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Whitehall is preparing for operation negotiation – and wants a tailor made deal

The government has said that Brexit will be triggered by the end of March 2017. The government does not envisage seeking an extension of the two-year period allowed for negotiation since that would require the unanimous consent of the 27 other EU governments.

The government wants a soft Brexit but is setting conditions (no freedom of movement; no role for the European Court of Justice) which, if it sticks to them, will make it harder to negotiate an outcome which protects the UK’s economic interests.

The President of the European Council, Donald Tusk, said in the light of the Prime Minister’s Party Conference speech, that the only alternative to a hard Brexit was no Brexit. Tusk is not disposed to empty rhetoric.

Theresa May has given conflicting signals. Carrying her own party and securing the national interest are not currently readily reconcilable.

It is equally clear that the government does not want any of the off-the-shelf solutions, such as a Norway or Switzerland deal, which would not exactly be ‘soft’ but would limit the otherwise inevitable damage to the UK economy.

It wants a tailor-made deal, and it is on the nature of such a deal that British officials are working, preparing options for ministers.

This approach will recognise that ad hoc solutions will need to be sought for trade in services. Some parts of the insurance industry, for example, operate through established subsidiaries in other EU countries while others, which are not incorporated on the continent, will need some form of passporting.

The financial services sector will need either continued passporting rights or a deal which allows them to establish the equivalence of UK banking rules. To achieve that, the British government would have to accept the incorporation of existing and future EU regulation into our laws. This part alone of the negotiation with the EU will be fraught and lengthy.

The British negotiation will be unprecedented and the goodwill that exists (albeit alongside very hard headed self-interest) in negotiating with a country such as Ukraine that wants to join the EU will not be replicated in negotiations with one that wants to leave.

Apart from the fact that we cannot expect to enjoy the club benefits without following the club rules, the desire at present to penalise the UK is strong. And our best friends, such as Denmark, Netherlands and Sweden have a particular interest in demonstrating to their own publics that, if you want to leave, it’s not easy.

British officials and ministers are talking to their contacts elsewhere in the EU, but there will be no negotiation until Article 50 has been triggered. It will then take time for the EU to formulate its negotiating position. The first (and complex) order of business will be the Article 50 negotiation itself, which is about dismantling existing mutual rights and obligations.

Whether, and to what extent, the EU will be prepared to negotiate, in advance of our departure, on the detail of the future relationship between the EU and the UK is a separate, and so far unresolved, issue.

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