The horrific nerve agent on attack Yulia and Sergei Skripal in Salisbury could spell the start of a new cold war – but it may be the catalyst for warmer relations between the UK and EU on Brexit.
It’s early days yet, but the Russian attack prompted not just widespread condemnation from Europe, but also the mass expulsion of Russian diplomats across the EU.
Theresa May received a noticeably warm welcome from leaders when she arrived in Brussels for the EU summit to ratify the newly-negotiated transition deal – a far cry from a year ago, when she was almost ignored.
Because this was not just an unprecedented attack on a European nation, but one that saw the UK go to extraordinary lengths to share intelligence with its EU allies.
According to newspaper reports, the UK divulged “unprecedented levels of intelligence” to convince member states that Russia was behind the attack.
‘Huge degree of standing’
The move won not only vital support, but also reassured – and perhaps reminded – EU allies that when it comes to security, the UK would always remain at the heart of Europe.
In a parliamentary debate, Conservative MP and deputy party chairman James Cleverly, said the response to the Salisbury attack “shows she has a huge degree of standing amongst our European friends”.
He added: “It bodes well for a pragmatic and mutually beneficial conclusion to these Brexit negotiations.”
In his annual State of the Union speech he said, “On 30 March 2019, [there] will be a union of 27… where being a full member of the eurozone, banking union and Schengen have become a standard for every member of the eurozone”.
A former prime minister of the tiny tax haven of Luxembourg, Juncker once boasted how he had lured Amazon to set up its European HQ in the state.
Documents leaked in 2017 showed he had blocked EU attempts to curb tax avoidance by multinational companies, many of who were attracted to Luxembourg by tax rates as low as 1%.
Michel Barnier – EU chief negotiator famously promised that Brexit consequences would be “painful” and that he intended to “educate” the UK on the price of leaving the EU. “There are extremely serious consequences of leaving the single market and it hasn’t been explained to the British people,” he said in a speech in Rome in September 2017. “We intend to teach people what leaving the Single Market means.”
In 2011 Barnier, while serving as EU internal markets commissioner, tried to move some of the City of London’s functions to Europe. He famously enraged the normally phlegmatic Bank of England governor at the time, Sir Mervyn King, with an arrogant attempt to limit his powers to control the capital held by UK banks.
However, the Frenchman – who during EU/UK negotiations has come across as a disdainful headmaster ticking off an errant pupil – has ambitions to succeed Jean Claude Juncker as president of the EU Commission in 2019, which some say will incentivise him to make a workable deal with the UK.
Guy Verhofstadt – the European parliament’s Brexit coordinator. Although not directly involved in negotiations, the parliament will vote on the final deal and has the power to block it.
A diehard Europhile, the Belgian famously described David Cameron, Boris Johnson and Nigel Farage as “rats fleeing a sinking ship” when they resigned their roles after the Brexit referendum.
Who stands to benefit from Britain leaving the EU?
FTSE 100 companies that earn most of their cash in dollars have seen their earnings go up dramatically because of the favourable exchange rate caused by the fall in the pound.
UK tourism-related businesses have benefited from an influx of tourists as a result of cheaper exchange rates.
UK exporters have seen sales soar as a result of cheaper prices, with British goods seeing plenty of demand thanks to their perceived quality and status. Free trade deals will allow UK firms to be even more competitive in overseas markets.
The City of London will be the biggest loser post-Brexit, with job losses in the financial services sector estimated at roughly 75,000 by the Bank of England.
However, a survey published in the Financial Times in December 2017 showed that 15 of the UK’s biggest international banks were planning to move just 4,600 jobs to Europe in preparation for Brexit.
This contrasted with an EY study that suggested 10,500 jobs would leave on “day one”.
Companies have already been looking at inventive ways to reduce job losses in London in the event a deal on financial services is not agreed.
One possibility is that trades are made through a subsidiary company registered in an EU nation to meet EU requirements, while back-office functions remain in the City.
Retailers that source most of their produce from overseas have been hit by rising costs as a result of the fall in sterling, as have holidaymakers, although so far there has been limited impact on consumer demand.
ALL ABOUT THE BREXIT RESULTS
The official voting figures were:
Leave – 17,410,742
Remain – 16,141,241
Winning majority in favour of leaving 1,269,501; percentage voting to leave EU 51.89% to 48.11%. Polls suggest younger voters were more likely to vote Remain than older voters.
Turnout was high at 72%. If it had been a general election, the result would have been the biggest landslide since 1945, with a margin of nearly 200 seats for Leave (421 to 229).
Top five Leave constituencies:
Boston and Skegness 75.6%
South Holland 73.6%
Castle Point 72.7%
Great Yarmouth 71.5%
Top five Remain constituencies:
Biggest lies over the UK Brexit referendum
1. £350m a week would be saved by leaving the EU, which could be spent on the NHS.
In 2016 the UK government’s official gross contribution to the EU amounted to £18.9bn, according to the Office for National Statistics (ONS). Divided by 52 weeks, this would be £363m per week.
However, thanks to the £5bn rebate negotiated by Margaret Thatcher the UK only actually paid in £13.9bn to the EU budget. It’s worth noting that Tony Blair gave away some of this rebate, which was originally higher. Vote Leave argued the UK could be forced to surrender more of the rebate in the future.
However, the figure of a £350m-a-week saving put out by the official Vote Leave camp – which even the leader of the UK Independence Party (UKIP), Nigel Farage, refused to endorse – was widely discredited.
That figure of £13.9bn actually equates to roughly $267m per week. However, on top of that, the UK received money back from the EU for various projects amounting to £4.4bn. So the UK’s net contribution was estimated at about £9.4bn – roughly £181m per week. Still a large sum of money, but almost half the figure quoted by Vote Leave.
1. Every household will be £4,300 a year worse off because of Brexit
The official government advice said Brexit would cost every household in the UK the equivalent of £4,300 by 2030. This is a ‘guesstimate’ based on taking the UK’s GDP and dividing it up by the number of households. GDP per household does have an impact on household income, but not on a pound-for-pound basis.
2. A ‘punishment’ budget
Not the word used by chancellor George Osborne himself, but by Tory back-benchers when Osborne said a Leave vote would require an immediate emergency budget, with tax rises and spending cuts. After the vote Osborne resigned along with Cameron, and there has been no ‘punishment’ budget.
