Brexit Means Brexit, After All

You better bloody believe it, tossers!
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By ukhomeoffice [CC BY 2.0], via Wikimedia Commons

By ukhomeoffice [CC BY 2.0], via Wikimedia Commons

So it’s official: The U.K. will not be having its cake and eating it, too, vis a vis the European Union. Keeping other Europeans out and keeping them from weighing in on the country’s laws has been deemed paramount. And so, pious, pie-in-the-sky dreams of keeping all of the good bits (single market access, financial services passporting, etc.) while doing away with the bad bits (Polish people, mainly) have come to naught: It’s a Hard Brexit, baby, with a Capital H.

Prime Minister Theresa May on Tuesday charted a course toward a clean break with the European Union, calling for the country to abandon the single market after more than four decades of integration with the Continent….

“Let me be clear,” she said, adding that any agreement would be sent to both houses of Parliament for approval, “What I am proposing cannot mean remaining in the single market.”

But before we drag the unscrupulous quoter of Marie Antoinette, Foreign Secretary Boris Johnson, to the guillotine, wait: For all of the nationalist bravado of May’s speech, with its dismissal of “partial membership” and “associate membership” and holding “on to bits of membership as we leave,” it turns out that she’d quite like to have at least some cake and eat it, too,

Despite her pledge that she did not want to be “half-in, half-out” of the European Union, that seemed to be exactly the model Mrs. May favored regarding its customs union, which eliminates tariffs between European Union countries and some other neighbors that participate.

However, membership of the customs union limits the ability of member countries to strike individual free-trade deals with non-European nations, another of Mrs. May’s major objectives.

And if the Germans and French and other snail-and-horse-eating continental types spurn those hopes for a not-terribly-equal “new and equal partnership,” well, Theresa May has a plan B rife with historical irony: She’ll turn the U.K. into Ireland.

She warned that if Britain were locked out of European markets, it would feel free to cut corporate taxes and change its economic model to remain competitive.

Such an approach, you’ll recall, worked out swimmingly for Britain’s neighbors: The Celtic Tiger went for a swim in its race to the regulatory and tax-rate bottom, drowned, and the tides have been beating its rotting corpse against the Cliffs of Moher ever since.

As grim as the picture painted by May is, people won’t (can’t?) abandon all hope just yet. The prime minister, who has jealously—if ineffectively—defended her right to drag Britain out of the EU without giving Parliament a vote, says that the houses of Commons and Lords will get to vote on this best deal she’s promised to negotiate over the next two years. (Even as the anti-Brexit Northern Irish give her an excuse to wait on things a little longer.) And given the makeup of those bodies, that’s got people betting on soft Brexit once more.

“You can see there was a big bounce after she mentioned that both houses of parliament would have to vote on the agreement,” said Alvin Tan, foreign- exchange strategist at Société Générale, referring to the U.K.’s house of Lords and Commons.

“It’s positive because given the stated remain views of the majority of members of parliament, in a sense it would help to get a deal that is not too harsh,” Mr. Tan added.

The British people, alas, are somewhat less optimistic.

“At present, households appear to be entirely looking through Brexit-related uncertainties,” he said in remarks prepared for delivery at the London School of Economics. But he said rising prices will likely crimp their spending, which, combined with subdued business investment as corporate executives await more detail on the shape of the U.K.’s future relationship with the EU, will probably mean slower-than-average growth in the U.K. over the next few years.

In ‘Brexit’ Speech, Theresa May Outlines a Clean Break for U.K. [NYT]
Prime Minister Theresa May Says U.K. Won’t Seek Membership of EU Single Market [WSJ]
Pound Jumps as U.K. Prime Minister Promises Parliamentary Vote on Brexit [WSJ]
Bank of England’s Carney Sees Slower British Growth Ahead [WSJ]

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