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Brexit roundup: trade talks, transition and the possibility of a second referendum


After something of a lull following the conclusion of the Phase 1 negotiations before Christmas, Brexit is once again in the news.  Here's our take on some of the key developments since last December:

  • The UK government:  Press reports suggest that the UK government is hoping that some EU Member States can be persuaded to break ranks in support of its calls for a free trade agreement which is more ambitious than the EU's recent deal with Canada.  Whilst it is true that EU Member States have differing national interests, the EU's negotiating position is subject to significant legal and political constraints – such as the existence of "Most Favoured Nation" clauses in several of its trade agreements (which may make it problematic to offer the UK a "special" deal, as the EU would then come under pressure to extend the same terms to countries such as Canada and South Korea).   Norway is also reported to have indicated that if the UK secures a deal which it perceives as better than its current trading arrangements with the EU, then it may wish to revisit aspects of the EEA Agreement.

  • The opposition:  Opposition leader Jeremy Corbyn has indicated that he does not favour remaining in the Single Market, despite polls suggesting substantial support for this option amongst Labour Party members.   His view is reported to be that "the Single Market is not a membership club that can be joined."  Whilst not strictly incorrect, this statement omits to mention that there are in fact several existing "models" (falling short of EU membership) which would allow continued participation by the UK in the Single Market after Brexit.  The most obvious "club" to join would be that of the EEA-EFTA countries (Norway, Iceland and Liechtenstein) – see our Q&A on the EEA.  However, Ukraine also participates in most aspects of the Single Market via its Association Agreement with the EU and Switzerland effectively participates so far as most goods are concerned.

  • The EU:  The EU, meanwhile, has been considering its negotiating guidelines for the next phase of the Brexit talks.  These are expected to be agreed by the end of January 2018. The current draft focusses largely on transitional arrangements, with no mention of the future relationship. There have also been reports that the EU may be hardening its stance on certain aspects of the transition, for example by insisting that the cut-off date for freedom of movement/legal residence of EU citizens should be the end of the transition period (rather than Brexit day). Whilst the UK government would like transitional arrangements to be agreed by March 2018, some reports suggest that EU officials regard the middle of the year as a more realistic deadline.   In any event, the fact that both sides have adopted the mantra "nothing is agreed until everything is agreed" means that any agreement in principle on the transition could be derailed by a failure to agree on other issues.

  • A second referendum?   Suggestions that a second referendum on the UK's relationship with the EU could be on the cards have been widely reported.  However, it is worth bearing in mind that, unlike a general election, a second referendum would require specific legislation.  Extra time would also have to be allowed for "lead campaign groups" to be designated ahead of the start of the official campaign.   Given that there are only 5 months between the end of October this year (when the Phase 2 Brexit negotiations are due to conclude) and the UK's exit date in March 2019, the timing of any second referendum would not be straightforward – especially if the exact nature of the UK's future relationship with the EU was still unclear at that point (most commentators agree that in the time available, it is unlikely to be possible to agree more than a broad outline of the shape of any future EU-UK trade deal by later this year).  This is not to say that a second referendum is inconceivable, especially if public opinion were to move clearly in favour of it  – but it would be made considerably easier if the 2 year negotiating period in Article 50 could be extended (so as to allow more time for the referendum to be held).
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