9 December 2016

The Financial Times has this morning published a leaked memo drawn up by a City of London Corporation representative after a meeting with David Davis, the UK’s Secretary of State for Exiting the European Union. Most of the attention has focused on the fact that, according to the memo, Davis told the meeting that he was “not really interested” in the discussion around possible transitional arrangements to bridge the ‘withdrawal agreement’ that will be negotiated under Article 50 of the Treaty on the European Union with the broader deal that will underpin the future relationship between the UK and the EU-27.

The memo’s description of the likely relationship with the single market is more significant

However, the memo contains a potentially more significant piece of news – that is, Davis suggests the UK is unlikely to retain full access to the single market because of the approach taken by the EU-27 on the indivisibility of the ‘four freedoms’ (the free movement of goods, services, capital, and workers). This is a crucial point.

As I wrote in a recent op-ed for Prospect, many, on both sides of the Channel, still seem to work on the assumption that the upcoming Brexit talks are going to be a mere replay of David Cameron’s renegotiation – with the UK looking to change the terms of its EU membership or trying to rewrite the rules of the single market. If this was the case, the UK would face a high risk of a car crash with the EU-27. But it really isn’t. The UK is on its way out of the EU and the point of the negotiations is to build a brand-new relationship.

According to the memo, Davis dropped a pretty clear hint that the UK will no longer be a full member of the single market after Brexit and pointed at CETA, the EU-Canada free trade agreement, as an illustration of the alternative. This still leaves a wide range of bilateral possibilities to reflect upon when the UK sits at the negotiating table with its European partners, but should at the same time help us move on from constantly going around in circles regarding the ‘four freedoms’.

Davis has appeared softer on issue of transition in recent weeks

One final point on Davis’s views on a possible transitional deal: it should really come as no surprise that Brexiteers see this option as politically unpalatable and ideally something to be avoided. Therefore, the challenge for the Government is to make sure that any transition remains (and is seen by everyone as) such and does not turn into the ‘new normal’. Any bridge must lead to a clear and ‘final’ destination. Interestingly, the European Commission’s lead Brexit negotiator, Michel Barnier, made just that point earlier this week.

Furthermore, Davis himself was more open to the idea of a smooth transition in his statement to the House of Commons last week – which, incidentally, is more recent, given that the memo is dated 15 November.

The debate over a transitional deal is still very much open – just like many others.