Brexit: Weekly Update

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Posted on October 24, 2016

Difficult Negotiations Ahead
It has become increasingly clear over the last few days how difficult and tortuous Brexit will be for Prime Minister Theresa May. She received less-than-a-lukewarm reception in Europe. While she promised that the UK will remain a full and active member of the European Union (EU) until the UK leaves, she knows that the UK’s influence has already diminished and the UK is being sidelined as the country becomes more isolated in the EU. At last week’s meeting in Brussels, Mrs. May was limited to five minutes at one a.m. as the dishes were being cleared away to give a statement on Brexit.
She will not have underestimated the feeling among the EU political elite nor some of the member states. Not only does she have a difficult balancing act in the UK, she will now be under no illusion how tough the EU and Member States are going to make the next couple of years. At the moment, there is no sense from Europe that they are close to thinking the best interests of both the UK and EU may continue to align. Rather EU leaders appear intent on corralling the wagons to tighten the Union, even with the UK outside.

The inability of the EU to close CETA due to Wallonia will give the Brexiters pause for thought. Although Brexit will be decided by qualified majority voting, so that no one country will have a veto, getting as many member states on side once Brexit has been agreed in principle will be tough. Each member state will want to ensure they get the best deal for their country.

At home, the UK Devolved Administrations are also asserting themselves. Scotland is maintaining pressure on the prime minister for Scotland to remain within the Single Market, a demand which so far has been dismissed. The Scottish National Party’s leader, Nicola Sturgeon, is playing a clever game by pushing Scottish interests, which are counter to England’s, to launch a second referendum on Scottish independence. Ms. Sturgeon knows the economics are stacked against Scottish independence at the moment, but she is playing a long game, taking advantage of this clear divide with England.

The Welsh are also asserting their right to be at the table as they count the economic cost of leaving the EU. Despite the Welsh majority having voted to leave, the Welsh Government are already wary of the economic impact of Brexit unless they can secure a good deal for the Welsh. Northern Ireland too with its one specific issues of a land border with the EU/Single Market/Eurozone and interdependency with the Irish economy wants to be at the negotiating table. To this point, Prime Minister May is offering only updates and the ability for the Devolved Governments to put across their positions through the Brexit Minister David Davis. Whether this will be enough remains to be seen.

Mrs. May must also attend to the other issues facing the Government, not least the impact Brexit is starting to have on the economy. Sterling remains under pressure and, as the UK is an importing nation, there are signs of price rises. Oil and gas prices and inflation are starting to creep up. Brexiters, who are trumpeting cheaper UK exports, are being reminded that around 40-50 per cent of manufactured goods in the UK include imported components. Meanwhile, the British Bankers Association is clearly articulating that ongoing uncertainty will lead its members to leave the UK over the next year.

Politically, many are suggesting that the still-new prime minister should launch a general election now. The shambles and retreat of UKIP, the disarray of the Labour Party under Jeremy Corbyn’s renewed leadership, and changes to the electoral boundaries all favour the Tories and taken together suggest the possibility of a huge Tory victory. While Mrs. May is hugely popular, Mr. Corbyn is not. However, it is possible the prime minister will see a general election as an unnecessary diversion that brings with it no guarantee of increasing the number of newly elected Brexit MPs to keep her feet to the fire over the negotiations.

Navigator's Brexit Response Team

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