Angel investor: Theresa May’s bespoke Brexit plan is “a big mistake”

Norwegian Constitution Day celebrations © Getty Images
A Norway-style solution would “make far more sense”

The government’s Brexit strategy has evolved somewhat in the two years since the referendum. For example, after insisting that a deal could be negotiated by the time Britain left the EU in 2019, it has now agreed to a transition period that will last until the end of 2020. It has also made concessions on everything from the status of European citizens to divorce payments.

However, one thing that the prime minister has been relatively consistent about is her desire for a “bespoke” deal, rather than a relationship based on any of the existing models (such as Canada, Switzerland or Norway).

Joe Zammit-Lucia, angel investor (someone who makes large investments in unlisted firms) and head of the centrist think tank Radix, thinks that this is a huge blunder. Trying to negotiate a bespoke deal, off the bat, is a bit like “spending a large amount of money on a tailored suit, rather than buying one off-the-rack”, he says.

Zammit-Lucia has recently released a report entitled A Very British Brexit: A Roadmap, with Nigel Gardner and Nick Tyrone. In it, they argue that, at least initially, it would make far more sense for the UK to leave the EU via EEA/EFTA membership, and even consider remaining a member of the customs union (of which Norway is not a member).

Because such as system already exists it would be “easier for the UK to sidestep into such a deal”, especially compared to the “uncertain and theoretical” benefits of a harder Brexit. At the same time, the “Norway option” is also the best way to “maintain the potential for frictionless trade”.

Of course, if things go better than expected, and it looks like we could benefit from a looser arrangement, having something already in place would strengthen our position in any attempt to create a more bespoke deal (similar to Dr Richard North’s “flexit” strategy).

As well as helping maintain access to the single market and giving us flexibility to pursue our own special arrangements further down the line (if we so desire), Zammit-Lucia argues that the EEA model also “takes into account most of Theresa May’s red lines” – for example, replacing the ECJ with the EFTA Court (as was discussed two weeks ago). Indeed, by letting us retain an ability to influence the debate over legislation, it would actually make us less of a rule-taker than the current transitional deal, which gives us next to no power to influence the direction of legislation from Brussels.

Of course, one area in which EEA membership would fall far short of Theresa May’s goals is immigration, as we’d be required to allow EU citizens to come to the UK to take up jobs and search for work. However, Zammit-Lucia thinks that the current problems with the system are as a result of successive governments refusing to take advantage of the space that the current rules give us.

For example, under the Treaty of Rome we’re entitled to send back any European immigrant who has been out of work for more than three months. Indeed, freedom of movement hasn’t stopped Belgium from “returning masses of people”, though such a system might require some form of ID cards.

Sadly, Zammit-Lucia admits that, “it is unlikely that Britain will opt for a solution based around EEA membership”. The refusal to seek a “reasonable balance”, as well as the continued uncertainty surrounding Brexit in general, “has made Britain a much less attractive destination for investment”.

Even the UK’s many benefits, such as a skilled workforce and a flexible labour market, which makes it easier to hire and fire people, pale into insignificance when set against the potential disruption caused by leaving the single market, especially when the EU is tightening its rules on data protection. As he puts it “why take the risk”?

As an angel-investor, Zammit-Lucia has experienced this change in attitude first hand. Indeed, his “constant discussions” with the people who run the various companies that he invests in, has revealed that they are much less positive about the UK.

Indeed, in one company located in the UK was recently faced with a choice between expanding its home office or investing in its Italian subsidiaries. It ended up choosing the latter since it felt that this would be best way to preserve its relationships with the continent, especially since the EU is bringing in new rules around data protection, which could lead to the company being cut off from EU markets.

  • Cynic_Rick

    Quote this article:

    “The government’s Brexit strategy has evolved somewhat in the two years since the referendum. For example, after insisting that a deal could be negotiated by the time Britain left the EU in 2019, it has now agreed to a transition period that will last until the end of 2020. It has also made concessions on everything from the status of European citizens to divorce payments.”

    On the basis that “nothing is agreed until everything is agreed” and with particular reference to the Irish Border conundrum, all the government has succeeded in doing inasmuch as leaving the EU is concerned is ‘kicking the cannery down the road’ securing us Vassal State status in the meantime. Very clever.

