 I'm going to introduce Matt. Matt is the Head of International Trade Unit with EY. He has been here in the IEA before in 2014 and we were reflecting on how different times are from 2014, such a short time ago. Matt is, as I said, the current Head of International Trade at EY, following his previous role as a Special Advisor to Prime Minister Cameron, and he was appointed opposition in 2015. In this role he advocated David Cameron's EU reform program and the UK's EU membership prior to the referendum in June of last year. He was previously Director of Open Europe, another think tank which promotes ideas for political economic reform in Europe and he was instrumental in changing the organisation's focus from being a UK think tank opposing UK involvement and further EU integration to become a European think tank advocating liberal EU-wide reforms. I hope that's a fair description. You can interrogate all of these comments in a moment. He recruited a pan-EU staff, he also co-founded Open Europe Berlin. Matt is going to address us on the future EU-UK trade relations. Without any further ado, I'll hand over to you, Matt. Please interject, heckle, throw things at me, whatever you want to do. Whenever I do these Brexit talks, and I do quite a few of them, I tend to start off by telling the story from the nights of the referendum, the UK's referendum on the EU. June the 23rd last year, going into the early hours of June the 24th. I was in Downer Street that evening and I was watching the result coming in together with the Prime Minister at the time, David Cameron, George Osborne, the Chancellor at the time as well as various other advisers. There's a lot one can say about that, but the surprise now would perhaps say shock when one of the first results came in from Sunderland in Northern England. Sunderland of course is home to the Nissan factory, employing I think around 7,000 people in Sunderland, one of the biggest private employers in that region. 6 out of 10 cars produced in Sunderland I think are exported, many of them to the EU, free of tariffs, free of barriers, free of additional trade costs because of EU membership. Nissan had come out quite strongly in favour of a remain vote prior to the referendum. If you want the illustration for the importance to the UK, to UK local jobs and growth of EU membership then Sunderland was your key illustration. The result came in there when we sat in number 10, the BBC was reporting it shortly after midnight. Does anyone know what the result in Sunderland was? You get an extra gold star on EU flag if you do. So what was the result in Sunderland? Does anyone know? I was presenting to Disney the other day by the way or a few weeks ago now Disney you know the cartoon and so I was surrounded by fluffed animals and various things and they got this right so are you smarter than the fluffed animals that's the question. Anyone read your guess? You usually have sort of a bit more 61% in favour of leave of course. So you can hear a penny drop in number 10 down the street when that result came in and the reason I was telling that story is because I think that's what Brexit is right? It's something much more fundamental than the precise trading relationship between the UK and the EU. It's about social and political forces that are very prevalent in the UK but exist elsewhere as well so always keep that in mind when you think about Brexit. It's not only a narrow trade issue it's about something much much bigger and that is the challenge involved and Brexit is a big expression of that kind of forces that we're seeing across Western democracies but it's not only an expression. Right well of course I only told that story to credential myself and show that was a number 10 moving along. So I brought some pictures because I'm now at EUI and if you're at EUI or any of the big fours my colleague from KPMG will know you cannot do anything without some sort of powerpoint presentation. It's impossible I literally kind of move I have to show up to dinners with the powerpoint presentation in order to socialize. So there I brought some pictures. So this is just to recap on where we're at in the negotiations and what the time that looks like. You know I always like to conceptualize Brexit in three or four different phases. So as you know article 50 they own a legal way for a country to leave the European Union was triggered on in March this year and article 50 gives the UK and the EU exactly two years to negotiate the UK's exit from the EU and hopefully also a new trading arrangement. So two years from March 2017. Now the four phases I think involved here is so you have the negotiation phase which in turn is split into the negotiation over the withdrawal agreement and then the negotiations over the future trading relationship. So that's sort of two phases and then you move into post March 2019 a transition phase a very likely transition period in my view that can last anywhere between two to five years depending a bit on what the two parties want in the end and then post 2022 2023 2024 you have the new permanent arrangement between the two parties. So those are the Brexit phases and they matter tremendously for the conversations I have with businesses across sectors because this is what business plan around right so but these are the four phases. So we're already at the moment well we're very much in the first phase the discussions around the withdrawal agreement. So what the EU side has said is that in order to move on to the discussions around the future relationship we need to make significant progress on the withdrawal agreement. No one knows exactly what the significant progress means but the withdrawal agreement includes a divorce bill so how much the UK will pay up as a result of leaving the EU it includes the discussion around what will happen to UK citizens in the EU and EU citizens in the UK as well as some broader discussions which for example include the north-south border. The withdrawal agreement is incredibly important to watch what happens with that because it basically now will decide anything else that will follow right so if we can't make significant progress on that then we're in trouble. So but those are the four phases you will be familiar with this so I don't need to dwell on them. So in terms of dynamics involved in in brexit and particularly on the UK side I think it's it's it's useful to conceptualize this and I'm sorry if this becomes a bit UK centric but I think it's it's useful to conceptualize this in terms of a a five-way negotiations if you Theresa May you're effectively involved in a five-way negotiation at the moment and it's it's very important if you want to understand where brexit is going to understand all five of