NIESR researchers' reaction to Theresa May’s speech at the Conservative Party Conference
Two senior members of the National Institute of Economic and Social Research offered their reaction following the PM speech on Sunday.
Dr Angus Armstrong, Director of Macroeconomics at NIESR, said: “The triggering of Article 50 by March may be needed for political reasons but it is not necessarily conducive to the best possible outcome for the UK.
“Finance theory tells us that when there is uncertainty and an investment decision cannot be reversed, then there is there is value in waiting for the uncertainty to be resolved. The timing of starting the Article 50 process meets these conditions.
“The process faces at least two important uncertainties: first, can the best outcome for the UK be achieved in the two year window and, second, who are will be the UK’s main interlocutors?
“If we need an extension to the two year window to achieve the best outcome, we are likely to be in a stronger negotiating position to achieve this before starting the Article 50 process rather than after. All of the discussions to date suggest the process is harder than expected.
“In May we will know the outcome of the French Presidential election. The potential victors have very different policies towards the EU and may have an important baring on the EU negotiating position. Waiting to find out who wins may make sense for our strategy. Starting our negotiations before the election process is complete may lead to unwanted politicisation.
“Some may say that it is best to start Article 50 as soon as possible so that it is competed as soon as possible. But the priority should be getting the best possible Brexit outcome for the UK not the fastest or politically most expedient.”
Jonathan Portes, a NIESR Fellow, recently said: “We may know more about the timing of Brexit from Theresa May’s speech today, but we still don’t know what Brexit means for the two key issues of trade and immigration. The fundamental tradeoff – that the greater the restrictions the UK places on labour mobility post-Brexit, the greater are likely to be the new barriers to trade flows between the UK and the EU – remains, and we have no more clarity on how the government intends to make those tradeoffs. That means continued uncertainty for businesses, both those who trade with the EU and those who employ EU nationals, and of course for EU citizens resident here and Brits abroad.
“What we cannot and should not do is delude ourselves that we can ‘have our cake and eat it’. We can be under no illusions about the strength of our negotiating position. Claims that because we run a large trade deficit with the EU somehow they need trade with us more than vice versa simply don’t add up. Exports from the UK to the rest of the EU are about 1/8th (12.5%) of UK GDP; but EU exports to us are only 3% of EU GDP.”
Notes for editors:
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