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UK and EU could be better partners apart

Why a deal will (have to) be done
by Bob Bischof, London, 28 February 2018

As a German businessman who has lived and worked in Britain for 40 years and seen all facets of the Anglo-German divide over Europe, I am convinced that UK and continental negotiators will reach a mutually satisfactory accord over European Union withdrawal.

Britain and the EU-27 are better off apart than together. The EU will reach an agreement because the other 27 countries believe it is in their interest that Britain not only leaves now, but also that no future government thinks of knocking on the door again. Many well-meaning British Europhiles from all parties are sadly wasting their time by campaigning for Britain to stay in.

There has been much noise and hot air. Prime Minister Theresa May’s cabinet met last week and declared that only a bespoke deal is acceptable – earning an immediate rebuff from Brussels that this is impossible. Jeremy Corbyn, the leader of the Labour party, has pledged that Britain will stay in a customs union with Europe to help industry and employment and prevent a ‘hard’ Irish border. This spurred claims that Labour is ‘betraying’ those party supporters who want a full-scale EU exit. It also threatens May by encouraging Europhile Conservative rebels to join Labour against the prime minister’s strategy.

Squabbling over Europe is as old as Britain’s 50 years of half-hearted attempts at being a full and engaged European partner. European wrangles have haunted successive Conservative prime ministers. David Cameron had to step down after miscalculating the outcome of the 2016 referendum. May would have met the same fate, had her adversaries not hesitated to oust her out of fear of Corbyn in Downing Street.

The litany of divergence is long and substantial. Not having accepted the euro or Schengen area borderless travel, Britain will never sit at Europe’s top table. Public opinion, heavily influenced by a powerful right-wing press, is hostile to Europe. The British don’t like and are not good at the big government, structure and regulation conducive to European integration.

Other sources of division are Britain’s affinity with case law and a non-written constitution, contrasting with the continent’s Napoleonic code, and the British hankering for flexible labour markets and shareholder value rather than worker protection and the social market economy.

The referendum outcome gave credence to James Surowiecki’s book The Wisdom of Crowds. Large numbers of ordinary people sometimes make better decisions than smart elites. Because of deep cultural, political and economic disparities, I believe now – as I did before the vote – that Britain will continue to have misgivings about the EU and its political framework in spite of the fact that it will be worse off economically. Moreover, the EU will be better off without its quarrelsome neighbour.

For all these reasons, May and the EU have to and will agree a deal that Remainers and Leavers can (just about) live with in parliament and even in a second referendum.

Ultimately the EU will deliver such an accord. The reasons are rooted in reality, not fairyland. The right-wing press regularly claims that the EU needs Britain more than vice versa, that the EU’s exporters are somehow more vulnerable than the UK’s, or that the EU will be a more dangerous place without a deal. These mantras are overdone and misleading. Both sides need a deal, for equal and opposite reasons.

Separation can take place amicably. The French and German elections led to one common political result: more Europe and more integration.

A softer EU stance on Brexit is unlikely to encourage other countries to leave, as the EU is economically out of the doldrums. Employment is rising. Growth is higher and at a more sustainable rate than in Britain, where, in spite of sterling’s fall, the high current account deficit is expected to show only marginal improvement. Household debt is at record highs. Unemployment started to creep up in the last quarter of 2017.

No wonder net migration to the UK has fallen substantially. Because of Britain’s worse economics, I predict that immigration will shrink so much that May will claim victory and can drop insistence on free movement of people for a future accord. This is one more reason why, in the coming months, headlines will portray more harmony than hostility between London and Brussels.

Bob Bischof is Chairman of the German-British Forum, a Vice-President of the German-British Chamber of Industry and Commerce and a member of the OMFIF Advisory Board.