British officials have quietly abandoned hope of securing the government’s promised “cake and eat it” Brexit deal, increasingly accepting the inevitability of a painful trade-off between market access and political control when the UK leaves the EU.
This is in stark contrast to the public position of both main political parties, first set out in the Theresa May’s Lancaster House speech in January, in which she echoed Boris Johnson’s boast that Britain can “have its cake and eat it” – enjoying full trade access without conceding over immigration, courts and payments. Labor’s Jeremy Corbyn sacked three shadow ministers on Thursday for departing from a similar position.
Yet UK civil servants are now said to be presenting ministers with a more binary choice: accept political compromises like aspects of the European Economic Area (EEA), or settle for a much more limited trade deal such as the recent EU-Canada free trade agreement (Ceta).
“We have a problem in that really there are only two viable options,” one official told the Guardian. “One is a high-access, low-control arrangement which looks a bit like the EEA. The other is a low-access, high-control arrangement where you eventually end up looking like Ceta – a more classic free trade agreement, if you are lucky.
Though full EEA-style participation in the single market is seen as politically toxic due to its requirement to accept freedom of movement, pressure is building in Whitehall for a rethink of opposition to a customs union with the EU. This would satisfy many business leaders, who are clamoring for ways to avoid trapping manufacturers behind an inflexible tariff wall but possibly still allow new international trade deals to be pursued in the service sector.
A spokesman for the Brexit department denied there had been any change of mood since the election and said the approach outlined in the prime minister’s Lancaster House speech remained the government’s official strategy. Asked to respond to reports of ministers now being forced to consider a trade-off, the DExEU spokesman said they “did not recognise the language”.
But reports of the new mood of realism across Whitehall have been confirmed by at least two other officials at the highest levels of DExEU and the Treasury who have spoken privately.
Tensions burst into the open last week when Hammond gave a speech in Berlin warning against allowing “petty politics to interfere with economic logic” and publicly ridiculing the “cake and eat it” approach. Davis hit back by questioning the consistency of the chancellor’s calls for a transition phase.
“The coalition of forces pushing for a softer Brexit is considerable,” Grant said. “The Treasury, long an advocate of retaining close economic ties to the EU, is newly emboldened.”
But insiders warn that the clock is now ticking to agree which vision will prevail before the first phase of EU negotiations is concluded over the summer.
“There is still a fudge and before we get down to negotiating in October/November we have got to decide once and for all which of those two options we are going for,” he added. “What you can’t do is sustain a fudge because then you are going into negotiations without knowing what you want.”