July 13, 2016
Brexit could take six years to complete
Despite Brexit, we notice that the eurozone-related news flow is already ebbing as the holiday season gets under way. Today is Theresa May's big day. Most of the British papers are focused on who is going to be in her cabinet. What piqued our interest instead is this story in the Guardian, quoting foreign minister Philip Hammond that Brexit will take six years to complete. He arrives at this number by adding two years for the Article 50 procedure, followed by another four years of negotiations and ratification of a free-trade agreement. His analysis is premised on an assumption of mixed competence, rather than trade only. A pure trade agreement could be fast-tracked, since trade is an EU-level competence. One of the issues for negotiation will be the transitional regime for Britain on exit, but before the conclusion of an FTA deal.
While the Conservatives now have a chance to unite behind their new leader, the Labour Party is tearing itself apart. Labour's National Executive Committee yesterday voted to put Jeremy Corbyn on the ballot for the Labour leadership, frustrating an attempt by Labour MPs to keep him off the ballot which seemed like a last desperate tactical ploy by the Blairites in the Labour Party to defeat the left. Labour's membership last year backed Corbyn by a large majority, but a separately agreed shift in voting rules may deprive Corbyn of some support this time around. We are reading in the papers that moderate Labour MPs are fuming about the decision, as their staged coup attempt now seems to be faltering. The Guardian writes that Corbyn starts as the favourite in the race against his challenger, Angela Eagle, and his supporters are already plotting to remove moderate Labour MPs in the constituency-based selection process ahead of the next election. Our conclusion is that, no matter whether Corbyn or Eagle wins, the Labour Party will split. But this split will not produce a large pro-European majority party in the House of Commons, even if Labour moderates and LibDems join forces. We think that such a party could have some potential, but it will not be able to frustrate the referendum result as some Remain campaigners have hoped. We think that the main beneficiaries of these developments will be the new prime minister and the Conservative Party.
This is from Robert Peston from ITV. We fully agree with his assessment that the Labour Party moderates are badly misjudging the situation.
"Even by Labour's recent history of giving shambles a good name, today's meeting of the ruling NEC takes the biscuit. Because at the end of the meeting, after a couple of pro-Corbyn members had left, and Corbyn himself had gone, a vote was taken on a motion not on the agenda, to exclude from the leadership vote anyone who joined the party in the past six months. So the 130,000 who signed up since Brexit, most of whom are thought to be Corbyn supporters, will be unable to vote. Now whatever you think of Corbyn, this looks and smells like gerrymandering by his opponents.Corbyn will definitely attempt to get the vote over-turned. And he may resort to the law, since Labour's website made clear that membership bought a vote.As for those who joined since January, they will be revolting."
There are also signs that the foreign press, which has treated Brexit as a decision likely to reversed, is becoming more realistic. Jochen Buchsteiner of FAZ writes that May will probably not call elections, and instead get on with the job of making Brexit work. Given the thin Tory majority she can ill afford to make a U-turn on Brexit. She will need to deliver. He also noted her challenge to big business. No Conservative leader has so far talked about worker representatives.
And finally we noted an article by Ambrose Evans Pritchard who talked to Siemens, a company that seems remarkably unperturbed by Brexit. Siemens wanted the UK to stay in the EU, but says there is life after Brexit. Siemens decided not to downsize its UK operations as a result of the vote.