The costs of Brexit will rise, not fall

The UK will find no comfortable status quo outside the EU

One of the enduring problems in assessments of Brexit (at least in and around Westminster) is a stabilisation bias. What I mean by this is an assumption that UK-EU relations will tend towards a new, stable status quo. People who start from that status quo will then not experience any particular costs or benefits from being outside the EU. People who remember life in the EU will also adjust to this status quo and perceive a new baseline. The UK would enter a period where the relationship with the EU would be more or less fixed and there would not be any need for new governments to have deeply considered positions on the principles of European integration, with objectives for what the UK needed to achieve in talks with the EU or ideas of the UK’s broader place in Europe.

I believe this is a mistake.

It is a mistake in two respects. One is the general point that the UK-EU relationship will never be fixed. It will always be changing because both the UK and the EU will always be changing. New aspects to the UK-EU relationship will necessarily emerge over time and Britain’s leaders will need to develop positions on these shifts at each turn. Whether these positions are short-termist and reactive or long-termist and based on deep principles won’t change the fact that the operation of this relationship will constantly be subject to debate and revision for as long as the EU continues to exist.

This, by itself, is a fairly neutral assessment. That the relationship must be constantly managed does not convey any sense of policy direction. That is where the second part of this mistake comes in.

Not only will the UK-EU relationship avoid reaching a point of self-managing stability, the UK staying on the outside will become actively more costly. Some of these costs will be obvious and economic in nature. For example, when the EU eventually finalises its work on banking union and capital markets union, the opportunity cost for the UK will be significant, with more investment coming into the EU and listings shifting away from the City of London.

Others will have economic costs but also more intangible aspects. Take the EU’s moves towards more joint procurement in military equipment. This development is moving in tandem with an increase in preference for EU-made hardware. There will be an economic cost to UK military-industrial firms missing out on procurement contracts but there will also be a cost to our broader ability to participate in the formation of European defence policy.

So even those who never knew life in the EU, or who have forgotten it, will experience Britain’s choice to stay outside the EU as a volatile, negative and worsening act due to the EU’s continued development as an economic and political union.

This is a notably different perspective from those who argue that further integration in the EU would push the UK further away as it would not align with the preferences of a country that voted to leave.

This idea is flawed anyway because it assumes that British public opinion would continue to be shaped first and foremost by euroscepticism, in spite of us living in a world where this ideology has been taken to its logical conclusion and failed to deliver on any of its promises. A new generation, raised on the thin gruel of Actually Existing Brexit, with no baggage from decades of anti-EU propaganda, will not have the same reaction to a more integrated EU as the older Leave (and Remain) voters who were shaped by the Thatcher/Delors conflict and Black Wednesday.

But more importantly, the argument ignores the fact that even if the EU may develop in ways that the average British voter would not have chosen otherwise, this will accentuate rather than remove the need for the UK to at least be an active player in the European community and ideally to be in the EU itself.

Even if we entertain the legitimate differences of opinion on the political narrative in the UK and how political views may develop with regards to European integration, either way the gravitational pull on the UK of a more integrated and more powerful EU will be unavoidable.

This is a dynamic that almost every country in Europe understands apart from Britain. It extends not just to countries outside the EU but also to those inside who have found themselves arguing against ideas like a ‘multi-speed’ Europe, precisely for fear that the cost of being in anything other than the innermost circle would be too great.

This is why Britain’s leaders must quickly shake themselves out of the notion that we can blissfully glide down to soft landing outside the EU, smooth out the rough edges of our current trade deal, and then never again really worry too much about the whole thing.

Even from outside the EU, and even if we wish to stay there, British governments present and future will need to hold wide-ranging views on how the UK meshes with the EU today and where we would like it to end up in the future. As EU integration deepens, the importance of these decisions, and the costs of getting them wrong, will only grow.