Don’t start Brexit talks with a clash on cash

Frankly Speaking

Picture of Giles Merritt
Giles Merritt

Founder of Friends of Europe

Find common ground first


The eyes of the world will soon be on the Brexit negotiations, amid widespread fears that they may end in a ‘train crash’, not least because of a cash clash. Here’s a suggestion for averting that – or at least making it much less likely.

The pressures and constraints affecting both sides are well-known, but aggressive positions across the English Channel have inflamed tempers and risk putting the talks in peril. On the continent, the UK’s espousal of a ‘hard Brexit’ is baffling, because it limits London’s room for manoeuvre. For the British, the idea of their government’s democratic mandate being ‘punished’ by Brussels is intolerable.

Seasoned negotiators say that the best way to approach hard bargaining is to deal first with the easiest elements. Creating an emollient atmosphere is always helpful. Yet the Brexit talks are due to open with tough demands for the UK to pay tens of billions of euros into the European Union’s coffers.

There is a better way. Begin instead with defence and security cooperation. Military outreach and intelligence-gathering are areas where the UK has much to offer, and the EU much to gain.

London’s line has been that Britain’s NATO membership guarantees Europe’s security. But in political terms there’s far more to be won for all concerned by binding the UK into the EU’s burgeoning ‘defence union’.

Military outreach and intelligence-gathering are areas where the UK has much to offer, and the EU much to gain

Britain is militarily the strongest country in Western Europe. Although France and Germany are intent on forging themselves into a unified spearhead of EU defence, it will take at least a decade before that happens. Meanwhile, security threats from resurgent Russia and the turmoils of the Middle East are on the rise.

These threats are common to all Europeans, and at a time when the Trump administration has called into question the United States’ support for NATO, the case for underpinning Europe’s own defence capabilities is obvious. It’s an area where Britain can exert leadership while safeguarding its sizeable exports of defence equipment.

But the idea of starting the marathon two-year Brexit process with a win-win topic like defence and counter-terrorism cooperation has gained little traction. For reasons that have more to do with political grandstanding than finding mutually satisfactory solutions, negotiators on both sides prefer to open with the thorny question of the exit bill to be presented to London.

The subject is guaranteed to inflame passions. The EU-27 faces a gaping hole of at least ten per cent in the 2021-27 EU budget, the multiannual financial framework, and are desperate for funds. Britain’s largely Eurosceptic mass media, meanwhile, will howl with rage when it learns what Brexit will cost the UK Exchequer in cold cash. British ministers may even find themselves having to walk out before the talks can get down to business.

Brexit negotiators on both sides prefer to open with the thorny question of the exit bill to be presented to London

How large the amount due to the EU will be seems anyone’s guess. Estimates of pension obligations and commitments to various EU projects vary quite wildly, from a low of €40bn up to €60bn. If the UK’s share in EU assets is deducted that could whittle down the final figure a bit, but it will still compare starkly with the €8bn net annual cost to British taxpayers of EU membership.

The irony is that no definitive figure can be reached until the end of the Brexit negotiations, so it seems perverse to place it at the head of the agenda. Nobody can yet say whether the UK will decide to remain part of key EU programmes on research and development or industrial cooperation – something that the worlds of business and science are crying out for.

It’s possible that the die-hards in Theresa May’s government who demand a hard Brexit will win the day, causing a degree of havoc in the UK economy that some analysts put at £100bn in costs and lost growth. But perhaps cooler heads will prevail, with their warnings that by value half of all Britain’s exports go to the EU, and that leaving the single market threatens the UK’s position as the leading recipient of foreign direct investment in Europe.

Much hangs on the mood created during the early days of the Brexit talks. With Article 50 still to be invoked, there has been sabre-rattling and name-calling on both sides, so it’s time to lower the temperature. Pushing the cost-accounting of Brexit to one side and replacing it with security and defence cooperation would be a good way to start.

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