After Brexit: What comes next?

If Britain does vote to leave the EU today, what happens next looks remarkably unclear. David Cameron has said he will inform the European Council that Britain wishes to withdraw from the EU, in line with Article 50 of the Lisbon Treaty. Britain would then have two years to negotiate its future relationship with the remaining 27 member states. After two years its membership terminates automatically.

So far, so straightforward. But actually there are a number of imponderables at work.

Firstly, what if David Cameron resigns as Prime Minister? Boris Johnson has said he would not invoke Article 50 right away, pointing back towards his suggestion at the start of the campaign that Britain might yet be able to wring a better deal (e.g. further restrictions on freedom of movement) out of other EU states if the government already had a mandate to leave. Most EU leaders have ruled out this option. But that doesn’t mean they wouldn’t consider it if Britain actually did vote to leave. Remember, most didn’t take the prospect entirely seriously during the previous round of negotiations. And even if they did, it makes no sense from a bargaining perspective to admit that you are willing to offer more to a bargaining partner who does something you don’t want. We could see a successful second re-negotiation followed by a second referendum in which Prime Minister Johnson successfully campaigns for Remain, having achieved his main goal of becoming Prime Minister.

Secondly, what sort of mandate would a successful leave camp have? Two key concerns are driving the leave vote – fear of mass immigration and a desire to repatriate sovereign authority currently pooled with other EU states, for example the power to alter employment regulations or to negotiate new free trade deals. To an extent these concerns can both be resolved by leaving the EU. But many of those who argue for a leave vote on sovereignty grounds nevertheless still want Britain to have the best possible trading relationship with other EU states, which makes sense since most of our exports go to them. They say they would like Britain to stay in the European single market as far as possible. Both Norway and Switzerland are in the single market but not the EU, so there is precedent here. The problem is that the rest of the EU sees free movement of people as one of the fundamental pillars of the single market. In other words, the price of retaining access to the EU market is likely to be allowing free movement of people. There is a fundamental clash between the desire to remake Britain as a free-trading nation and the desire to restrict immigration (this is true conceptually as much as in practice). So what sort of deal would a post-leave government pursue? I suspect the answer is that it would be unable to negotiate a deal because it would be unable to concede on free movement, leaving Britain outside of the single market by default at the end of its two year withdrawal period.

Thirdly, and relatedly, what sort of deal would parliament approve? Most MPs favour remaining in the EU, but they will have to sign off on any post-Brexit agreement. Will they be willing to do so in principle? Probably, given most have more respect for the electorate than is often implied. But, again, what sort of deal will they have a mandate to approve? One that retains access to the single market at the cost of allowing free movement, or one that cuts off both? The differences are stark, and the reality is that the leave vote is split between the two broad approaches.

Fourthly, what happens if there is an early general election before the two years are up? This is entirely possible, though the Fixed Terms Parliament Act sets a high bar (assuming the government does not lose a confidence vote, which it probably wouldn’t, two-thirds of MPs have to vote for an early election, which means both Labour and the Conservatives have to be confident they’ll win). It could happen if the Conservative Party splits, which looks like a realistic possibility regardless of the outcome of the referendum. It could also happen if the worst economic predictions of the Remain camp come true. If Britain votes to leave the EU, the hit to business confidence will occur immediately. It won’t wait for the two year period to be up. That could mean an immediate recession, which in turn could undermine the government’s position. The prospect of an early election is interesting for this reason: What if the Labour Party campaigns on a pro-EU mandate, and wins? Could a new government withdraw the Article 50 notification before the two year period is up? Article 50 doesn’t say, which means presumably the possibility is there.

Just as a vote for Remain will leave the government needing to do a much better job on housing, healthcare, jobs and community cohesion, all issues that clash with its underlying commitment to fiscal austerity, so too a Leave vote will trigger a period of prolonged uncertainty and likely some sort of further vote. It doesn’t end at 10pm on 23 June, in other words.

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