A Beginners Guide To Brexit

We recently held a retreat to think about issues that are likely to impact upon the future of the UK out to 2050. Naturally enough, Brexit appeared as one of those issues that would be very significant. We decided to give our thoughts some shape in order to help frame our conversations around these issues. In doing so, we felt that the best tool to help us here would be the Three Horizons Model, simply because it allows us to think in terms of a "before" (Horizon 1 - H1), an "after" (Horizon 3 - H3), and a "transition" period (Horizon 2 - H2). We decided that the output would be a timeline onto which our thinking could be placed. We could then use that timeline as a backdrop to some more specific scenario work following on from this review.

In stylising the three horizons, we thought that H1 would be dominated by determining what it is that the UK doesn't want from Europe. This process has been under way for some years and was given a sharper edge in the process leading up to the referendum vote in 2016. It would seem that there is a desire to assert the sovereignty of Parliament and to derogate from the four freedoms that are an essential part of the European Union. In particular, there is a desire to derogate from the free movement of labour in order to begin to control the flow of immigration into the UK. In our view, the bulk of H1 would take place in the years up to 2017. It forms the essence of the British position in the negotiations to withdraw from the EU.

The negotiations to leave the EU are the trigger for H2. We have stylised this as the "WTF Phase". It contains the complex interactions between the EU nations and the UK; the EU nations with each other; and between the EU nations, the UK, and third party nations. We have already seen some of the issues that could arise in this phase. Could Spain use this as an opportunity to resolve the question of Gibraltar? Could Greece use this as an opportunity to insist upon the return of the Elgin Marbles? Could the European Commission use this as an opportunity to create a united Ireland? There are some really difficult questions to be settled during this phase.

We took the view that the period of two years 2017-19 is not long enough to resolve these questions. Even if all sides were willing to negotiate in good faith, the matter is too complex to yield a stable solution. In our view, H2 is likely to split into three phases: (a) the negotiation phase - where the Lisbon Treaty is adhered to but not much progress is made, (b) an hostility phase - where each side tries to act to gain an advantage over the others, and (c) a resolution phase - where each side actually finds common ground to reach an accommodation with each other. In our thinking, the negotiation phase would dominate the period 2017-19, the hostility phase could occupy the period from 2019 to the mid-2020s, and the resolution phase would take the second half of the next decade to work through.

The outcome of the resolution phase of H2 is likely to determine the shape of H3. We alternately called this the phase where the dust settles and the phase of the new world. We see this as a period beyond 2030. The exact shape of the contours of this period are a bit hard to discern at this moment because we need an appreciation of how other key actors have developed in this period. For example, will the Euro have collapsed? Will the Schengen area continue? Will other members of the EU decide to leave as well?

Despite these uncertainties, of some things we can be certain. Britain will find it almost impossible to live without Europe, which suggests that some form of accommodation - with the attendant price - will be reached. Equally, Britain is such a sufficiently large European nation that the EU nations are likely to thrive better if the UK is engaged rather than isolated. This relationship, taken away from the institutional framework of the EU, is rather important to both sides. The sooner this is appreciated by both sides, the sooner we can move away from H2 to H3.

If this broad sketch of the Brexit trajectory is anywhere near correct, then it is likely to have considerable impacts upon the UK economy, especially during the hostility phase of H2. To a certain degree, to be forewarned of its likelihood allows us to hedge against its possibility. We are going to pass through some highly uncertain times during the next few years. Hopefully, enjoining conversation around those uncertainties will help to make them less opaque.

Stephen Aguilar-Millan

© The European Futures Observatory 2017