these different players and the interaction between them because I think that will very much decide what kind of arrangement will end up in the end within the end. So a five-way negotiation so so if you Theresa May at the moment you you have to deal with your own cabinet you have to deal with the UK Parliament you have to deal with the business community and the wide economic picture you have to deal with the devolved administrations and then of course the EU itself which is a hugely multifaceted and diverse player in its own right so those are the five players involved so let me just discuss a bit each of them in turn and where the latest is that with with the brexit negotiations so as you know we've had an election in the UK in June which resulted in a hung parliament in Theresa May losing a majority we've also had a number of developments over the summer which are really interesting to look at in terms of the future relationship so what are these developments well let's take the cabinet first so cabinet in the cabinet in the UK cabinet you at the moment have a bit of a standoff between what you can call this sort of liberal wing and not quite the nationalist wing because that's putting it a bit unkindly but but sort of the the kind of the liberal wing and the more kind of sort of UK centric wing if you will and that's a big standoff around issues like immigration in particular what has happened since the election is that within the UK cabinet the liberal wing the likes of Philip Hammond and this is no secret has massively increased its influence so in the cabinet in internal cabinet discussions there's now increased influence amongst those who want a liberal outward looking United Kingdom but anyway Theresa May is involved in a very tricky balancing act in keeping her own cabinet together that's that's sort of one two is the UK parliament Theresa May does not have a majority on her own which means that she has to rely on DUP for a supply agreement so DUP is not part of the government but they have pledged to support the UK government in parliament but she's also very vulnerable because even with DUP the minority is very small so so parliament the parliamentary dynamics is incredibly important because you are now going to have a number of Brexit bills going through parliament over the autumn and going into the new year which will be needed to facilitate Brexit if you start to lose on those then that becomes a difficult issue for what has happened in the last few weeks which is really interesting is that the opposition party the main opposition party Labour has sort of switched its position into contemplating the UK remaining a member of the single market and the customs union that is not yet game changing but it has the potential to be so if you Theresa May at the moment your biggest fear is that your your remainder MPs your pro remainder MPs start to side with Labour MPs and you lose your majority if you Europe you may look like that as an opportunity if you think that Britain should stay in the single market because that's the that's the route to the single market for the UK but that's so the parliamentary numbers going into this autumn will be absolutely crucial so that's the second big element the third one then is business the business community and this again particularly since the election in June has become a significantly more important voice there's a lot one can say about this I mean I do I you know speak to a lot of businesses across sectors and I think we sort of it's starting to hit home now that if you UK by business UK based business but also if you're an Irish based business you're going to be impacted by Brexit some there are some businesses that see opportunities I mean there's certain some Irish businesses who see opportunities and for Ireland there are of course some opportunities if business choose to relocate from the UK but as I always say for every one opportunity involved in Brexit I think the business community sees these 10 challenges I mean that's the relationship the ratio between opportunity to challenge so but the business community in the UK I think has become significantly more important over the last few months and what's really interesting to watch is if UK firms starts to signal that they will start to really push the button on relocating elsewhere because that becomes a quite big problem for the government and I think I would argue that the business community in the UK but perhaps also here in Ireland are entering a quite important five to six months window when they will have to make business decisions around you know operating models around where to be where to base their you know redistribution center for example if the UK ends up inside the customs union because of the lead times involved they will have to make a decision fairly soon so and and to see how the UK government will respond to that will be very important but I think it does matter that the business community has become more important I would say that increases the likelihood of a softer Brexit. Fourth area the fourth big player is the devolved administrations in the UK loads one can say about that but of course situation in Northern Ireland is very important here an interaction between that and Brexit will be very important to watch and finally the EU itself and you know there's a lot one can say about the EU negotiation position but you know what I will say is having actually been part of a team that has negotiated in Europe is that once the EU has agreed a common set of principles and processes principles and processes it's very difficult to go back and change those EU negotiations as many of you will know operate by principle and process and the EU has agreed a common set of principle and processes that they publish in the spring which in my view set the parameters for negotiations now there's plenty of flexibility and ambiguity in those principles and processes but there are some things that in my view still it's not possible so my view for example is that it's still not possible or I should be careful what I say but I have not seen any evidence of the EU being willing to accept a single market style arrangement for the UK but without full free movement of people you know what I'm talking about there is the idea of Britain now negotiating an emergency break on numbers which we sort of talked about many times before but that's never really happened it would be interesting to hear views in the room on this point but if you certainly if you labor the labor party in the UK this is one of the things that you perhaps will in the end try to gun for stay in the single market but with some sort of control mechanism on migration numbers from the UK because it's