THE BLOG
17/09/2018 01:11 BST | Updated 17/09/2018 01:11 BST

Why Talk Of A ‘No Deal’ Brexit Makes A Deal More Likely

Talking up the risk of a No Deal Brexit is no doubt an attempt by May to focus the minds of MP that her Chequers plan is the only basis for an orderly exit from the EU

AARON CHOWN via Getty Images

As Brexit negotiations between the UK and the EU move towards an endgame series of summits among the leaders of the EU27, little new has emerged about whether Prime Minister May’s ‘Chequers Plan’ – or a variation of it – will be acceptable to the EU. Although reports were circulating that the EU’s Chief Negotiator, Michel Barnier, had described the plan as ‘dead’, European Commission President Jean-Claude Juncker – in his annual State of the Union speech – appeared to offer some hope to the UK that an ‘ambitious new partnership’ could be forged on the basis of a free trade agreement as envisaged in the Chequers Plan. Nonetheless, he also warned that a state that left the EU and its Single Market could not enjoy the same privileges as an EU Member State. Prime Minister May also knows that even if her Government can reach an agreement with the EU, there is no guarantee that MPs will endorse it.

Noticeably, the UK Government has been talking up its arrangements for a ‘No Deal’ Brexit. In August, the Brexit Secretary Dominic Raab outlined the UK’s preparations for a disorderly departure from the EU. An initial series of technical papers were issued by his Department, indicating the likely effects of leaving the EU without a legal framework to govern future trade and cooperation between the UK and the EU. With 80% of the Withdrawal Agreement in place – including settlements of the UK’s financial liabilities – Raab noted that the scenarios identified were not what the Government expected or wanted, and instead presented the publications of the papers as a government planning ‘for every eventuality’.

With the UK publishing a further round of No Deal technical papers on Thursday (13 September), the political theatre seems to have shifted. The Prime Minister hosted a special meeting of the Cabinet apparently to discuss contingency planning should the UK leave the EU without a deal. The Governor of the Bank of England, Mark Carney, also attended for part of the meeting.

Meanwhile the Brexit Secretary amplified remarks he made earlier in the week that ‘nothing is agreed until everything is agreed’ and that included the settlement of the UK’s financial liabilities as agreed in the first phase of Brexit talks. While repeating that the UK would honour its obligations, Raab made clear that should a No Deal Brexit occur, the agreement reach at the end of 2017 would lapse. At her weekly Prime Minister’s Questions session in the Commons, Theresa May had similarly noted that in respect of the accepted so-called ‘Divorce Bill’, in the event of a No Deal Brexit, ‘the position changes’.  To be clear, the Government accepts it has financial liabilities and it is not suggesting it will not meet those liabilities, just that the specific terms and schedule of payments agreed in 2017 will be off the table.

All this talking up of a No Deal Brexit appears aimed at a range of audiences.

The technical papers are supposed to give guidance to stakeholders about how the Government intends to implement regulatory arrangements governing goods like medicines and services like mobile phone use and data roaming.  Yet much of this guidance does not get beyond telling businesses that the UK will legislate to allow EU-based manufacturers and service-providers to continue to access the UK while leaving enormous uncertainty as to what degree of reciprocal arrangements – if any – UK companies will experience in 27 other countries. The same goes for citizens’ rights after Brexit. If the deal done on those rights in 2017 disappears, the UK could legislate to replicate the terms of the deal for citizens of the EU27: a point that Raab has also made in interviews. But again, this does nothing to provide reassurance for UK nationals resident in any of the EU27 Member States with the potential for those states to take divergent approaches, subject to any common EU legislative rules.

Given that real certainty and clarity can only come from a Withdrawal Agreement that includes a clear transitional framework and from some sense of what the future relationship between the UK and EU will entail, the No Deal chatter is really aimed at different political audiences.

At a domestic level, talking up the risk of a No Deal Brexit is no doubt an attempt by Prime Minister May to focus the minds of MPs – as well as members of her own Cabinet – that her Chequers plan is the only basis for an orderly exit from the EU. With sections of her own party apparently still contemplating ousting her as leader and Prime Minister, the idea that a forced exit from Number 10 could lead to a No Deal departure from the EU is a linkage that Mrs May could be keen to underscore.

More generally, in selling her plan to the public, discussion of a No Deal Brexit also helps to prepare people for the reality that things will be different outside of the EU. For those ideologically committed to Brexit, the risks and downsides of EU withdrawal have often been dismissed as ‘Project Fear’: the Brexiteer equivalent of ‘Fake News’. The release of technical papers describing some of the potential fall-out from life outside the EU, allows the PM to worry the public just enough to make her plan seem like a less bad outcome.

But perhaps the primary audience for all of this is really the leaders of the EU27. The UK has been asking Barnier and his team to show flexibility and not to stick to the models of how they have done deals in the past. Raising the threat of a No Deal Brexit may be intended to appeal directly to the EU leaders to redefine the negotiation mandate of the European Commission to allow for talks to reach a positive conclusion. An upcoming informal summit of those leaders may be an opportunity to do just that.

In the end, when we consider a ‘No Deal’ Brexit we need to keep in mind that the current talks cannot and will not define the future relationship between the UK and the EU; it can only settle the ‘framework’ for that relationship. And so there is always the potential to kick the can down the road by agreeing a thinner rather than a thicker version of that framework. Indeed, the value of Sterling recently rose on the back of a Bloomberg Report that Germany might accept a more minimal framework agreement.

Paradoxically, then, the current preoccupation with a No Deal Brexit is an indicator that some serious political thought is now being given to how to ensure that the Brexit endgame produces a Withdrawal Agreement, making a No Deal Brexit a more remote possibility.

Kenneth Armstrong is Professor of European Law at the University of Cambridge and author of Brexit Time – Leaving the EU: Why, How and When?