexit is still “out there”, impacting little on the daily lives of people. Only when Brexit becomes disruptive and negative, if indeed it does, will support for the UK being outside the EU weaken. But it would be unwise to count on Brexit having a short shelf life.
All things considered, it is probably best for business to work on the assumption that the UK will be outside the scope of EU law completely from January 1, 2021 and to take steps accordingly. If your EWC is based in the UK, time to move it to another jurisdiction. Ireland remains our recommendation of choice, followed by Belgium.
Check that you have measures in place to allow for the free flow of data from the EU to the UK in the event that the EU has not issued a “data adequacy” decision allowing data to be transferred to the UK before December 2020. This may be easier said than done as the main procedure to allow for continued data flows, Binding Corporate Rules, is under challenge in the European Court, with a preliminary ruling expected next week, on December 19.
It is only when detailed rules on work permits and travel visas are published by both UK and the EU (and individual EU Member States) will businesses be able to plan how to handle these issues. But UK/EU “free movement” is dead and things will never be the same again. Where once there were open borders, now there will be barriers.
This is our last publicly posted BEERG Brexit Briefing. From January 2020 we will be circulating updates via our weekly BEERG members newsletter.