Permission to Pull the Trigger

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Posted on March 14, 2017

Permission to Pull the Trigger
After a few weeks of wrangling in Parliament, the Government has finally won Parliamentary agreement to trigger Article 50 and now has the ability to start Brexit negotiations. The House of Lords attempted to amend and influence the Brexit vote to include a) retaining the rights of EU nationals to remain in the UK and b) allowing meaningful Parliamentary debate on the final deal. Ultimately, this was rejected in the House of Commons and then, reluctantly, at the second reading in the House of Lords. Prime Minister Theresa May finally has the ability and authority to pull the trigger to start the talks.
So what does this mean?

Once the UK has formally informed the European Commission that the UK intends to leave, now likely by the end of this month, the Commission will call an emergency meeting of all the Member States and expects, within 48 hours, to publish its strategy. Formal talks between the UK and the European Union (EU) would be expected to start sometime in April. From there the two-year clock will start counting down to March 2019, when the UK will actually have to leave the EU — this is the one element the UK cannot control. The Commission and Member States could drag their feet during the negotiations process and the UK could leave with nothing if there is a failure to reach agreement or move to transitional arrangements.

Once the negotiations start, hopefully serious business will follow. The tone will, like all negotiations, be important and trust will need to be built on both sides as early as possible. What we are also likely to see is a shift from the pre-negotiations rhetoric of what the UK wants and expects to what both sides can expect to achieve. What has gone largely unsaid to date, but is well understood by both sides, is that it is not in the UK’s interest to see the EU weakened nor vice versa. The Prime Minister has said the UK will be leaving the single market. At the end of the negotiations, she must be able to come back to Parliament and the people with the ability to control immigration, but also allow some form of access to the UK’s single largest export market. Businesses in the EU that trade and invest in the UK will also want to see some certainty with access to the single market, financial passporting and remaining in the customs union.

We are also now likely to see the fissures appear within Member States. Member States do not and have not always spoken with one voice. For example, the eastern EU Member States are more flexible on having parallel trade talks with the UK, while the Brexit negotiations are taking place. There are a number of countries who do not want to “punish the UK” with potential nasty surprises. Moving to win-win will be difficult but not impossible.

There will also be huge pressure on the Brexit Ministers – Davis, Fox and Johnson – who led the Leave campaign to take responsibility, own leaving the EU, and ultimately to deliver what they promised during the referendum campaign. It will be difficult to recover the promised ᆪ350 million per week to the National Healthcare Service, while compensating the vocal agricultural community over the loss of EU agricultural subsidies, as well as more broadly, the loss of EU infrastructure, science, and research dollars for the British people.

While Brexit is the biggest EU show in town and possibly the largest threat to the EU, the elections in the Netherlands this week, France in June, the Greek debt repayment in July amounting to タ7.4 billion and shrouded by talk of Greece being hoofed out of the Euro, German elections in September and the Italian election in the first half of 2018, will all individually or separately impact the future shape of the EU. 2017 is likely to be the toughest year the EU has ever faced. The Commission has been looking at possible outcomes for what the EU might look like and one option it seems is that the EU does end up as purely a trade bloc.
The Devolved Administrations: Scotland and Northern Ireland
Both Scotland and Northern Ireland will make the Brexit negotiations more complicated for Theresa May. Nicola Sturgeon, who leads the Scottish Nationalist Party, has called for a second independence referendum, which is being fiercely fought by May. Sturgeon can’t stop Brexit, but she can and will make life more difficult and complicated for May, particularly as she wants the Scottish people to be able to have a say in the final Brexit deal.

Now is not the obvious time for an immediate Scottish referendum 2.0, as for example, the economics simply don’t stack up and Sturgeon cannot guarantee a win. The more she can blame Westminster for holding Scotland back and the less interested the English are that Scotland remains part of the UK, she may well find herself in 2-3 years time in a stronger position.

Northern Ireland will remain problematic too for May with the Irish government deeply concerned about a possible hard border with Northern Ireland. For the first time, Sinn Fein is now totally and unexpectedly one seat short in the Northern Ireland Assembly of the Unionists, whose position is to remain part of the UK. Sinn Fein has now called for a referendum to leave the UK and there is a growing concern that, on both sides of the border, Brexit will either push Ireland and Northern Ireland further apart or towards reunification.

Both of these are difficult for May and she will not want to see the start of the UK breaking up on her watch. Then again, neither did Cameron in 2014 with the first Scottish referendum. Through Brexit, pressure for a second Referendum has come around again, far sooner than anyone anticipated.

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