It’s one thing knowing the outcome of the Brexit referendum. It’s quite another thing to act on it.
After a turbulent three weeks, a new PM is in charge. She is going to make Brexit work, she tells us, but Brexit hasn’t actually started.
The EU is legally unable to act on the referendum outcome, at least officially. Even though the currency and stock markets have been in turmoil since the referendum vote, nothing “Brexity” can happen in Brussels until the [resident of the European Council, Donald Tusk, receives a properly accredited letter from the British prime minister notifying him of Britain’s intention to leave the EU.
Not a single law has changed since the outcome of June 23. The difficulties experienced to date have been created by panicky responses in an atmosphere of uncertainty.
Just as there were bets on the outcome of the referendum itself, bookies are now offering odds on the timing of this formal notification by the UK to Brussels. The longer the delay the shorter the odds.
This delay could be tactical, because once that formal notification has been issued, the treaties which the UK has signed up to guaranteeing rights to access the Single Market cease to have effect two years from the date of notification.
The longer the delay, the later the clock starts ticking.
There is some anecdotal evidence that the UK didn’t have a fully developed Plan B if there was a ‘leave’ vote. Last week, meetings in Whitehall with government departments were cancelled, with the official reason given being senior civil servants would need to be available to ministers at all times.
This is perhaps understandable in a week when a prime minister was appointed sooner than most might have expected, but it will be interesting to see how long this situation persists.
Another pragmatic reason for a notification delay is the EU budget cycle. The EU budget runs in seven-year terms and the current cycle is due to end in 2020. The UK has already committed to contributions under this timeframe, to the tune of some £10bn per annum.
Brexit or not, the remaining 27 countries might well insist on fulfilment of these obligations up to 2020. The longer the UK stalls, the more value for money it will get for these payments. Why leave a club early but continue to pay the membership fee?
European leaders have already signalled that a rapid triggering of the so-called Article 50 procedure, which sets the two-year clock running, is probably in their best interests.
They will also want to see what the UK can bring to the Brexit negotiating table.
Despite all the vilification it receives, there are advantages to being within the EU and in particular within its single market arrangements. A country which has opted to leave the club but wishes to retain some of its favourable terms has to offer something in return.
What can the UK offer? It certainly helps the UK’s cause that it remains a huge economy in its own right, the fifth biggest in the world. Other EU member states will still want access to that market and continue trading with Britain.
But not only has the UK a significant economic presence, it also has a significant presence in terms of international relations.It is a permanent member of the UN Security Council, and a founding member of Nato. It enjoys a famous “special relationship” with the US.
All of this matters. As Al Capone is supposed to have pointed out, you can get much further with a kind word and a gun than you can with a kind word alone.
This is not to suggest that Brexit arrangements would be conducted under any kind of threat, but negotiators on both sides will want to ensure excellent and sustainable political relationships between the UK and the other European countries for more than just economic reasons.
A long delay in triggering the Article 50 procedure may well suit UK interests better. For them there is no point in being too hasty.
* Brian Keegan is director of taxation with Chartered Accountants Ireland
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