3. Britain’s economy could be tipped into a year-long recession
This was touted as official Treasury analysis in the same government document.
Bank of England governor Mark Carney also warned a leave vote could tip the UK into a “technical recession” – two successive quarters of negative growth.
Since the referendum, UK GDP (gross domestic product) growth has remained firmly in positive territory, falling only slightly from 1.8% to 1.5% since June 2016. Mark Carney now admits he is “quietly optimistic” about Brexit.
4. Britain’s economy would shrink by 3%-5.5% in four years after the vote
This prediction came from respected accountants PwC. It predicted the UK economy would shrink by 3% to 5.5% compared with how it would have performed if we stayed in the EU in the four years following the vote. PwC also said unemployment would rise to 7%-8% per cent. See the answers to 3 and 5 for what has actually happened so far.
5. At least 500,000 jobs could be lost and GDP could fall 3.6%
Again, official government advice on Brexit. Employment has actually increased since the referendum by 325,000, and while some jobs will be lost in the City of London – current estimates are down to around 75,000 – when we leave regardless of how good a deal we get, it’s highly unlikely to be as many as 500,000. With exports booming since the referendum – reaching an all-time high of £53.6bn in October 2017– a drop in GDP, let alone a massive fall of 3.6%, is extremely unlikely.
6. House prices could slide by 10%-18% in the next couple of years if Britain leaves the EU
This was a claim made by then chancellor George Osborne at a G7 finance meeting in Japan. “Next week the Treasury is going to publish analysis of what the immediate impact will be and one consequence of leaving the European Union is that there would be a hit to the value of people’s homes of at least 10%, and up to 18%,” Mr Osborne said in a BBC interview.
House prices have continued to increase since the referendum, and given the shortage of housing stock in the UK – partly due to the pressures of immigration running at 250,000-plus (net) per year – prices are only likely to go one way for the foreseeable future.
7. The London stockmarket could fall by up to 20% in the event of a Brexit vote – wiping £450bn off share valuations
This widely touted prediction came from global research firm Absolute Strategy Research. UBS Wealth Management agreed, saying the FTSE 100 index could drop by more than 10% in the event of a Brexit vote.
The International Monetary Fund also said a Brexit vote could spark a stock market crash and a steep fall in house prices.
In the immediate aftermath of the referendum the FTSE 100 did fall, from 6338 on 23 June to 5982 by 27 June – reacting, as shares do, to any sudden change. Stockmarkets like stability. However, by 1 July, the FTSE 100 had shot up to 6577, and currently stands at around 7544. In fact as at December 2017 the FSTE 100 was trading at its highest ever level of nearly 7,700, while the FTSE 250 was at its highest level for five years at 20,734.
8. Brexit would risk the ‘peace and stability’ of Europe and increase the threat from terrorism
In a speech at the British Museum during the Brexit campaign, then prime minister David Cameron said Brexit would be a threat to peace in Europe. “Can we be so sure peace and stability on our continent are assured beyond any shadow of doubt? Is that a risk worth taking?” he said.
The UK is a founder member of NATO, the guarantor of peace in Europe, and there was never any question of it leaving. As a nuclear power, and with the largest military budget in Europe, the UK will continue to help safeguard Europe.
Cameron also suggested the UK would be at greater risk of terrorist attacks because of Brexit. “When terrorists are planning to kill and maim people on British streets, the closest possible security cooperation is far more important than sovereignty in its purest theoretical form,” he said.
To suggest that either the UK or the EU would wish to cease security cooperation with each other was disingenuous. It is clearly in everyone’s interest to maintain security, and no-one on either side has suggested otherwise.
Furthermore, the UK is part of the world’s most powerful security network, known as the ‘five eyes’. The UK shares intelligence with the four other big Anglophone nations – the US, Canada, Australia and New Zealand; a legacy of the Second World War. The EU needs UK intelligence input far more than the other way round.
9. Reform of Freedom of Movement rules
Just before the referendum vote, David Cameron said reform to the EU's rules on Freedom of Movement rules would continue “on Friday” if Britain voted Remain. But within hours of his statement Jean Claude Juncker, the president of the European Commission, said Britain had already received “the maximum” on offer in its proposed EU/UK reforms package.
BEST BREXIT QUOTES
“I've been clear that Brexit means Brexit.” Prime minister Theresa May
“I sometimes think that the In campaign appears to be operating to a script written by George R.R. Martin and Stephen King – Brexit would mean a combination of A Feast for Crows and Misery.” Environment secretary Michael Gove
“Brexit is for the richest in our country: they can afford recessions.” Former chancellor George Osborne
“What happened with Brexit was people taking back control.” Paul Manafort, Donald Trump’s presidential campaign manager.
“I don’t think I’ve ever wanted magic more.” Harry Potter author JK Rowling
“Napoleon, Hitler, various people tried this out, and it ends tragically. The EU is an attempt to do this by different methods . . . there is no underlying loyalty to the idea of Europe.” Foreign Secretary Boris Johnson
“We’ll turn round to the bureaucratic elite and say: ‘We’re just not into EU’.” Suzanne Evans, UKIP
“New Zealand shows no interest in merging with Australia, yet the Kiwis are not written off as insular Australo-sceptics.” Daniel Hannan, Conservative MEP
“If [former French president] Hollande wants to administer punishment beatings to anybody who seeks to escape, rather in the manner of some World War Two movie, then I don’t think that is the way forward.” Foreign Secretary Boris Johnson
“Welcome to hell.” Belgian politician Guy Verhofstadt welcoming David Davis to the negotiating table.
“Whatever the result, Farage will always be a dick.” Football commentator Gary Lineker
“The UK is going to be at the back of the queue.” US president Barack Obama, (referring to a potential trade deal).
“When I heard that I did think of Pinocchio and the nose growing rather longer.” Former Conservative party leader Iain Duncan Smith (on George Osborne’s claim that house prices will dive by 18% after Brexit).
“Seven, or seven and a half.” Labour leader Jeremy Corbyn gives his enthusiasm for the EU in marks out of 10.
“We will not allow any cherry-picking. The four basic freedoms must be safeguarded – freedom of movement for people, goods, services and financial market products. Only then can there be access to the Single Market.” German chancellor Angela Merkel
“There must be a threat, there must be a risk, there must be a price, otherwise we will be in negotiations that will not end well… [or] other countries or other parties will be minded to leave the European Union in order to have the supposed benefits and no downsides or rules.” Former French president François Hollande
Meanwhile the Labour Party has come off the fence and said the UK should remain in a post-Brexit custom union with the EU to ensure seamless trade with Europe – and no hard border in Ireland.