very difficult for the labor party to sell full free movement of people even for the labor part that's going to be difficult remember seven out of ten labor constituents that voted for leave and in large part because of free movement so so but to me the EU position does not accommodate for a single market without free movement the old thing that I've heard so many times and that you guys many of you repeat as well that the four freedoms come together or go together still hold true so obviously a very important discussion very keen to hear thoughts in the room on that so but those that is basically the five-way negotiations that Theresa May is facing and the interaction between the five here will be incredibly interesting to watch anyone who tells you that they know exactly how this is going to play out in the next several months is either lying and trying to say you something and you know because this is incredibly unpredictable having said that I will move to trying to predict what will end up so these are my scientifically proven probabilities because obviously I predicted Brexit I predicted Trump and I predicted that Theresa May will lose a majority like all of you did as well but these are my probabilities around roughly where we will end up in terms of a new trading relationship you will be familiar with these different post-Brexit models when people talk about post-Brexit arrangements they usually mention sort of four to six so the European economic area or single market membership the two are used interchangeably often that's the softest of soft Brexit the next in line the next one on the scale is membership of a some sort of customs union which means that you have no customs border between the UK and the EU but also means that the UK will not fully run its own trade policy then next in line is a more traditional free trade agreement you know a sort of a more comprehensive version of the trade agreement that exists between for example the EU and South Korea or the one that you know is soon coming into force between the EU and Canada and then finally you know this hardest Brexit will be a very limited deal or no deal at all which would mean that the UK and EU will trade in large part based on World Trade Organization rules I mean these are the post-Brexit models that people usually have in mind and so if you go down the line here and look at the probabilities and all of those controversially I still think it's very difficult to see how the UK remains an EU member in order for that to happen a number of things will have to happen which I've the path to the UK remaining member is set out here I do have a thing that can change quite quickly though because it's such a fluid environment and we can discuss how that might change but I think at the moment the thing to remember about whether Brexit can be stopped or not which a lot of people are getting excited about is that a number of political things and events have to materialize for that to happen that aren't imminent but it's not completely impossible equally for reasons I mentioned earlier around free movement I still think it's a rather slow probability of Britain remaining a member of the single market because of free movement that's the main issue there there's higher probability in my view of a customs union arrangement because that's something that labor is potentially pushing for is something that conservative MPs are contemplating it's also something they can probably do without free movement of people maybe depending on what the EU says but traditionally customs union arrangements have not come with free movement of people there's fine it's fine just identify yourself for the rest of the room if you don't mind it's based on the entirety of the treaties customs union is such the customs union is specified as removing tariffs so it will remove tariffs it won't remove customs border sorry for interrupting no no no it's a very important point so so and of course you're absolutely right so if you look at Turkey so Turkey has the c884 you still have to fill out they still have to have some rules of origin so you're absolutely right so if you if you follow the Turkish model then you'll definitely have a border I think what the UK government has in mind if they if they go for a customs arrangement it's something much much better than Turkey so because why would you why would you want to have the Turkey model you would have the border but without the ability to sign the free trade agreement so I think that's a really good clarification thank you but so there's a trend so but I still some sort of customs union arrangement certainly is is a higher probability there than than perhaps around single market for the reasons that we discussed the central probability to me though the most central scenario to me remains the free trade agreement because particularly because you know if you if you put together the UK's traditional red lines as well together with the the EU's principles and processes that they have agreed that's where you basically land on current evidence so the UK says it wants to end free movement it wants to end large-scale financial contributions it wants to end ECJ direct ECJ jurisdiction and it wants to run its own trade policy you cannot do that unless there's an FDA so so I think I think still that's that's where we are that can still be very comprehensive free trade agreement and we can discuss what that might look like but it can you know there's no reason why it shouldn't be more comprehensive than than for some of what the EU and Canada have I think you can have a substantially more comprehensive free trade agreement than what that agreement is but then of course on a less you know upbeat note I genuinely think there's still a real risk of there being no deal or only a withdrawal agreement that's something that is under discussed that you may leave only within withdrawal agreement which means that for a period of time you may end up with WTO I think it's inconceivable that WTO rules will be the permanent arrangement because of the huge implications that would involve but you know there is a risk and the main risk involved here is the main risk here is that the clock simply runs out because we have so little time left to agree everything that we need to do the main thing for me whenever we talk about Brexit is to try to now avoid confirmation bias right I mean you see so much confirmation bias on all sides Brexit is very likely to happen and we need to find a constructive way through and and so that's my plea in closing that it's easy to to be very negative about it but I think good ideas are definitely needed so please let's come up with some good ideas actually literally now let's all Brexit