Brexit: the vote is just the beginning; what's next?

27 June 2016

The UK's historic decision to end its 43-year love-hate relationship with the European Union represents a turning point in British history to rank alongside the two world wars of the 20th century.

On the assumption there is no turning back, Britain will live with the political, constitutional, diplomatic and economic consequences for a decade or more, points out The Guardian, as it outlines what to expect in the coming days.

The politics
The scale of the destruction wrought by 'independence day' is such that one of the last redoubts of the establishment left standing – the civil service led by the cabinet secretary, Sir Jeremy Heywood – will now take centre stage.

It will be Heywood's task, in conjunction with the governor of the Bank of England, Mark Carney, and David Cameron acting as a caretaker prime minister, to bring a semblance of shape to the chaos that is likely to ensue.

By agreeing to stay until autumn, he at least provides time for the Conservative party to put flesh on the frankly skeletal Brexit plan set out by the official leave campaign.

Cameron had vowed during the campaign that if there was a Brexit vote, he would trigger Article 50, the part of the Lisbon Treaty that sets in train a two-year process whereby a member state can notify the EU council of its decision to leave.

But in his resignation statement on Friday, he said it would be up to his successor to fire the starting gun on exit negotiations. ''It is right the new prime minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the EU,'' he said.

This will give the Brexiters time, but is already frustrating the Europeans, who want a rapid Brexit process. Once Article 50 is triggered, the clock starts ticking on a two-year renegotiation with the EU that must end with the UK's ejection unless the EU member states unanimously agree to extend the negotiations.

The Article 50 process has been constructed to give the negotiating advantage to the EU, and not the country planning to leave. If at the two years' end neither a deal nor an extension has been agreed, the UK automatically reverts to World Trade Organisation rules, meaning the UK faces tariffs on all the goods it sells to the EU. So if the UK triggers Article 50, Britain will have stepped on to a conveyor belt that could end with the EU holding all the bargaining chips.

Cameron now faces a constitutional impalement. The parliament elected in 2015, and from which he derives his authority, has through the referendum been overridden. The vast majority of MPs and peers are pro-Europeans who have been shown to have been out of step with public opinion. The sceptics may number no more than 200 MPs at most, but the referendum has shown that the minority speak for the people. It leaves the locus of political authority in dispute, as well as highlighting the anomaly of Scottish MPs committed to the union with Europe, but not with Great Britain.

For the next few months Cameron will be operating largely at the sufferance of the Brexit wing of his party. That wing is disunited to the point of dysfunction and will need time to absorb their unexpected victory. Some Brexiters have for months quietly pointed out that the referendum is advisory and asks voters' views only on whether to leave the EU. It is silent on the form of the departure. An Irish referendum, by contrast, posed very specific legal questions, giving clear instructions to the politicians.

So Brexiters will face a choice between maintaining their pledge to withdraw from the single market and so ending the free movement of people, or whether instead to seek what has been described as purgatory – the kind of half-in, half-out arrangement enjoyed by Norway.

Eurosceptic MEP Daniel Hannan has argued Brexit should be viewed as a process, not a single moment of departure, and a Norway arrangement for the UK might be a stepping off point before the final rupture in years to come.

If the Brexiters are too leisurely in seeking to leave the EU, the electorate may become impatient, the pro-EU Commons majority start to mobilise against Brexit, and the vista of a fresh general election, providing new political mandates, becomes more imminent. It is not inconceivable that a new election, possibly contested by new leaders in both main parties and focused on Europe, could see a call to revisit the referendum decision.

The European Union
The EU, grappling with dangerous centrifugal forces, will try to act decisively, something it rarely does. The German chancellor, Angela Merkel, has invited the EU council president, Donald Tusk, the French president, François Hollande, and the Italian prime minister, Matteo Renzi, to Berlin on Monday. There will be an EU council meeting in Brussels on Tuesday and Wednesday.

Cameron will appear on Tuesday but will not attend Wednesday's session. Frank exchanges about the speed of action are likely, but Europe can do little to accelerate the timetable Cameron has set, short of suspending Britain from the EU – an unprecedented and unwarranted step.

The priority is to prevent what has been described as the psychology of a bank run gripping the EU, as the calls for parallel referendums proliferate in the Netherlands, France, Poland and Hungary. That, after all, has been the explicit goal of some leave campaigners. Michael Gove, for instance, called for the ''liberation of Europe''.

The ultimate EU aim will be a firm, sustainable settlement that does not harm its vital interests. The German finance minister, Wolfgang Schäuble, has reportedly prepared an eight-page paper looking at UK withdrawal from the European Investment Bank, the rights and obligations of EU households, of relations and whether the UK can act as president of the Council of the EU next year as scheduled.

The paper raises the possibility of associate status for the UK, and says there can be no automatic assumption that the EU will give the UK access to the single market. It also accepts that the way in which the UK negotiation is handled will determine the degree to which there is an attempt to imitate the UK in other countries.

Separately, the higher-stake trade talks will look at whether the UK rejoins the existing European free trade agreement, so enjoying access to the single market, or instead strikes outside on a free trade treaty of its own.

Beyond that, talks with the Irish government, the Commonwealth, Nato and innumerable other bodies await. The success of these complex negotiations will depend on the chemistry of the relationship between the UK and Europe post-Brexit, and whether the triumphalists or the pragmatists in the Brexit camp hold sway.

That in turn will depend on whether Cameron can restore relations with the two old friends that have laid him so low – Gove and Boris Johnson. After the events of the past two months, all the actors know they travel without maps.

The referendum result has cast fresh doubt on Britain's own union. Nicola Sturgeon, Scotland's first minister, has announced she will now seek to bypass Westminster by directly approaching the EU for negotiations on how her country can disentangle itself from Brexit.

After Scotland voted 62 per cent to 38 per cent to stay in the EU, Sturgeon said she plans to begin immediate discussions with the European commission to ''protect Scotland's relationship with the EU and our place in the single market''.

There is a large diplomatic corps in Edinburgh, including consuls general from several of the major world powers and from other EU member states. She said that at her summit with diplomats she would ask their help in reassuring their nationals living in Scotland that they were welcomed and cherished.

Speaking after an emergency cabinet meeting on Saturday morning, she added that she is to establish an advisory body of financial, legal and diplomatic experts who can advise her government on its options for retaining EU membership.

She said the cabinet had endorsed her decision on Friday to begin immediate preparations for a second Scottish independence referendum. Her officials refused to confirm indications that a new bill would be in her programme for government in September.

The City
Comments from the European Central Bank on Saturday morning crystallised the fears of London's financial industry, which had pushed hard to remain in Europe. Now London's status as a major financial centre could be in doubt after the ECB signalled that banks in the City of London risk being stripped of their lucrative EU ''passports'' that allow them to sell services to the rest of the union.

France's central bank governor François Villeroy de Galhau said keeping the so-called ''passport'' would not be possible if the UK left the single market of trade in goods and services.

The passport issue is a key concern for big non-EU banks working out of London as the system has given access to the EU's market of 500 million people.

Such moves would mark a major shift for the UK economy. The country accounts for more than 2 million of the EU's 11 million financial services jobs, according to trade body TheCityUK.

Villeroy de Galhau, who is an ECB governing council member as well as the governor of France's central bank, also echoed calls from EU leaders for quick Brexit talks and warned that Britain would bear the brunt of the economic consequences of leaving the EU.

He told radio station France Inter, ''What happened on Thursday is bad news, first of all for Britain. Of course there will be negative consequences for the European economy but they will be much more limited than the negative consequences all experts forecast for the UK economy.''

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