Labour leader Jeremy Corbyn has been accused of selling out millions of Brexit-supporting Labour voters at last year’s general election, when Labour said staying the customs union was just a possibility.
Staying in a customs union would remove customs barriers with Europe but leave the UK unable to strike trade deals with other countries.
Corbyn said Labour would seek a “final deal that gives full access to European markets and maintains the benefits of the single market and the customs union”.
In a speech, at Coventry University, he said Labour would “negotiate a new comprehensive UK-EU customs union to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland”.
The day before Corbyn’s announcement, shadow Brexit secretary Sir Keir Starmer had outlined the party’s new position after months of mixed messages.
“We have long championed being in a customs union with the EU and the benefits of that,” he said speaking on the BBC’s Andrew Marr Show on 25 February.
“Obviously, it’s the only realistic way you can keep tariff-free access, it’s really important for our manufacturing base, and nobody can answer the question of how you keep your commitment to no hard border in Northern Ireland without a customs union.”
‘Better off working with EU’
Challenged by Andrew Marr on how the UK could make its own trade deals if it were in a customs union, Starmer failed to give a clear answer and said: “How that is done will have to be negotiated.”
Starmer claimed the UK would be more likely to strike “bold new trade agreements” if it worked “jointly with the EU”.
However, the evidence speaks against that – the EU is not actually that good at negotiating trade deals.
According to Civitas, since 1970 the EU has concluded 37 trade agreements, and in 2014, the aggregate GDP of the 55 countries with an EU deal in force was $7.7trn.
In contrast, the aggregate GDP of all the countries with which Chile had agreements in force was $58.3trn, while Korea’s totalled $40.8tn and Switzerland’s $39.8tn. (More in the section below ‘How it all began’.)
21 trade deals discussed
The ruling Conservative party has committed the UK to leaving both the Single Market and the customs union. International trade secretary Liam Fox told Andrew Marr his department was already working to have trade agreements in place with 21 different nations that could be signed as soon as the UK formally leaves the EU.
Labour has its own rebels, however, aware that many core Labour areas voted for Brexit. Brexiteer Kate Hoey said backing a customs union with the EU would mean “going into the next election saying we don't want to have our own trade policy”.
She told Sky News' Sunday with Niall Paterson: “I don't understand how we can have a customs union that would still give us the freedom to be able to make our own trade deals.”
She added: “When you think how long it’s taken the EU to get trade deals, they still haven’t got them with China, with America.”
Hoey said Remain rebels on both sides were trying to find a way where the UK would leave the EU “in name only” – a so-called ‘soft Brexit’.
Bid to sabotage Brexit
A small minority of Tory MPs who backed Remain led by Anna Soubry are fighting a rearguard action against Brexit.
The backbenchers are threatening to sabotage prime minister Theresa May’s plan to leave the Single Market and the customs union. Labour is under pressure to join them in a vote to defeat the government and potentially trigger a general election.
Liam Fox urged the Tory rebels to have an “an open mind” and said a speech by the prime minister on 2 March would “deal with a lot of the reservations they have”.
The speech is intended to clarify and consolidate the government position after months of infighting in her own Cabinet between ardent Brexiteers, such as Foreign Secretary Boris Johnson, and those keen to stay as close to the status quo as possible, such as chancellor Phillip Hammond.
‘Growth up to 8% lower’
Meanwhile a leaked government briefing document claims to show the UK economy would be up to 8% worse off after Brexit than if it had remained in the EU.
The impact assessment suggests UK growth would be 8% lower over 15 years in the event of a ‘hard’ Brexit, while even a soft Brexit would see growth fall by 2% in the same period. It does not say growth would actually fall, as implied by some news reports – but that the economy would not grow as rapidly.
The report, published by BuzzFeed News, also claimed gains from any new trade deals struck with the US, and other countries such as China and India, would only make up 10% of the drop in growth.
However the leaked document, EU Exit Analysis – Cross Whitehall Briefing, was criticised by the government as being “incomplete” and the findings “highly speculative”.
Hard-line Tory Brexiteer Jacob Rees-Mogg told the Daily Mail similar modelling by the Treasury before the Brexit referendum, predicting major job losses following a Leave vote – had been “comprehensively wrong”.
While former Tory leader Iain Duncan Smith told BBC Radio 4's Today programme: “I would observe that almost every single forecast coming from government, and most of the international organisations, has been completely wrong. I think we should take this with a pinch of salt.”
‘4% better off’
Just days later the group Economists For Free Trade produced a rival report, Alternative Brexit Economic Analysis, suggesting the UK’s total economic output (GDP) would actually be 4% higher 15 years after Brexit.
Julian Jessop of the Institute For Economic Affairs, one of the four economists who authored the new report, said the original Whitehall briefing did not “model what the government is actually trying to achieve, namely a comprehensive free trade deal with the EU, covering both goods and services, and a significant reduction in barriers to trade with the rest of the world”.
In an article written to rebut critics of his own report, he said some of the Whitehall report’s assumptions were “highly dubious”.
“For example, it is wrong to assume that, in a ‘no deal’ scenario, the UK government would always choose to impose damaging new tariffs on imports from the EU, rather than maintain the level playing field required under WTO rules by eliminating tariffs on imports from the rest of the world.
Wider economic benefits
“These studies also typically assume that Brexit would be used as an opportunity to severely restrict immigration in ways that harm the economy, even though future policy in this area would be entirely in the hands of the government of the day to decide.”
He added: “In all of this, it is vital not to lose sight of the wider economic and political benefits of Brexit. The UK’s departure from the EU is a once-in-a-generation opportunity to create a more open and dynamic Britain, adopting policies that better suit our own economy.
“This includes many aspects that are hard, perhaps even impossible, to quantify. It would therefore be wrong to place a lot of weight on the results of disputed Whitehall modelling that does not grasp fully the changing global economy and opportunity that lies ahead.”
Barnier faces backlash
Meanwhile EU Brexit negotiator Michel Barnier has faced a backlash after a draft document on terms for the UK’s 21-month transition period revealed a ‘punishment’ clause that would have allowed Brussels to ground all flights from the UK to Europe.
