A Brexit barometer

How to judge whether Britain’s EU divorce will be “hard” or “soft”

Britain

Throughout 2017, observers will read the runes in Britain and the rest of the European Union to see if they point towards a hard Brexit, meaning walking away from the single market, or a soft one that preserves barrier-free access to that market. Here are eight signs to watch.

The economy. If growth slows or the country goes into recession, the balance tips towards a softer Brexit, which minimises future economic damage. If growth stays robust a hard Brexit becomes more likely, as voters will believe that all those dire warnings of big losses were wrong.

The pound and inflation. If financial markets are jumpy, sterling keeps sliding and inflation picks up, Britons will fret that Brexit may make them poorer, boosting the chances of a soft version. If none of this happens, that raises the likelihood of Britain leaping out of the door.

Big foreign investors. The more who hint, as some carmakers and banks have done, that they might switch future investment elsewhere, the more the government will try to stay in the single market. The more investors remain committed to Britain no matter what, the greater the chance of a hard Brexit.

Migration figures. If net migration from the European Union stays high, a hard Brexit that emphasises controlling it becomes likelier. If net migration falls sharply, the odds of a soft Brexit rise as economic concerns gain greater traction.

Westminster turf wars. If David Davis and Liam Fox, the two main pro-Brexit ministers, retain control of the process, the odds of a hard Brexit go up. If Philip Hammond at the Treasury plays a bigger role, that makes a soft Brexit more likely. The same is true if Parliament gains more say over the Brexit terms, as most MPs backed the Remain side and want to stay in the single market.

Brussels turf wars. If the negotiations are in the hands of the Euro­pean Commission, the risk of a hard Brexit rises as it has a tougher stance on the four freedoms in the single market. If the European Council (and national governments) have more say, the chances of a soft Brexit rise, as they understand better the political pressures on their British counterpart.

European politics. Elections loom in 2017 in the Netherlands, France, Germany and (probably) Italy, among others. If they produce more hardline or more fiercely nationalist governments, that will make it more difficult to negotiate a soft Brexit. If most current leaders are re-elected, it will become slightly easier.

Public opinion. A referendum is a snapshot. If Britain’s economy, for the first time in years, does less well than the euro zone, and if numbers of migrants from the EU fall, public opinion may shift. Not only will that make a soft Brexit more likely, it will increase calls for a second referendum—which might conceivably mean that Brexit never actually happens.

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