    Shame on them for ignoring Richard North.

  • Cynic_Rick

    I was wondering what Richard North thought of ‘A Very British Brexit: A Roadmap’; so I asked him

    http://eureferendum.com/blogview.aspx?blogno=86837

    Cynic_Rick • 2 hours ago

    Richard, forgive me if I should know, I wondered if you were aware of the following and, in any case, what your thoughts were with regard to it:
    https://radix.org.uk/work/b

    Dr Richard North Mod • 41 minutes ago

    Suffers from the usual failures. Why, when we stay in the EEA, would we then want to negotiate a comprehensive free trade agreement which could only give worse terms that the EEA.

  • AJAX

    “Hard or Soft Brexit” is eu-Quisling talk for staying in the eu.

    The Referendum vote was to Leave the eu, Dr. Quail.

    • kowloonbhoy

      Indeed, a tactic of the weasel Lord (fast talking no need to answer my question I will do it for you) Adonis —- he demands the people are given a choice of a soft pregnancy after being raped, it is so much preferable to a hard pregnancy.
      .
      Well Andy, the people don’t actually want to be raped at all —- no point in discussing with our Andy as he doesn’t listen or do opinions —- perhaps the reason he has never done the hard slog of constituency work & being voted in as a MP.

      • disqus_x5UmkDRb7H

        I am sorry but I fail to see the connection between a democratic vote and rape which is an horrific crime.
        Perhaps you could explain and justify your obnoxious metaphor

  • marylyn ford

    If you want something to last, not fall apart, and be of very good quality and admired by all, you will go bespoke.

    • Cynic_Rick

      Quote:

      “If you want something to last, not fall apart, and be of very good quality and admired by all, you will go bespoke.”

      If it’s, for example, a boat you’re having built, then yes why not.

      But if it’s a Trading Relationship intended to replace something as complex as that one which has taken 40+ years to achieve, then it would take a very long time to negotiate such; I’m talking in terms of 10 years (if ever – TTIP anybody?)

      What’s wrong, as an interim measure, with the ‘off the shelf’ model Efta/EEA?

      • marylyn ford

        The civil service have rubber stamped everything for forty years, of course they don’t want to suddenly have to actually do some work. World trade will do fine, as only 6% of trade goes through Europe. All the other options prevent us from signing trade agreements for ourselves, there are 93 countries out there beyond the few in Europe. Joining was pointless in the first place because there are few things in Europe that we can’t make, grow or invent here. The EU only made sense when it meant tariff free trade instead of the protection and extortion racket it has become.

        • Cynic_Rick

          Quote:

          “The EU only made sense when it meant tariff free trade instead of the protection and extortion racket it has become.”

          It’s not the EU to which we can attribute “tariff free trade”. It is the EEA and its associated Single Market.

          Following the Efta/EEA option would allow us to leave the EU but still enjoy the benefits of “tariff free trade” with the EU. What’s not to like?

          • marylyn ford

            I have read many of the arguments for and against all the options, but I can’t remember which rules are which, and neither can I remember why none of them would work for us, according to the different authors. All I know is there are a lot of vested interests, and none of them have our best interests at heart.

            • Cynic_Rick

              Quote:

              “I have read many of the arguments for and against all the options …”

              There are fundamentally 3 options:
              a) Bespoke Agreement of some sort (barring a miracle not going to happen not least because of the Irish Border problem)

              b) WTO – ‘No Deal’ default situation

              c) Efta/EEA (so-called ‘Norway option’)

              Quote:

              “All I know is there are a lot of vested interests, and none of them have our best interests at heart.”

              Vested interests:
              a) The EU is not going to compromise its interests just to allow Britain to cherry-pick what it wants

              b) The Disaster Capitalists would love to see this come to fruition. They’ve even got the naive Ultra Brexiteers on board

              c) All of those calling for this option do genuinely have Britain’s best interests at heart!