This and other penalties, such as punitive tariffs, could have been implemented if the UK were deemed to have strayed from the agreed terms of the transitional period, during which the EU insists the UK must obey all Brussels’ rules and regulations.
However, Nordic and eastern European countries, and even France, were rumoured to have considered Barnier’s approach high-handed.
A diplomat from a country sympathetic to the UK told the Daily Mail: “Could anyone accept these terms? If I was Britain I would be tempted to say ‘no’ – walk away and then see how the EU does without the money.”
The European Commission later apologised for the “inappropriate wording” of the Brexit ‘punishment’ clause, amid fears the British would walk away from the talks.
New wording will simply refer to the UK being subject to the EU’s standard infringement procedures.
‘Less bad than we thought’
Brexit “turned out less badly than we first thought” – not words you would expect to hear from former prime minister David Cameron. But that’s exactly what he said at the Davos economic summit when he thought the microphones were off.
Cameron is now one of several leading Remainers who have backtracked on Brexit since the start of 2018.
Let’s not forget this is same the David Cameron who, in a TV interview in the run-up to the 2016 Brexit referendum, warned of the economic “shock” that would follow a Brexit vote.
‘Like a bomb under the economy’
“Let's just remember what a shock really means,” he told workers at a Vauxhall car factory. “It means pressure on the pound sterling. It means jobs being lost. It means mortgage rates might rise. It means businesses closing. It means hardworking people losing their livelihoods.”
Adding fuel to the fire, he said just two weeks before the vote that Brexit would be like putting a “bomb” under the UK economy.
And a few days later in parliament, he added: “Nobody wants to have an emergency Budget, nobody wants to have cuts in public services, nobody wants to have tax increases”.
Other high-profile Remainers have been changing their tune, too.
Former Conservative Treasury minister Lord O'Neill admitted his gloomy forecasts had been wrong.
He told the BBC negative expectations about Brexit were likely to be “dwarfed” by the effects of strong global growth.
“Maybe this means the country’s going to be able to cope with Brexit better than certainly somebody like me might have thought some time ago,” he said.
Asked if he had been too pessimistic, he replied, “I'm almost embarrassed to admit that it might sound like that”.
“I certainly wouldn't have thought the UK economy would be as robust as it currently seems,” he added.
‘Got it wrong’
Stephen Stone, chief executive of major UK construction firm Crest Nicholson, also admitted he had “got it wrong” on Brexit.
Speaking to BBC Radio 5 Live, Stone said he had been very concerned about the impact Brexit might have on the economy.
“So we stopped buying land for a period, which is why we ended up with more cash on the balance sheet at the end of that year than we might have done,” he said.
“But it’s fair to say I got that wrong and a lot of other people now accept they’ve got that wrong – the economy is proving to be reasonably robust, we’re still seeing high levels of employment, low interest rates and they’re the factors that are supporting the new-build housing market.”
‘Companies are doing OK’
Meanwhile Martin Gilbert, the boss of Britain’s second biggest fund manager, has said “Brexit won’t be as bad” as many had predicted.
Martin Gilbert, co-chief executive of Standard Life Aberdeen, said the figures suggested the UK economy was “doing OK”. “Job figures are good. I think it is going to be better than people imagine,” he said.
“Companies in the UK are also doing okay. You have to remember to disregard what economists are saying and look at corporate results.
“Certainly we're not yet seeing the recession that was predicted.”
He warned a deal on financial services was critical, however, with firms unable to wait until the last minute when looking at plans to relocate.
“The issue that the government didn't get is that we in the financial services industry would have to press the contingency button so quickly,” he said.
“We can't just press it the day before the two years is up. So all the banks are preparing their contingency to set up another office in Europe – normally Dublin. Dublin's doing quite well out of this.”
Fewer City job cuts
While some jobs in the City will undoubtedly be lost, the policy head of the City of London Corporation, which represents the City’s major financial institutions – believes there will be fewer job cuts than first feared.
Bank of England estimates suggest as many as 75,000 jobs could be lost in the City as a result of Brexit, if financial services are not included in the future UK/EU trade deal – though other projections have been much lower.
Catherine McGuinness, chairwoman of the corporation’s policy committee, said there were grounds for optimism after the ‘divorce’ deal signed in December and the prospect of a two-year transition period.
“The signs are positive,” she told The Times. “It is clear that the government is not only listening but has understood our position. Now we have to persuade the EU27 to strike a deal which works for this sector.”
She said the UK would “get less than what we have at the moment, whatever the settlement”, but that a deal was “absolutely possible” with will on both sides.
Action on City jobs
UK authorities have tried to allay fears over financial services, and the ability of EU firms to continue to use London as their base.
A consultation paper published by the Bank of England and the Prudential Regulation Authority (PRA) on 20 December suggests a continued high level of supervisory cooperation between the UK and EU. In the absence of continued passporting rights post-Brexit, UK branches of EU-based insurers will be able to apply for authorisation as a branch.
The UK government has also said it will act to mitigate risks to EU firms’ outstanding UK contracts.
Bespoke deal ‘possible’ – Macron
Chief EU negotiator Michel Barnier has said repeatedly that services will not be part of any future trade deal, and that the choice would be between a Norway model and a Canadian model (see below).
However, in a visit to the UK in January, new French president Emmanuel Macron hinted the UK could win a bespoke deal.
Speaking on the BBC’s Andrew Marr show about the possibility of such a deal, he said, “Sure, but … this special way should be consistent with the preservation of the Single Market and our collective interests.
“And you should understand that you cannot, by definition, have the full access to the Single Market if you don’t tick the box.”
He added: “So it’s something perhaps between this full access and a trade agreement.”
And German Foreign Minister Sigmar Gabriel has said a “smart” bespoke deal between the UK and the EU could serve as a model for ties with other nations such as Turkey.
‘No second referendum’ – Corbyn
Meanwhile, Labour party leader Jeremy Corbyn appears to have finally come off the fence and ruled out a second Brexit referendum being demanded by hard-line Remainers, including the Liberal Democrats.
Speaking on the BBC’s Andrew Marr show on 28 January, he said, “We’re not asking for a second referendum.” Pressed by Marr, who asked: “And you’re not going to?”, Corbyn replied: “No.”
