Bye-bye single market?

Photographer: Carl Court/Getty Images

Theresa May's Brexit Was Always Going to Be Hard

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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In February 2015, economists at HSBC Holdings in London coined the terms "hard" and "soft" Brexit. The latter would maintain "much of the status quo" if the U.K. voted to quit the European Union; the former entailed "huge risk and would be operationally complicated." Even just after the Brexit vote, you could be forgiven for seeing the hard option as unlikely. But not today.

The pound slumped below $1.20 to a three-month low after the Sunday Times newspaper reported this weekend that Prime Minister Theresa May will prioritize controlling immigration over trade deals in the Brexit negotiations. I find that reaction surprising; government ministers have been remarkably united ever since the June referendum on the need to prioritize immigration controls, whatever the price.

QuickTake Why Britain Voted to Leave the EU

A recent Economist magazine front cover castigated her as "Theresa Maybe, Britain's Indecisive Premier." That struck me as overly harsh; nothing to date from No. 10 is evidence of dithering. May has kept her word not to provide a "running commentary" on the departure plans. That has meant precious little detail to reassure business leaders, bankers or the 48 percent of Britons who wanted to stay in the EU.

But they need not look hard to see the direction of travel: Ever since her uncompromising October speech to the annual Conservative Party conference, May has been unequivocal about her priorities. Nothing in the government's stance has hinted at anything other than a hard exit.

Of course, innuendo isn't the same thing as having an outright statement of intent. A recent appearance before a panel of fellow politicians was a masterclass in obfuscation. "Brexit means Brexit" and "we want a red, white and blue Brexit" are great soundbites, but aren't exactly road maps to what May envisages post-EU Britain will look like.

So in the speech she's scheduled to give tomorrow, the prime minister needs to find a middle ground between not handing valuable ammunition to her negotiating opponents, and telling the British public what her key priorities will be in those discussions.

Is she really planning to abandon access to the single EU market and instead seek trade deals with the likes of New Zealand? Will the U.K. abandon the customs union? Does her apparent disdain for the banking industry mean she's not trying to maintain the passporting system that allows 5,500 financial firms based in the U.K. to sell services across the bloc? On the latter point especially, the longer it takes to deliver clarity, the more likely companies are to move preemptively and shift jobs and investment away from Britain.

Specificity comes with risks. It's worth remembering that May is an unelected leader, of both the country and her own party (while Tory MPs selected her, the broader membership never voted). She is currently popular, far more so than the opposition and any other potential leader. But popularity in politics can be quickly eroded and May's party has a long history of infighting over Europe -- recall John Major describing his anti-EU faction as "bastards" in 1993 when he was PM. It may yet again become divided.

In tomorrow's speech, May needs to categorically disprove the "muddled thinking" accusation delivered by the outgoing ambassador to the EU, Sir Ivan Rogers, earlier this month. Her electorate, and the rest of the EU, deserve something better than the vague, broad-brush pronouncements available until now -- even if that means detailing a hardline stance that worries those of us who fear the economic consequences of a hostile divorce.

Theresa May's Brexit Speech in 50 Seconds

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net