              • marylyn ford

                How can you speak for so many people you have never met? I wrote a reply but it got lost when I touched the wrong bit of screen.
                I don’t want to take a degree course on the EU . As long as we can stop sending more money there than we gain from the arrangement, and filling up the country with people who need to be housed with in work benefits, make our own laws and trade deals, get rid of foreign criminals and not have to let them in in the first place and have a fairer system for those who want to come from abroad to work here, I will be happy. When countries in Europe first started trading tariff free our population was about 45m allegedly, now its about 88m, if you include overstayers, illegals, students and other undocumented people. Nobody knows exactly and the estimates vary.

                • Cynic_Rick

                  Quote:
                  “How can you speak for so many people you have never met?”

                  How can you disagree that the Efta/EEA option is not in Britain’s best interests?

                  Quote:
                  “I don’t want to take a degree course on the EU . As long as we can stop sending more money there than we gain from the arrangement, and filling up the country with people who need to be housed with in work benefits, make our own laws and trade deals, get rid of foreign criminals and not have to let them in in the first place and have a fairer system for those who want to come from abroad to work here, I will be happy. When countries in Europe first started trading tariff free our population was about 45m allegedly, now its about 88m, if you include overstayers, illegals, students and other undocumented people. Nobody knows exactly and the estimates vary.”

                  If you were more clued up about the EU you’d realise that in order to avoid a catastrophe Brexit needs to be a process not an event. Rome wasn’t built in a day.

                  As far as your comments regarding population are concerned, they are irrelevant to the fact that Britain’s self-sufficiency in food was nearly as bad in the early 1970’s as it is now; Britain needed to be a huge net importer of food then as well as now.

        • Cynic_Rick

          Quote:

          “Joining was pointless in the first place because there are few things in Europe that we can’t make, grow or invent here.”

          Not entirely pointless from a trading aspect. The UK is so over-populated it has to import about 50% or so of what is consumed.

          But what began as The Common Market, succeeded by the European Economic Community (EEC) morphed by stealth into the political construct we now call the EU.

          It is the political construct we now call the EU which is adversely affecting the UK (in addition to Westminster, etc I may add!)

          • marylyn ford

            When we joined our population was half what it is today, and there is no point concreting over most of the countryside to accommodate people who have to claim benefits that we pay for, and praise a fake GDP that is only bigger because we subsidise it out of our wages and taxes

            • Cynic_Rick

              Quote:
              “When we joined our population was half what it is today …”

              Since when was 56 half of 66 ?

              More to the point is the UK’s self-sufficiency in food production.

              It can be assessed from the Table that self-sufficiency just prior to joining the Common Market in the early 1970s would have been between 50% and 60%; i.e. requiring vast amounts of imported food.

              http://library.uniteddiversity.coop/Food/rethinking_britains_food_security.pdf

              Page 13:
              Table 3. Indicative UK self-sufficiency rates at different periods Pre-1750 Around 100% of temperate produce, 1750-1830s 90-100% except for poor harvests 1870s Around 60% 1914 Around 40% 1930s 30-40% 1950s 40-50% 1980s 60-70% 2000s 60% Source: Defra (2006) Food Security and the UK: An Evidence an Analysis Paper. https://statistics.defra.gov.uk/esg/reports/foodsecurity/foodsecurity.pd

        • Cynic_Rick

          Quote:

          “All the other options prevent us from signing trade agreements for ourselves…”

          Not true!

          If we left the EU and maintained Single Market access via Efta/EEA (the so-called Norway Option) the UK would be free to make its own trade deals, assuming it has withdrawn from the Common Commercial Policy (CCP), with the RoW.

          • marylyn ford

            Not sure what they are, but we probably would not be allowed to resign without it affecting something else. I just hope that all our exporters to Europe have used the extra time to find alternative markets, or effective smuggling routes, so that when the talks break down we can just walk, keep all our money, deport all the criminals the EU sent us, even if they send all ours back, it is still three to one in our favour.

            • Cynic_Rick

              Quote:

              “Not sure what they are …”

              I presume you mean Efta and EEA; find out here:

              http://www.efta.int/eea

        • Cynic_Rick

          Quote:

          “World trade will do fine, as only 6% of trade goes through Europe.”