Corbn added that a Norway-style arrangement would not be the right deal for Britain, saying, “Norway accepts all the rules of the Single Market, doesn’t have any ability to influence them whatsoever, and is a rather different economy to ours, because it’s heavily dependent on mainly oil. We’re not.”
He said the UK should be able to influence new EU regulations, “so that means a trading relationship with Europe that gives us the opportunity to negotiate with Europe.”
He added: “The principle has to be the trade relationship, and that’s what we’re focused on, and whatever we need to negotiate, we will.”
How it all began
A lot of water has passed under the bridge since the UK voted to leave the European Union on 23 June 2016, sending shockwaves through the world’s financial markets.
Stockmarkets tumbled overnight, the pound plummeted, the FTSE100 index of leading UK shares dropped off a cliff. It seemed that prophecies of financial Armageddon had come home to roost.
Fast-forward 18 months and it’s almost as if nothing had happened. Stock markets have recovered and the FTSE 100 is trading at its highest-ever level.
The pound did fall to around $1.35, but that has served to boost exports, which reached an all-time high of £53bn in October 2017. In January, sterling recovered to a pre-referendum level of around £1.41, though a strong pound is not in the UK’s interests in a post-Brexit world.
So far, then, Brexit has been far less damaging than Remainers predicted – but has this just been a ‘phony war’? To some extent, yes, as a trade deal with the EU has yet to be negotiated – and the question of tariff-free access to the Single Market has yet to be determined, with no guarantees of a crucial deal on financial services.
But one of the UK’s top fund manager’s, Neil Woodford – who runs funds worth more than £15bn – said he believed predictions of a looming Brexit disaster were “profoundly wrong”.
“I’ve rarely witnessed such an overwhelming consensus view – which I believe to be profoundly wrong – that the UK economy is going to hell in a handcart,” he said in a December 2017 interview with the Financial Times.
“People have become so extreme in their view that Brexit is a pre-determined disaster for the UK economy, that the share prices are discounting literally economic Armageddon for the UK economy.”
‘Not a cliff-edge event’
Woodford admitted he would have been a “happier, less stressed fund manager” if the UK had voted to remain in the EU.
However, he added: “But we didn’t. And as a country, we just need to get over it. And the Remoaners need to get over themselves.”
Referring to the millennium bug, he said: “Exactly the same thing will happen with respect to Brexit, whether we are able to negotiate a deal or not.
“I’m not saying that it won’t be disruptive. But this notion of a cliff-edge event for the UK economy, where unemployment rises massively, consumer and business confidence evaporates and companies desert the UK is just not how the real world works.”
So what lies ahead for the UK in terms of its relationship with Europe, and our economic prospects as a fully independent trading nation?
We’ll do our best to answer those questions. Below you will find a timeline showing how Brexit is unfolding, together with a roundup of the key players involved.
We’ve also nailed some of the biggest lies told by both sides of the debate in the run-up to the referendum, how it played out, and the biggest winners and losers from Brexit.
We will be updating this article every month to keep abreast of the latest developments, so be sure to check back regularly.
The story so far
Article 50 was finally triggered on 29 March, nine months after the Brexit referendum, starting the formal two-year process at the end of which the UK will leave the EU.
Talks finally got under way in August 2017, and somewhat surprisingly, the UK almost immediately conceded to EU demands that the talks follow a two-stage process: agreement on the size of the UK’s ‘divorce bill’ first, followed – only once this was agreed – by discussions on a trade deal.
Since the UK is the second largest net contributor to the EU budget after Germany, this was something Brussels was clearly determined would be front and centre of discussions. The UK government wanted to discuss both issues simultaneously.
11th hour deal
Deep divisions in the UK, both within the Conservative Party and between Brexiteers and Remainers generally, undermined any hope of a modest settlement and served only to bolster the EU’s hand. An impasse lasted for several weeks.
Then at the end of September, Theresa May gave a conciliatory speech in Florence in which she said the UK would honour its commitments to the EU “in full”, and called for an “implementation” period of “about two years”.
Her speech was well received across the European capitals, and divorce talks continued with renewed momentum.
Ultimately, a deal agreeing to pay a figure of £35-40bn was signed in December – after 11th hour talks over the wording on the future status of Ireland – although it won’t all be paid at once.
Agreement was also reached on how to deal with legacy issues such as the UK’s cash in the European Investment Bank, the European Development fund, and Euratom, which deals with the control and disposal of nuclear material used in medicine and research.
So, with stage one of the talks done and dusted, the next round, starting in January 2018, will be to determine the precise details of the transition period.
Britain leaving the EU: transition period
Details on the transition period will be discussed among EU member states in March, with an agreement being hammered out with the UK in April, before talks on a trade deal get under way.
Brussels is insisting that even though the UK will no longer legally be a member of the EU during the transition period, it will have to obey every law and regulation from Brussels – what is known as the EU ‘acquis’ – as if it were still a full member, including any new legislation.
“There will be no transition à la carte. All the rules and policies of the EU must continue to be applied,” Barnier told a press conference.
He added that “all new rules adopted by the EU during the transition will be applied to the United Kingdom,” with the European Court of Justice continuing to have ultimate authority over the UK’s legal process.
Negotiating global trade deals
In theory, this would mean the UK would not even be able to negotiate trade deals with non-EU countries during the transition period, as that would be illegal under EU rules.
However, May has made it clear the UK will negotiate and sign deals during this period, and the EU now seems to have accepted this position – though deals will not be able to come into effect until the transition period has ended.
This and other precise details about the transition deal will be determined in the next round of talks in March 2018.
The good news is that half the cost of the UK’s ‘divorce bill’ is covered by the implementation period.
EU chief negotiator Michel Barnier would like the transition period to finish at the end of December 2020, when the EU’s five-year budget cycle comes to an end, as it will make things neater, financially.
UK-EU trade negotations
In March 2018 negotiations on the future trading relationship between the UK and the EU get under way.
The UK would like to continue to trade goods and services with the EU without restriction, as at the moment, while also agreeing trade deals with other nations outside of the EU, and controlling immigration from EU countries.
Brussels calls this “cherry picking” and has said the UK cannot leave the EU and expect to retain all the trade benefits that go with it.
There are arguments on both sides, which have been repeated ad nauseam in the media.
However, it’s fair to say that many countries have free trade deals with other nations that don’t include the unrestricted right to live and work in those nations.
