The government’s Brexit strategy has evolved somewhat in the two years since the referendum. For example, after insisting that a deal could be negotiated by the time Britain left the EU in 2019, it has now agreed to a transition period that will last until the end of 2020. It has also made concessions on everything from the status of European citizens to divorce payments.
However, one thing that the prime minister has been relatively consistent about is her desire for a “bespoke” deal, rather than a relationship based on any of the existing models (such as Canada, Switzerland or Norway).
Joe Zammit-Lucia, angel investor (someone who makes large investments in unlisted firms) and head of the centrist think tank Radix, thinks that this is a huge blunder. Trying to negotiate a bespoke deal, off the bat, is a bit like “spending a large amount of money on a tailored suit, rather than buying one off-the-rack”, he says.
Zammit-Lucia has recently released a report entitled A Very British Brexit: A Roadmap, with Nigel Gardner and Nick Tyrone. In it, they argue that, at least initially, it would make far more sense for the UK to leave the EU via EEA/EFTA membership, and even consider remaining a member of the customs union (of which Norway is not a member).
Because such as system already exists it would be “easier for the UK to sidestep into such a deal”, especially compared to the “uncertain and theoretical” benefits of a harder Brexit. At the same time, the “Norway option” is also the best way to “maintain the potential for frictionless trade”.
Of course, if things go better than expected, and it looks like we could benefit from a looser arrangement, having something already in place would strengthen our position in any attempt to create a more bespoke deal (similar to Dr Richard North’s “flexit” strategy).
As well as helping maintain access to the single market and giving us flexibility to pursue our own special arrangements further down the line (if we so desire), Zammit-Lucia argues that the EEA model also “takes into account most of Theresa May’s red lines” – for example, replacing the ECJ with the EFTA Court (as was discussed two weeks ago). Indeed, by letting us retain an ability to influence the debate over legislation, it would actually make us less of a rule-taker than the current transitional deal, which gives us next to no power to influence the direction of legislation from Brussels.
Of course, one area in which EEA membership would fall far short of Theresa May’s goals is immigration, as we’d be required to allow EU citizens to come to the UK to take up jobs and search for work. However, Zammit-Lucia thinks that the current problems with the system are as a result of successive governments refusing to take advantage of the space that the current rules give us.
For example, under the Treaty of Rome we’re entitled to send back any European immigrant who has been out of work for more than three months. Indeed, freedom of movement hasn’t stopped Belgium from “returning masses of people”, though such a system might require some form of ID cards.
Sadly, Zammit-Lucia admits that, “it is unlikely that Britain will opt for a solution based around EEA membership”. The refusal to seek a “reasonable balance”, as well as the continued uncertainty surrounding Brexit in general, “has made Britain a much less attractive destination for investment”.
Even the UK’s many benefits, such as a skilled workforce and a flexible labour market, which makes it easier to hire and fire people, pale into insignificance when set against the potential disruption caused by leaving the single market, especially when the EU is tightening its rules on data protection. As he puts it “why take the risk”?
As an angel-investor, Zammit-Lucia has experienced this change in attitude first hand. Indeed, his “constant discussions” with the people who run the various companies that he invests in, has revealed that they are much less positive about the UK.
Indeed, in one company located in the UK was recently faced with a choice between expanding its home office or investing in its Italian subsidiaries. It ended up choosing the latter since it felt that this would be best way to preserve its relationships with the continent, especially since the EU is bringing in new rules around data protection, which could lead to the company being cut off from EU markets.