Imagine British political headlines in 30 years. Number 10 might declare victory on achieving carbon neutrality. Westminster might pass a universal minimum income to deal with mass unemployment due to automation. But almost certainly, the country won’t be debating whether to rejoin the European Union.
Instead, Labour and the Conservatives (or their future incarnations) will compete on who is the tougher negotiator with Brussels. Remainers will have become a relic of the past; the United Kingdom will be a country of Euroskeptics of different breeds.
How can we possibly know this? The answer is simple: by looking at Switzerland.
For the Swiss, the 2016 Brexit vote was a strange déjà vu. In 1992, 50.3 percent of the Swiss voted against joining the EU’s single market. As a basis for their economic relationship with the EU, the Swiss were left with the classic free trade agreement they had negotiated with the bloc in 1972.
Under that agreement, the Swiss continued to enjoy tariff- and quota-free trade in industrial goods with the EU. But compared with their EU competitors, many Swiss exporters faced restricted access to EU markets along with red-tape costs and chronic legal uncertainty that limited their competitiveness.
The result? A decade of low growth. Looking for easier access to EU markets, Swiss exporters outsourced production facilities—first to Germany and, later, to the EU’s newer member states. A real estate bubble-turned-financial crisis dealt a further blow to the Swiss economy in the begging of the 1990s.
Although difficult to imagine today, wealthy Switzerland was the worst-performing economy among countries in the Organization for Economic Cooperation and Development (OECD) between 1992 and 2002. And this despite austerity-obsessed Bern trying to compensate the hit to the Swiss export economy by running fiscal deficits of up to 3 percent of GDP.
This is the not-so-rosy outlook the U.K. is facing now. The final Brexit deal is a free trade agreement that is only marginally more advanced than the Swiss deal from 1972. It is likely that the country’s EU-facing exporters will, over the years, gradually move production and jobs to the continent.
For the U.K., the economic pain is likely to be even worse than it was for Switzerland in the 1990s.
For one, the deepening of the EU’s single market since the 1990s has rendered the union more protectionist. Especially in financial services, the EU has massively advanced the harmonization of regulations across the continent and thereby shut out service providers from third countries, such as Switzerland and now the United Kingdom.
Second, Britain’s economy is more fragile than Switzerland’s was in the 1990s. The country’s share of business investment relative to GDP is already now only on par with Italy among Europe’s major economies, which also explains the United Kingdom’s flat productivity growth, its large share of low-income jobs, and also its persistent weakness on exports. The U.K. is even more dependent on domestic consumption than Italy or Spain is.
Third, the pandemic has hit British businesses particularly hard. London is forecast to run a budget deficit of a whopping 16.9 percent in 2020, compared with 9.5 percent in Paris or 6.3 percent in Berlin. Still, the OECD forecasts that the U.K. will have the worst year-on-year GDP contraction among major economies bar Argentina in 2020.
Given these difficult economic realities, it won’t take long for British businesses to start to press London to reengage with the EU’s single market, just as the Swiss business lobby did in the 1990s.
British diplomats will likely spend the coming years in Brussels trying to complement the current deal by negotiating the United Kingdom’s participation in some sectors of the EU’s single market. And just as Swiss diplomats did in the 1990s, they will have to agree to conform to Brussels’s regulations in return for market access. Over the long term, economics will trump concerns for sovereignty.
But at least the trade-off paid off for Switzerland. The new agreements granting Swiss companies single-market access and allowing free migration of workers with the EU entered into force in 2002. They helped the economy finally reboot. Since 2003, Swiss GDP growth has ranked third among Western nations.
So all’s well that ends well, right? Not quite. Twenty-eight years after Switzerland’s own Brexit moment—and even with businesses satisfied by the market access agreements and the economy purring—the EU question remains the most divisive in Swiss politics. And this is for two reasons.
First, imagining that Swiss-EU relations would ever reach a stable equilibrium was illusory. The world keeps turning, new economic sectors develop, and interests change. In life as in politics, there is no end state—discounting death. For that reason, the 2002 Swiss-EU agreements have to be continuously revised to remain effective. Put simply: Since 1992, negotiations between Bern and Brussels have never ceased. The same logic will apply to the United Kingdom’s future relationship with the EU
Second, carefully crafted trade deals do not end culture wars. That’s especially true since the camp on the winning side tends not to drop the issue, preferring to milk it instead. Swiss newspapers and politicians continue to find something to agitate over in an attempt to reinvigorate opposition to Brussels. This is the case whether there is a legitimate concern, as when the EU cuts out Switzerland’s banks from its market, or a bogus one, as with 2008 claims that the EU would ban the Swiss national sausage.
In other words, British politics will remain consumed by its relationship with Brussels for decades to come, continuing to distract from other important issues. Over the long term, this opportunity cost may turn out to be the biggest harm wrought by Brexit on the U.K.
As another consequence of Brexit and the drama surrounding it, British people—even pro-EU Remainers—will come to perceive the EU increasingly as an opponent, not as a partner.
In permanent negotiations, the EU will continue to defend its perceived collective interests, with little regard for British public opinion. With London finding itself more often at the losing end of negotiations, it will resort to bad-mouthing the EU in order to defend its own reputation at home. The often unsatisfactory compromises with Brussels that London will be forced to accept will fan the flames of Euroskepticism in the U.K.
This is what has happened in Switzerland over the past 28 years. Nearly half of the Swiss were friendly to the idea of EU membership in 1992. Today, far fewer are. At the turn of the millennium, 3 out of Switzerland’s 4 major parties supported EU accession. Today, not a single party is actively campaigning on EU membership.
The Swiss political debate has completely shifted from the benefits of prospective EU membership to what can be achieved in negotiations outside of the union. The Swiss who continue to talk about membership are painted as off-topic and as failing to address immediate practical questions at hand. Even the left-wing parties, which were traditionally the most pro-European, have abandoned the issue.
In statements about the last-minute Brexit deal, European politicians were quick to voice their regret about the divorce but also the hope that a new generation of Brits would one day knock at the EU’s door once again.
But if Swiss history is any guide, that is unlikely. With time, the market access issues will likely be addressed, allowing the British economy to find its footing. But this will come at the price of Brits turning ever more Euroskeptic. The cards are now firmly stacked against Remainers.
