Brexit shapes up to be 'hard' 6 months after vote, academics say

[LONDON] Six months after Britain voted to leave the European Union, the signs are pointing to a "hard" Brexit, according to a report by 12 academics and policy researchers.

The shock decision has united the 27 other EU members to a degree rarely seen, while exposing how divided Britain is, UK in a Changing Europe, an EU-funded research program based at King's College London, said in a report published Friday.

Brexit has led to a reorganisation of government and laid bare disarray in the opposition Labour Party, the researchers from nine universities and the National Institute of Economic and Social Research said.

Britons are "little closer to knowing what Brexit actually means," said Anand Menon, professor of European politics at King's College. That's left the media, politicians and businesses speculating about whether Britain is heading for a soft Brexit that retains strong trading ties, or a hard one that would see the country leave the single market and revert to a tariffs regime.

"I'd put my mortgage on hard," Prof Menon told reporters in London, citing factors including Prime Minister Theresa May seeking to accommodate the right of her Conservative Party and a lack of flexibility from the rest of the EU. "If you combine that with the sheer levels of bitterness I think we can expect to come out of the Article 50 negotiations, let alone the trade negotiations, my imagination falls short of being able to see a path from where we are now to what we'd call a soft Brexit."

Ms May is preparing to start two years of Brexit talks by triggering Article 50 of the Lisbon Treaty by the end of March. She has refused to flesh out her negotiating priorities, citing the risk of handing an advantage to her EU counterparts, and there is little clarity over how she intends to reconcile her twin demands for maximum access to the single market and control over immigration.

The complexities range from dealing with the demands of devolved administrations in Scotland and Northern Ireland, where voters wanted to remain in the EU, to paying debts and setting up new regulatory bodies. Ms May needs to reach two main agreements: one on the divorce arrangements and another covering the new relationship between Britain and the EU. While Britain wants to work on both deals simultaneously, Michel Barnier, the chief EU negotiator, favours the traditional European approach of negotiating treaties one chapter at a time.

"If there was good will on both sides, you could see the two sets of negotiations - the divorce and the future relationship - being done in parallel," said Catherine Barnard, a professor of European law at the University of Cambridge. "At the moment the EU is playing hardball on this, and they're saying we're not going to even start negotiating any future deal until you become a third state."

That means Britain faces a "chasm" between the moment of divorce, probably in April 2019, and a future deal kicking in - a space that needs to be filled by transitional arrangements, said Prof Barnard. Ms May said on Monday she's contemplating "an implementation phase" to give British companies time to adapt to a post-Brexit regime. She may have to deal with EU demands for as much as 60 billion euros (S$90.2 billion) to cover outstanding liabilities, including pensions for EU civil servants.

"The money issue is going to be far more potent than has been let on so far," said Iain Begg, a politics professor at the London School of Economics. He said that because EU budgets are agreed for a seven-year period, Britain could be liable for payments until the end of 2020, even if it departs in early 2019.

To provide a degree of certainty, the government plans a "Great Repeal Act" to convert existing EU legislation into domestic law. Even so, there may be 100 EU monitoring and regulatory agencies referenced in EU law that the UK will have to set up equivalents for, according to Prof Barnard.

"The range of issues that have got to be negotiated are vast and complex and will require supreme skills," Prof Barnard said. Reaching a Brexit deal "may well take a whole lot longer" than the 18 months that Mr Barnier has set as a limit in order to give the European Parliament time to approve it.

BLOOMBERG