Most analysts agree the speed and scale of immigration into the UK was the biggest single factor in the Brexit debate – a net migration figure of 330,000 was announced just before the referendum.
It is therefore disingenuous to suggest those voting Leave did not want to quit the Single Market after Brexit, since that would mean continued unchecked immigration to the UK.
As German chancellor Angela Merkel said, “We will not allow any cherry-picking. The four basic freedoms must be safeguarded – freedom of movement for people, goods, services and financial market products. Only then can there be access to the Single Market.”
The other thorny issue that has come to the fore is whether to remain in the EU’s customs union.
The customs union sets out the tariffs that are applied to all goods coming into the EU from non-EU countries and means goods can pass freely from one country to the next.
Some countries outside the EU, such as Turkey, have signed up to the customs union as it makes it easier for their companies to export to the EU.
It sounds great in principle, but in practice it would prevent the UK from signing free-trade deals with other countries. It would not be able to agree, say, tariff-free trade on cars with the US, as the EU currently imposes a 10% import duty on US cars.
If the UK is to flourish and prosper outside the EU, then it must be free to strike its own trade deals with other countries.
There are three possible scenarios for the UK’s trading relationship with Europe post-Brexit.
The Norwegian model: By joining the European Economic Area (EEA), like Norway, the UK would still have access to the Single Market, but be exempt from EU control in some areas, such as external trade. Norway is not a member of the customs union, and controls its own agriculture and fisheries. However, it would be required to retain Freedom of Movement, and would still have to pay into the EU budget without having any say in how it is spent.
The Canadian model: The EU has just concluded a free trade deal with Canada that has been seven years in the making. This has been suggested by Brussels as the basis for a deal with the UK, but critically the agreement only covers goods, not services.
David Davis has called for a “Canada-plus-plus-plus” deal. But EU negotiator Michel Barnier has said “there is no place” for a deal on financial services, so critical to the UK economy. “There is not a single trade agreement that is open to financial services. It doesn’t exist,” he said. “In leaving the Single Market, [the British] lose the financial services passport.”
This has led some Brexiteers in May’s cabinet to call for a ‘hard’ Brexit if no deal can be agreed without making damaging concessions to the EU.
International trade secretary Dr Liam Fox has said that because the UK already complies with all EU standards it will be able to ‘copy and paste’ the EU’s existing 40 trade deals with other countries “the second after midnight” in March 2019 – although this would be delayed by a transitional deal.
Dr Fox, who attended a World Trade Organisation event in Argentina in December 2017, said the US, Australia and New Zealand – with whom the EU has no agreement – are all hoping to strike a trade deal with the UK as soon as it leaves.
“What was interesting in Buenos Aires was the great interest in the United Kingdom,” he said in a video interview with Express.co.uk.
“We weren’t short of bilateral meetings, everyone wanted to talk to the UK about Brexit and our plans post-Brexit.”
Dr Fox said the UK already operates entirely on WTO terms with its biggest single trading partner, the United States.
“People talk as if it [WTO terms] is some nightmarish vision. WTO rules are the basis on which we all operate; the free trade agreements are a subset of WTO rules.”
Indeed, one has to question why the EU would not want a free trade deal with the UK when it has been so actively pursuing free trade deals with the US, Canada and Japan.
According to UK economic thinktank Civitas, if the UK leaves the EU without a trade deal UK exporters could face tariffs of £5.2bn on goods being sold to the EU. However, EU exporters would face £12.9bn in tariffs on goods coming into the UK.
The report also says that:
- Exporters to the UK in 22 of the 27 remaining EU member states face higher tariffs costs when selling their goods than UK exporters.
- German exporters would have to face the impact of £3.4bn of tariffs on goods they export to the UK. UK exporters in return would pay £0.9bn of tariffs on goods going to Germany.
- French exporters could face £1.4bn in tariffs on their products compared with UK exporters facing £0.7bn.
Furthermore, since the pound is roughly 12% down on the euro from June 2016 (as at December 2017), a 10% tariff on, say, British car exports to Europe would still leave them cheaper than before Brexit.
New trade deals
The Cameron government said it would take “years” to renegotiate existing EU trade agreements with more than 50 non-EU countries after Brexit. It also claimed the UK would miss out on trade deals currently being negotiated by the EU.
In fact, the EU is not good at negotiating trade deals – partly because it requires the agreement of all 28 (currently) member states.
According to Civitas, since 1970 the EU has concluded 37 trade agreements, most of them with small economies, some multi-country. In 2014, the aggregate GDP of the 55 countries with an EU deal in force was $7.7trn.
In contrast, the aggregate GDP of all the countries with which Chile had agreements in force was $58.3trn, while Korea’s totalled $40.8tn, Singapore’s $38.7tn and Switzerland’s $39.8tn.
Moreover, 90% of the deals hammered out by these four smaller, independent countries included services, whereas only 68% of the EU’s trade agreements did so.
Although the EU has finally signed a trade deal with Canada, its much-vaunted TTIP free trade deal with the US is dead in the water, and little progress has been made on talks with China, India, Australia and New Zealand.
Quick US deal
At the January 2018 World Economic Summit in Davos, Switzerland, US president Donald Trump said trade between the UK and US would increase “many times” following Brexit.
“The discussions...that will be taking place are going to lead to tremendous increase in trade between our countries, which is great for both in terms of jobs,” he said.
Shortly before Trump arrived at Davos, US treasury secretary Steven Mnuchin said the president had made it “clear” the UK would be “at the front of the line, and not the back of the line” when trade negotiations get under way.
In November, US commerce secretary Wilbur Ross told the Daily Telegraph a post-Brexit trade deal between UK and the US could be agreed quickly.
“Any trade deal is important but especially one with a country with whom we have such intense relations as we do with the UK, from a geopolitical, military, and a commercial point of view,” he said.
“Our two economies have $1.2tn invested in each other. That is a very big number. Assuming that there are no big landmines in the UK’s exit agreement from the EU, it shouldn’t take terribly long.”
Deals with Commonwealth countries such as Australia, New Zealand and Canada, with whom the UK has close cultural ties – and for whom the Queen is head of state – should prove straightforward.
In July 2017, Australian prime minister Malcolm Turnbull told Theresa May he wanted to sign a free trade agreement with the UK “as soon as possible” after Britain's withdrawal from the EU and said he would not “muck about” getting it done.
