The Commons voted to allow the British Prime Minister the right to invoke article 50 of the Treaty of Lisbon last night. This paves the way to the UK leaving the EU within two years of notification of that intent to the EU. The bill needs to be passed by the House of Lords who can send it back to the Commons with amendments or they can bend to “the will of the people” and agree to its passage. Few people doubt that the bill will eventually pass, so minds are now focussed on what happens next.
In principle, the two year notice period is solely dedicated to the process of disentangling the UK and the EU. In theory, no negotiations between the EU27 and the UK can occur until this process has completed and the UK is no longer a member of the EU (for the very good reason that the EU can’t negotiate with its own members). It is likely, however, that “informal” negotiations on the relationship between the UK and its former partners will occur in parallel. It is clear that the UK hopes to get “the best possible access” to the EU single market, but does not wish to be bound by the principal of freedom of movement of EU citizens; the sovereignty of the European Court of Justice; and (much of) the customs union. Any deal would need to be approved by the European Parliament and all 27 EU states (and some regional assemblies).
If the UK doesn’t get what it wants, it will fall back onto WTO trade rules, but critically, these don’t cover services and whilst a member of WTO, the UK has no agreed schedule of tariffs which would need to be agreed by the full membership of the body (currently, it uses the EU schedule for trade deals concluded between the UK and non-EU states). To concentrate EU minds, the government is threatening to reject a “poor” EU deal and to turn the UK into an off shore (of continental Europe) tax haven with bargain basement corporation tax and, potentially relaxed financial regulations. However, the wisdom of such a move is being challenged by no less authoritative a source than a senior figure at the Bank of England itself.