          In the absence of a Bespoke Deal (barring a miracle, not going to happen) and following the Efta/EEA option (or as closely as possible to it, see Flexcit) there is only the WTO default option left.

          A ‘No Deal’ (WTO option) Brexit will adversely affect export trade. Our exports to the EU are by no means insignificant:

          https://fullfact.org/europe/uk-eu-trade/

          “About 43% of UK exports in goods and services went to other countries in the EU in 2016—£240 billion out of £550 billion total exports.”

          I’m not sure as to precisely which trade you refer as being 6%. A substantiating link would be helpful.

          • marylyn ford

            It is always given as the figure. Your figures apply to stuff that goes through Europe to other places I think, and it will not be beyond anyones imagination to find other trade routes. In any case there is nothing to stop the people we will be trading with, from selling our stuff on to their punters in the EU.

            • Cynic_Rick

              Quote:

              “Your figures apply to stuff that goes through Europe to other places I think …”

              According to:
              https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/whodoestheuktradewith/2017-02-21

              “Almost half (48%) of UK goods exports went to the EU in 2016. UK goods exports to the EU were worth £145 billion in 2016, or 7.4% of GDP.”

              In 2016 48% of UK exports went to the EU. This equates to 7.4% of UK GDP. I would suggest that your figure of 6% relates to GDP and not to just exports.

              In which case you would be greatly underestimating the EU as a market for our goods exports (let alone our service exports).

        • Cynic_Rick

          Quote:

          “The civil service have rubber stamped everything for forty years, of course they don’t want to suddenly have to actually do some work.”

          I agree with those sentiments; nor are they limited to the Civil Service; Politicians and Media.

          But are you replying to my question by implying the downfall of the Efta/EEA option is that the Civil Service would have to make an effort to follow it?

          • marylyn ford

            Making an effort does not go down well with many of the modern public servants. I would love to see a purge of all the things our taxes pay for, on the grounds of is it useful or necessary?

            • Cynic_Rick

              Agreed

              I’d be interested to read any comments you may have to my 4 other replies to you…

  • Cynic_Rick

    Quote:

    “Why don’t we work towards a tariff free zone between British Commonwealth countries…?”

    Why don’t we work towards a *global trade barrier* free zone? There are potentially enormous financial savings to be achieved. I’m talking in terms of £10Bns annually for the UK alone.

    And that is one of the admirable objectives of Dr Richard North’s Flexcit:

    http://www.eureferendum.com/documents/flexcit.pdf

  • Cynic_Rick

    Quote:

    “This would remove the need for any Irish border…”

    Borders don’t just exist to assist the imposition of Tariffs. Perhaps their main function is to assist in the imposition of regulatory standards; to function, amongst other attributes, as a quality control.

    It’s the Non-Tariff Barriers (NTBs) imposed by the EU upon any country outside of the EEA and therefore outside of the Single Market (designated by the EU as ‘Third Country’) that would impose considerable burdens and constraints upon the UK’s trading abilities; and not just with the EU.

    Learn more about ‘Trade Barriers and Brexit’ here:

    http://eureferendum.com/documents/BrexitMonograph005.pdf

  • Cynic_Rick

    Quote:

    “Maybe this is totally naive …”

    It’s been naive for quite some time now to rely upon the media and politicians to know what they are talking about. And Brexit has really highlighted this serious situation; without a doubt the best place to be properly informed about Brexit is:

    http://eureferendum.com/default.aspx

  • disqus_x5UmkDRb7H

    Tony

    I hvae beenn suggesting something similar for months. Just announce that we will not enforce a border in Ireland. That leaves the EU to force one if it wants to, which will not be popular with the Republic, or leave a gaping hole in its external border.
    They can police it fairly simply by noting who exports what to The Republic, but the point is all the bother would be theirs, not ours.
    I also agree with you that we should be concentrating on a free trade agreement with the 2.3 Billion members of the Commonwealth. Agreed they are not as rich as the Europeans, but they are growing in wealth and number much faster. And we have plenty in common.

    • Cynic_Rick

      Quote:

      “Just announce that we will not enforce a border in Ireland.”

