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The Economist
The Economist

A realistic path to a better relationship between Britain and the EU

Ten years ago this month, David Cameron, Britain’s prime minister at the time, gave a speech at the London headquarters of Bloomberg, a news organisation. In it Mr Cameron outlined his cunning plan to cement Britain’s place in the European Union, by triggering a fundamental reform of the bloc and then offering Britons an in-out referendum on membership. That went well. The 2016 vote to leave the bloc has exacerbated Britain’s economic malaise, gumming up trade and muting investment. It has soured Britain’s relationship with many of its natural allies and weakened the bonds of its own union.

Worst of all, it has infected British politics with a destructive strain of magical thinking. Mr Cameron himself was an early victim, badly overestimating the EU’s willingness to change its fundamental principles in order to suit Britain. Brexiteers have been high on their own pixie dust from the start, whether conjuring up the gains to be had from leaving the EU or wishing away the issue of the Irish border. Remainers, too, succumb to hocus-pocus if they think that the split can be simply undone.

There is a path to a better relationship with Europe. Growing numbers of Britons regard the decision to leave the bloc as a mistake. The EU would like to be on better terms with its difficult neighbour. But taking that path will require an end to magical thinking. It will be a slow-going and incremental process, not an impulsive and revolutionary one. It will mean nurturing trust and consensus, rather than holding winner-takes-all referendums and presenting ultimatums in Brussels. Anyone can jump off a cliff. Climbing one is far harder.

For Brexiteers, that means recognising the damage that Brexit has done. The Bank of England has estimated that Brexit depressed investment by almost 25% over the five years to 2021. One think-tank reckons that the economy would be more than 5% bigger now if Britain had stayed in the EU. Yet among the Brexit faithful truth-telling is still heresy. In December the Conservative government trailed modest reforms to the financial-services industry as a Brexit dividend, when many of the changes had nothing to do with the EU. The government is still committed to replacing or repealing all retained EU legislation by the end of 2023, a goal that promises pointless disruption.

For Remainers, realism means putting aside ideas of rejoining the bloc. If The Economist had a magic wand, it would gladly turn back the clock to 2016, when Britain enjoyed a privileged status as an influential EU member with a host of opt-outs. But rejoining will be vetoed by EU governments until there is a rock-solid political and social consensus in favour of membership. Polls suggest Britons want a close relationship with the EU. But there is much less enthusiasm for Europe as a project of political integration. Returning to the question of membership now would reanimate the toxic polarisation of the Brexit years.

The pragmatic path to a better relationship with Europe would instead comprise three stages: normalise, build, reimagine. First, Britain must normalise its ties with Brussels. Rishi Sunak, the prime minister, already deserves some credit on this score: quiet co-operation in areas from the North Sea to migration is under way. But that will count for little if he cannot reach a workable deal on the Northern Ireland protocol. Doing so would unlock more goodies, from participation in scientific-research schemes to closer co-operation among regulators.

Next, build. The thin Trade and Co-operation Agreement (TCA) negotiated by Boris Johnson will come up for review in 2026. That is a vital opportunity to fatten the deal. The Labour Party, which may well be in power then, has proposed adding a sensible clutch of bolt-on agreements, principally easing the movement of some people and of food products. Labour must watch its own tendency towards magical thinking, which is to assume that not being Tories will be enough to win the EU over. But with hard diplomatic graft, it is possible to expand the TCA.

Even these revisions will only marginally offset the economic harm done by leaving the EU. Towards the second half of this decade, work must start on reimagining the Britain-EU relationship afresh. The “Norway” option—being a non-voting member of the single market—would have been a sensible holding position for Britain on the way out of the bloc. But a deal that suits Norway, a small, stable place whose main exports are oil, gas and fish, is much less suited to a large, truculent services-based economy like Britain. More promising is the terrain sketched out by Theresa May in the aftermath of the Brexit vote: deepening market access in areas such as goods and agriculture in exchange for adopting EU law, while retaining autonomy in services. Rejoining the customs union may eventually be possible.

This might strike many as yet another form of magical thinking. It would certainly be difficult for both sides. For the British, it would mean abandoning a dogmatic aversion to EU law for a cannier approach rooted in strategic self-interest. For Tory Eurosceptics, this will sound like betrayal. Yet if public support for their project is not to evaporate, the economy needs to grow. That requires deeper access to Britain’s biggest export market.

No rabbits, less cake

For the EU, it would mean softening its aversion to the idea of Britain cherry-picking bits of the single market. But the scenario it once feared, of Britain becoming a dynamic Singapore-on-Thames, is remote. Binding Britain back into the EU’s regime for chemicals, agriculture or state aid would be a boon for a bloc that aspires to be a regulatory superpower. And the benefits of a more constructive and respectful relationship with Britain are not just economic, as the war in Ukraine has demonstrated.

A bespoke relationship with Britain would also fit into a wider rethinking of Europe’s architecture. Over the coming decade the EU will need to ponder how to manage the aspirations of Ukraine and the western Balkan states which wish to join. Old debates about variable geometry and a multi-speed Europe will be given fresh impetus. Forging an enduring relationship between Britain and the EU will take time, hard work and realism. But there is still room for imagination.

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