“As Britain moves to completing its exit from the EU, we stand ready to enter into a free trade agreement with the UK as soon as the UK is able to do so,” he said.
He added: “There are no two nations in the world that trust each other more than the UK and Australia. We are family in a historical sense, we are family in a genetical sense. We are so close, and that trust is getting stronger all the time.”
New Zealand’s trade minister Todd McClay, said he too hoped for a quick UK trade deal.
“For the first time, Liam Fox has confirmed New Zealand will be the first cab off the rank, along with Australia, when it comes to the new FTAs they do once they leave the European Union,” he said.
“We’ve been working hard at this for the last six or seven months, and it is extremely pleasing to hear because it means once the UK leaves the EU we have the opportunity to negotiate a high-quality, comprehensive free trade agreement, that will guarantee a secure ongoing access for Kiwis and Kiwi exporters to the important UK market.
“There’s still a lot more to do but our relationship with the United Kingdom is going from strength to strength.”
The EU has just concluded (December 2017) a free trade agreement with Japan, though this has yet to be voted on by member states, which could take some time. The UK can simply copy the terms of this agreement, along with the trade deal with Canada and other nations with whom the EU has an agreement.
A free trade deal with China will probably take longer, but the UK is already her second largest trading partner in Europe, after Germany, completing a huge $55bn of trade with China in 2016.
After the USA and Germany, the UK is the only country in the list of China’s top nine trading partners not in the Asia Pacific region, and is the eighth biggest globally when it comes to foreign direct investment, having invested £4bn into China over the past decade.
Guy Dru Drury, the Confederation of British Industry’s head of China, said: “The Sino-British relationship is a great success story. As we delve deeper into the golden era of ties between China and the United Kingdom, we have so much to offer each other, and British business is keen to play its part.
“With the consumer market worth over £3.3tn, instantly recognisable British products are a particularly strong match for a growing generation of affluent Chinese. Moreover, this relationship creates thousands of jobs in the UK and China, raising living standards and boosting productivity.
“As the UK forges a new global trading future, it is well ahead of the curve in making the most of its relationship with the world’s fastest growing economy.”
20 February 2016
Prime minister David Cameron is widely criticised for returning from pre-referendum negotiations in Brussels with some concessions on no further loss of sovereignty, but crucially no curbs on EU immigration.
23 June 2016
EU referendum – UK votes by 51.89% to 48.11% to leave the EU.
24 June 2016
David Cameron announces impending resignation.
13 July 2016
Theresa May takes over as UK prime minister.
29 November 2016
It is revealed Theresa May offered talks on citizens’ rights immediately, prior to full negotiations taking place, but was rebuffed by Angela Merkel.
29 March 2017
Article 50 triggered by vote in parliament, starting two-year countdown to exit.
31 March 2017
Draft guidelines for negotiations issued by Brussels.
08 June 2017
Theresa May survives general election despite big losses over domestic issues and stays in government with support from Northern Irish Unionist party, the DUP. Her one crumb of comfort is that the Scottish Nationalist Party, which campaigned strongly for a second Scottish referendum on independence over Brexit, also suffers heavy losses. Unionist parties win 62.5% of the vote.
19 June 2017
Talks start between Michel Barnier, EU chief negotiator, and Brexit Secretary David Davis. The UK concedes to EU demands on framework for the withdrawal process – negotiations on withdrawal, including the amount of the EU ‘divorce bill’, must be agreed before trade talks can start.
28 August 2017
Negotiations on divorce deal start in earnest but little progress is made.
22 September 2017
Theresa May gives a speech in Florence confirming UK’s willingness to ‘meet obligations in full’ – in other words, pay a hefty divorce bill. The mood changes in Europe.
08 December 2017
Negotiations conclude with a deal that confirms citizens’ rights, agrees a divorce payment of £35-£39bn – the equivalent of four years’ payments into the EU budget – and appears to settle Ireland issue. But the North Irish DUP party, propping up UK government, scuppers deal over promise of ‘regulatory alignment’ in Ireland.
15 December 2017
After frantic last minute negotiations, the Irish question is settled (for now) and EU member states agree to accept the first round deal and move on to trade talks.
17 December 2017
EU negotiator Michel Barnier declares that trade talks will not include any deal on services, so vital to the City of London and UK economy. Some EU sources suggest he is speaking out of turn, and that Jean Claude Juncker, president of the European Commission, is unhappy with the comments. The UK turns the tables by using the EU’s own favourite mantra and saying the EU can’t “cherry-pick” what it wants to talk about in trade discussions.
20 December 2017
The Bank of England and the Prudential Regulation Authority (PRA) publishes a consultation on the future authorisation of UK branches of EU-based insurers, suggesting a continued high degree of supervisory cooperation between the UK and EU. The Treasury also announces that it will act to mitigate risks to the continuity of European firms’ outstanding UK contracts.
30 January 2018
EU ministers due to finalise their negotiating position over the transition period after Brexit in March 2019. Michel Barnier has suggested it should end on 31 December 2020, to coincide with the end of the EU’s five-year budget cycle. Theresa May suggested in her Florence speech it should be ‘around two years’, taking it to March 2021.
Talks to start on the length of a transition deal after Brexit in March 2019. Michel Barnier has suggested it should end on 31 December 2020. Theresa May suggested in her Florence speech it should be ‘around two years’, taking it to March 2021.
EU member states to finalise negotiating position for trade talks with UK.
Negotiations to start on a free trade deal between UK and EU.
29 March 2019
The UK will formally cease to be a member of the European Union, but will enter a transition period of between 21 months and two years, during which time it will continue to follow EU rules and submit to jurisdiction of European Court of Justice and be part of the customs union. Theresa May has declared she will hold trade talks with other nations during this period, and if possible sign deals, although the EU says this would be in breach of its rules, which the UK would still be following.
31 December 2020
The likely date for the UK’s full and complete withdrawal from the European Union.
The leading figures on each side of the in/out debate.
Nigel Farage – leader of the United Kingdom Independence Party (UKIP) which campaigned for many years in favour of the UK leaving the EU.
In the 2015 general election, UKIP won 3.8 million votes, despite considerable vilification in some parts of the UK media, but gained just one MP because of the ‘first past the post’ electoral system. With hindsight, it’s easy to see this surge in popular support as a bellwether for the referendum result. Farage and UKIP were not part of the official Vote Leave campaign. Although he has stepped down as UKIP leader, Farage has left the door open to returning to the fray should the referendum result not be respected. Given the number of times he has resumed the UKIP leadership after quitting before, this should not be ruled out.
