UK’s Brexit Risk: Five Issues That Need Watching
There is a low probability Britain will leave the EU, but if it does, the consequences will be tremendous.
- When asked about Brexit, more Britons opt for staying (45%) than leaving (36%) the EU.
- Two years ago, over 50% of Britons wanted to leave the EU. Today, 36% want to leave, 45% to stay.
- Points to consider for Brexit: Current opinion polls are not a reliable guide the future.
- Points to consider for Brexit: The UK cannot negotiate an entirely “new deal” with the EU.
- Points to consider for Brexit: Union questions will complicate the EU campaign.
Although the election result means that the United Kingdom should have a reasonably stable government in coming years, business and investors in Britain face considerable uncertainty. The big questions going forward concern the cohesion of the UK and its future in the European Union.
Mr Cameron promised during his last term to use a renewed mandate to get a “better deal” for his country in the EU and then ask the British people whether they want to stay or leave in a referendum.
Most observers consider the risk of the UK leaving the EU as tangible, but low. British voters seem a lot less interested in the “European question” than they were a couple of years ago. In the election campaign, the EU was hardly mentioned – despite the vocal campaign and strong result of the anti-EU UK Independence Party (which received 13% of the overall vote, but only one parliamentary seat).
When asked how they would vote in an EU referendum tomorrow, significantly more people now say they would opt for staying (45%) than leaving (36%).
Time to blow the all-clear signal then? That would be premature. Domestic uncertainties, in combination with European developments, make any forecast about the EU referendum at this point highly speculative. The following five issues can help us to assess the risk of Brexit going forward.
1. Current opinion polls are not a reliable guide the future.
Two years ago, over 50% of Britons wanted to leave the EU, compared with a quarter who wanted to stay. Only since the beginning of last year did the polls show a shift in favor of staying in the EU.
Voting intentions in the referendum could swing back towards “no” under any number of scenarios. If the eurozone crisis flared up again, for example, Britons would once again perceive the EU as a zone of economic instability and slow growth that is not worth belonging to.
2. The timing of the referendum will be important.
Under domestic considerations, Mr. Cameron might call the referendum sooner rather than later, perhaps as early as mid-2016. Eurosceptics would prefer an early decision. And so would business, which is keen to forestall the risk of prolonged uncertainty and a government distracted by EU negotiations.
Moreover, elections are due in both France and Germany in 2017, which will make the respective leaders of these countries less inclined to make concessions to the UK. On the other hand, an early referendum in 2016 would leave London a lot less time to negotiate a meaningful deal with the other European countries.
3. The UK cannot negotiate an entirely “new deal” with the EU.
In more nuanced opinion polls, a large majority of Britons would vote for staying in the EU if Mr. Cameron managed to negotiate a “better deal” for his country in the EU.
Mr. Cameron has so far said very little on what he thinks such a deal would look like. His strategy for the plebiscite will become clearer once he introduces the required “referendum bill” in Parliament, which could well be one of the first acts of his new government.
On issues such as subsidiarity and further market opening, Mr. Cameron can expect sufficient support from Germany and other member states. They would not, however, back the right of the UK to opt out of significant areas of EU policy and law.
Poland, the Czech Republic and other Central and East European countries have traditionally been allies of the UK in EU negotiations. They have, however, been antagonized by the Conservative party’s anti-immigration rhetoric of recent years.
What this means in practical terms is that, unlike in the past, Mr. Cameron and his cabinet will have to devote significant time to building coalitions in Europe to ensure that the negotiated deal is accepted by the other 27 member states.
The likely result of the negotiations will be a mixture of limited concessions and political pledges. Since some voters in Britain have incomplete knowledge of what EU membership actually entails, the government might be able to sell such limited results as the promised “better deal.” For others, whose objective it ultimately is to leave the EU, no result – however comprehensive – is likely to be good enough.
4. Party politics will be intractable.
Whatever the outcome of the negotiations, Mr. Cameron will have to campaign for a yes vote in the referendum. His party, however, will not necessarily follow him.
The Conservative grassroots have long been more eurosceptic than the population at large. In a poll in early 2015, for example, 58% of Conservative party members said they wanted their country to leave the EU, while 33% opted for staying. Even several members of Mr. Cameron’s new cabinet are on the record as saying they would vote no in a referendum.
Among the new Conservative members of parliament, one-third are said to prefer leaving the EU. Mr. Cameron’s slim parliamentary majority of only 12 seats strengthens the position of these eurosceptic backbenchers, who will now be in a position to “blackmail” the government into concessions over Europe.
Mr. Cameron will face an almost impossible balancing act between striking a pragmatic deal with the other EU governments and placating the hardliners within his own party. A number of Conservative politicians will reject any EU deal that does not restore significant powers from Brussels to London.
Since such a deal is not feasible, they will insist on the right to campaign against their own government. Therefore, the risk is high that the party will split during the referendum campaign, which might also imply a lost parliamentary majority and an early election.
5. Union questions will complicate the EU campaign.
Mr. Cameron will be distracted not only by European issues, but also by the pressing need to redefine the relationship between England and the other constituent parts of the United Kingdom, most notably Scotland.
Scotland’s nationalists have emerged strengthened from the election and they will demand that each of the four constituent parts of the UK must individually consent to a decision to leave the EU. Scotland is traditionally more pro-European than England.
If Scotland voted for staying in the EU, while England voted in favor of leaving, this split would almost invariably trigger another referendum on Scottish independence. The future of the United Kingdom is therefore one of the issues that voters will consider when they vote in the EU referendum.
Optimistic about the future
All things considered, there are still good reasons to assume that the UK will stay in the EU for the foreseeable future. If the British economy continues its recovery – and the good performance in the labor markets starts translating into wage growth – most Britons will have few reasons to opt for a radical change in the upcoming EU referendum.
Although some of Mr. Cameron’s EU-related decisions in the past appeared to be less than fully thought through, the prime minister is an experienced political operator who should be able to navigate the turbulences ahead.
The other EU countries are, on balance, willing to take a constructive attitude towards Britain’s demands for EU reform – provided the UK does not ask for unreasonable opt-out’s, for example from the free movement of labor.
And yet, the political landscape in both the UK and the EU has been changing so quickly in recent years that it is impossible to predict which constellation will prevail at the time of the referendum.