      So you are advocating leaving the Single Market; and as ‘No Deal’ would be made with the EU you are advocating the WTO option:

      http://eureferendum.com/documents/BrexitMonograph002.pdf

      In the eyes of the EU the UK would become a ‘Third Country’; currently frictionless borders would become subject to constraints such as NTB’s (Non Tariff Barriers); subject to the delays of relatively rigorous checks at Border Posts.

      The UK would risk losing trade with the EU; our exports to the EU are by no means insignificant:

      https://fullfact.org/europe/uk-eu-trade/

      “About 43% of UK exports in goods and services went to other countries in the EU in 2016—£240 billion out of £550 billion total exports.”

      If we left the EU and maintained Single Market access via Efta/EEA (the so-called Norway Option) the UK would be free to make its own trade deals, assuming it has withdrawn from the Common Commercial Policy (CCP), with the RoW.

      To include The Commonwealth.

      • disqus_x5UmkDRb7H

        Rick

        No, I am suggesting that as an answer purely to the Irish problem.

        I am stating we talk to the EU and if a deal is worth having, we take it. That means including services like finance. If EU want to cut out industries where we make a profit, but have a deal where they make a profit, that does us no favours and we are better off under WTO rules.

        But where Ireland is concerned, we let the EU do what they want – border, no border. Rather than let them force us into contortions to meet some unmeetable pattern.

        Incidentally, I have no problem with the Norway option as long as a) we don’t have to pay anything like Norway does as we are a lot bigger and the EU needs us more than they need Norway, b) financial services are included and c) there is no free movement of labour

        I am actually quite happy with free movement of labour. There are plenty ways of stopping people being a burden on the state and taxpayer, so minimising the downside. But the voters made it very clear that this was something that they don’t want, so although I disagree I understand the risk of ignoring the people – they can return to UKIP or an alternative and disrupt normal politics. It is also dishonest to have a referendum and then ignore the will of the people.

        • Cynic_Rick

          Quote:

          “I am actually quite happy with free movement of labour. There are plenty ways of stopping people being a burden on the state and taxpayer, so minimising the downside. But the voters made it very clear that this was something that they don’t want, so although I disagree I understand the risk of ignoring the people – they can return to UKIP or an alternative and disrupt normal politics. It is also dishonest to have a referendum and then ignore the will of the people.”

          To go with the WTO option would be an economic and political catastrophe. Is it the will of the people to engage an economic and political catastrophe?

          Some consider it is such as an economic and political catastrophe that is required to bring the populace to its collective senses.

        • Cynic_Rick

          Quote:

          “Incidentally, I have no problem with the Norway option as long as a) we don’t have to pay anything like Norway does as we are a lot bigger and the EU needs us more than they need Norway, b) financial services are included and c) there is no free movement of labour”

          If we take the ‘Norway option’ we will have left the EU; Norway is not in the EU, Norway is in Efta (European Free Trade Association) and as such is enabled to be a member of the EEA (European Economic Authority).

          The only other way of enabling membership of the EEA is via membership of the EU. It is membership of the EEA (not the EU per se) which gives us access to the Single Market. We are currently members of the EEA but unless we join Efta we will automatically be severed from the EEA (and therefore the Single Market) when leaving the EU.

          We would continue to pay into the EEA for the privilege of access to the Single Market.

          The Efta/EEA route via Article 112 of the EEA Agreement would enable us unilateral control over any or all of the Four Freedoms of Movement including that of People of the EU but not of the Rest of the World.

        • Cynic_Rick

          Quote:

          “I am stating we talk to the EU and if a deal is worth having, we take it. That means including services like finance. If EU want to cut out industries where we make a profit, but have a deal where they make a profit, that does us no favours and we are better off under WTO rules.”

          No, we would be far, far better off taking the Efta/EEA option as an interim measure; i.e. not to be a permanent solution in its present form.

        • Cynic_Rick

          Quote:

          “No, I am suggesting that as an answer purely to the Irish problem.”

          I am aware of that, but are you aware that as far as any Agreement with the EU is concerned “nothing is agreed [i.e. No Deal] until everything is agreed”; including the Irish problem (which they see as a problem of our making and therefore as one we should solve)?