Boris Johnson – The former Mayor of London left it until the 11th hour to commit to the Vote Leave campaign, prompting speculation he was cynically waiting to see which side had more momentum. A UK newspaper leaked two treatises he had written, setting out why people should vote both for and against Brexit. Johnson claimed they were simply to help clarify the arguments in his mind.
Michael Gove – A former journalist, Gove was co-leader of the Vote Leave campaign and one of the more articulate performers in the Brexit camp.
Destroyed his chances in the race to succeed prime minister Cameron after the referendum by sabotaging the campaign of rival candidate and personal friend Boris Johnson, claiming he was unfit for the job.
David Davis – Grammar-school educated and a former SAS territorial, Davis is Secretary of State for Exiting the European Union (DExEU) and responsible for conducting Brexit negotiations with Michel Barnier. Unlike many career politicians, David worked in business for many years before entering politics. Vied with David Cameron in 2005 for leadership of the Conservative Party.
Reports in The Times that Davis was being “sidelined” in the next round of talks in favour of senior civil servant Olly Robbins were dismissed by the DExEU as a bid by Brussels to undermine the UK’s position.
Liam Fox – the international trade secretary is heading up the UK’s bid to have free trade deals ‘ready to go’ when the UK’s transition deal with the EU ends in 2021.
Jacob Rees-Mogg – a staunch supporter of a hard, or ‘no deal’ Brexit if a good settlement can’t be achieved – and a critic of Philip Hammond and Mark Carney.
Rees-Mogg has claimed the UK economy could benefit from a £135bn financial boost in the five years after its departure from the EU. A frequent panelist on Have I Got News For You, he has something of a cult following among supporters and is viewed by some in the party as a possible successor to Theresa May.
Gisela Stuart – A German by birth and upbringing, Stuart served as a Labour MP from 1997 to 2017, and was chair and co-leader of the Vote Leave campaign. One of the few leading Labour figures to support Brexit, she now serves as chair of Vote Leave's successor organisation, Change Britain.
David Cameron – the former prime minister put his full weight behind the Remain campaign, but must bear responsibility for what became dubbed ‘Project Fear’, warning of the dire consequences of Brexit, which alienated many voters.
He also failed to come back from Brussels with a meaningful deal to curb immigration before the referendum. His resignation was inevitable.
George Osborne – the former chancellor outbid his friend the prime minister in his warnings of economic apocalypse in the event of Brexit.
Now trying to influence events from the sidelines as editor of the London Evening Standard.
Philip Hammond – the new chancellor has angered many in his own party with his pessimistic assessments of a post-Brexit Britain.
Mark Carney – the governor of the Bank of England joined Cameron and Osborne in issuing dire warnings of the effects of Brexit on the UK economy, continuing his pessimistic forecasts after the referendum.
In contrast his predecessor Sir Mervyn King has said that while Brexit would not be a “bed of roses”, it offers many opportunities, and said there were “real question marks” as to whether the UK should remain in the customs union, which would restrict the ability to strike independent trade deals.
Anna Soubry – a Conservative MP who campaigned for the Remain camp and has led a strong rearguard action in parliament in what many see as an attempt to reverse the referendum result.
Lord Heseltine – one of several Tory grandees on the Europhile wing of the party who have called for the referendum to be ignored or overturned.
In December he said that a Corbyn-led labour government would be less damaging to Britain than Brexit, leading to calls for him to be expelled from the Conservative party.
Vince Cable – the leader of the Liberal Democrats has followed on from his predecessors Tim Farron and Nick Clegg by refusing to accept the result of the referendum as the last word.
Supports remaining in the Single Market, which would require the UK to allow continued, unchecked immigration from EU countries. This would also mean remaining customs union, which would prevent the UK from making trade deals with other countries outside the EU.
Whatever the outcome of negotiations, the Liberal Democrats want a second referendum, with one of the options being to remain in the EU.
Sir Keir Starmer – the slick-talking barrister is a rising star in the Labour Party and leading its new charge to reverse Brexit, after an early period in which most in the party accepted the referendum result.
Starmer is calling for membership of the European Single Market to be retained in a Norway-style solution, with “easy movement” rather than “free movement”, though he has repeatedly failed to specify how this might work, or how it would tackle the issue of excessive immigration into the UK. Also supports remaining in the customs union, which would prevent the UK from making trade deals with other countries outside the EU.
Nicola Sturgeon – In the wake of the Brexit vote, in which Scotland voted to Remain, the leader of the Scottish National Party (SNP) called for a second referendum on Scottish independence from the UK.
However she lost several seats in the 2017 general election, with Unionist parties gaining a substantial majority of the vote, effectively quashing her campaign, which had been seen by many as opportunistic.
On the fence?
Theresa May – the current UK prime minister (then home secretary) toed the official ‘Remain’ line during the referendum campaign but failed to speak out at any platform event. Since taking office as PM she has embraced the Leave cause with her “Brexit means Brexit” mantra and consistently maintained that the democratic will of the British people must be respected. Having come close to being toppled after a disastrous general election and party conference, her speech in Florence followed by the 11th hour deal in the first round of EU negotiations restored some of her credibility and have given her a breathing space. Given the divisions within her party she could soldier on until 2022 – barring further mishaps, such as the chaotic Cabinet reshuffle.
Jeremy Corbyn – llike his opposite number, Corbyn was officially a Remainer, but failed to speak convincingly on the issue during the campaign and has opposed EU membership for most of his political life. His apparent new-found conversion to the cause of remaining in the Single Market has more to do with political pragmatism than European idealism, but speaking to inews in December 2017 he reiterated that Labour respected the Brexit decision and that there would be no second referendum if he were prime minister.
Jean Claude Juncker – Juncker has been president of the EU Commission – the unelected, executive branch of the European Union – since 2014. Former UK prime minister David Cameron opposed his presidency, in move that would not have endeared Juncker to the UK. He is said to have a weakness for Scotch whisky, keeping a supply of £130-a-bottle single malt Glenfarclas in a fridge in his office.
Juncker appointed Michel Barnier to be chief Brexit negotiator, and in September 2017 called for tighter European integration, with all states joining the euro, a common defence policy and an end to the veto powers of member states.