Florence

Leaked reports from Downing Street suggest that Theresa May will today offer to maintain UK budgetary contributions to the EU to facilitate a multi-speed exit. A figure of £20 billion a year is mentioned.

Let us examine what we should get for our money?

In 2015, according to the ONS, 44% of the UK’s goods and services were exported to the EU whilst 53% of our imports came to the UK from the EU.  The value of UK exports to the EU was £223.3 billion whilst the value of imports from the EU was £291.1 billion.

If tariff free access to EU markets ended tomorrow we should begin paying the EU a premium on everything we sell to them. Let us assume that this is a one-sided arrangement and that, in generous recognition of the benefits of free trade, we do not make a reciprocal charge on everything they sell us. Assuming, further, a uniform WTO tariff of 6% levied on everything we sell, we would have to pay the EU £13.398 billion on our exports.

So, that leaves a net contribution to EU funds of £6.602 billion each year of transition. We could be pretty sure that we should have no influence how the EU spent this money and equally certain that none of it would find its way back to the UK as spending or investment. Neither would this payment do anything to overcome the non-tariff barriers to trade which would only accelerate in the fundamentally protectionist EU.  So, if the £6 billion is for goodwill, you would have to be a supreme optimist to expect any of that commodity winging its way back in the opposite direction. On the contrary, listening to Macron and his unashamed bribes to lure British industry to France, £6 billion will only be the start of our “punishment.”

I fear that far from breaking the log jam of negotiation, Florence will mark the beginning of abject capitulation.