Softer Brexit may mean Ireland taps UK bounce

Softer Brexit may mean Ireland taps UK bounce

The parliamentary rejection of the British prime minister, Theresa May’s withdrawal agreement came as no surprise to anybody, nor should it have.

Ms May now has until next Monday to come up with a plan-B.

From the perspective of the EU, Britain, the Republic and the North, the withdrawal agreement would have been a decent outcome, but, as has been the case since June 2016, economic logic has no place in this debate and the mess goes on.

It was quite extraordinary to hear DUP leader, Arlene Foster, earlier this week describe the agreement as “toxic”.

From the perspective of the North, it presented the best of all worlds, but goes to prove it is DUP politics, rather than the withdrawal agreement, that is truly toxic.

The behavior of the DUP convinces me that I do not want to see a united Ireland in my lifetime, however long that will be.

There are many possibilities over the coming days.

The UK could apply to the EU for an extension to the two-year Article 50 period, which is due to end on March 29.

Even if Ms May does apply for such an extension, it is unlikely the EU would agree, unless a commitment is given to hold another referendum or, at least, have a firm plan in place.

An extension that would involve a continuation of the messing that has characterised the past two years would not be in anybody’s interests, particularly not in the context of the European elections, which will be held in May.

Another possibility is that Theresa May comes back with a number of options that her parliament would vote on.

Such options could include a Norwegian deal or a Norwegian Plus deal, which would include membership of the European Economic Area (EEA), or the Single European Market and the Customs Union.

This would represent a form of soft Brexit and would not fundamentally change the UK’s trading relationship with the EU, but would undermine the ability to do third country trade deals.

The other option is, of course, a hard Brexit, which would see the UK crashing out of the EU on March 29, with the notion of a transition period up to December 31, 2020 redundant and irrelevant.

Perhaps some other variation on these options will materialise, but it has to be hoped that the many sensible politicians in the UK who simply do not want a hard Brexit will come to the fore and push through a soft form of Brexit.

The centre needs to come to the surface and start to exert more influence on a process that has been dominated by radical nutcases. Bad things tend to happen when sensible people remain silent.

Over the past couple of years, the UK economy has been undermined by the toxic uncertainty concerning the UK’s future relationship with the EU.

This has manifested itself in declining property prices, lower car sales, depressed business investment spending, sterling weakness, and a poor equity market performance.

In the event of a soft form of Brexit, and an end to all of the uncertainty that has dogged the economy over the past couple of years, it is certainly possible that the UK could rebound like a coiled spring.

Business investment would play catch-up, car sales would rebound, UK property prices would start to rise again, sterling would strengthen appreciably, and the UK equity market could shake off its lethargy.

From the perspective of the Irish economy, this would represent a major boon, and turn an economic outlook that is looking relatively cautious into something much more dramatic.

In the context of a global economy that is starting to struggle, as evidenced over the past week by very weak export data from China and industrial production data out of the eurozone, a resurgence of the UK economy and its currency would be unambiguously good news for the very small and very open Irish economy.

Perhaps I am being very naïve here, and the dysfunction that has characterised the UK political system over the past three years is here to stay and will condemn the UK to a steady diminution of its economic and political place in the world.

We should hope not.

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