50 Sent: Brexit and Trigger of Article 50
If a couple had conceived on the evening of the Brexit referendum, there is a reasonable chance that the baby would be born on 29 March, the date on which the Prime Minister will finally trigger Article 50 and send notice to the European Council. The Brexit gestation period from 23 June 2016 has not always been pleasant, and for many in the UK has led to spells of nausea.
At the risk of repeating a trite point, the act of triggering Article 50 does not cause significant changes in the legal relationship between the UK and the EU. The UK is still bound by EU law up to and until the date of its departure at the end of March 2019, unless all 28 countries agree otherwise.
Politically, the triggering of Article 50 marks the end of the phony war, which has been punctuated by talk of second referendums, early elections and multiple challenges through the courts. This is not to say that we can entirely rule out a second EU referendum, a General Election before 2020 or one of the legal challenges derailing the Brexit process, but psychologically and as a matter of process the triggering of Article 50 does mark a significant change.
Following the triggering of Article 50, the Great Repeal Bill, which it is estimated will be about 50 pages long and will incorporate the body of existing EU law into the UK post-Brexit, will be published. It is anticipated that the Bill will contain “Henry VIII clauses” giving the government the ability to make changes to the law without seeking additional Parliamentary approval. But it is also anticipated that numerous additional Bills will be required before the date on which the UK leaves the EU in order to give effect to its departure (aside from any “deal” done with the EU).
Before Friday 31 March, Donald Tusk, President of the European will publish his draft Guiding Principles for negotiation. The date of the EU summit at which the Guiding Principles will be discussed and agreed is 29 April, one week before the final round of the French presidential elections. The agreed Guiding Principles will also need to be approved by the EU General Affairs Council. It is possible that even this early positioning will take a number of months, particularly if certain member states wish to “play hardball” and disadvantage the UK by allowing the clock to wind down.
It is likely that the negotiations will begin before the German elections at the end of September, but will be informed by the politics of them.
We can expect to see an immediate flash point in the summer with the UK arguing that the terms of its future trade deal with the EU can be negotiated simultaneously with the terms – particularly the financial terms – of the divorce settlement, with the EU arguing that the trade deal can only be agreed after. The UK may find that it is forced, not least for reasons of continuing to court the support of key media outlets, to walk out, at least as a negotiating tactic.
In terms of trade deals outside the EU, we anticipate that the UK will push ahead to scope out independent trade deals with major trading partners, including the US, but this could be difficult for two reasons. One, as long as TTIP is even theoretically alive, the EU will be unlikely to agree to let the UK get into detailed discussions with the US. Two, the US is unlikely to want to proceed too far with the UK before knowing what the UK’s trade deal with the EU will look like. It is possible that the UK will be able to make more headway in talks with countries with which the EU does not have a free trade agreement as yet, such as Australia, India or New Zealand.
One cannot underestimate the political challenges facing Theresa May in 2017. The UK government has not even indicated that it will need to make hard choices: it cannot both have its cake and eat it, whatever the Foreign Secretary may say. As the Chancellor’s U-turn over the Budget tax rise for the self-employed showed, there is little ability for the UK government to be able to follow through on hard choices it will need to make in tax or on Brexit. As David Davis, Secretary of State for Brexit, stated last week to a committee of MPs, he had not asked his civil servants to estimate the cost of obtaining “no deal”, an option the UK government insists is better than a bad deal. Both of these reveal a significant weakness in the UK’s negotiating position, and actually heighten the possibility of “no deal”, the costs of which no one knows.
Beyond Westminster, Nicola Sturgeon’s call for a second Scottish referendum looks like a miscalculation, and May could end up strengthened politically. But the surprise announcement last week is a reminder of the challenges that Brexit poses to Scotland and – far more significantly – Ireland, which many consider to be a huge Brexit headache.
The above sounds negative. It is true that there are immense, and possibly some insurmountable, challenges for the UK but there are also significant opportunities for it to reinvent and reposition itself in a new world. Brexit is happening, and the important thing for business is to look to influence the UK, EU, US and other governments as much as is possible to ensure that the outcome is as favourable as possible.
As any parent will tell you, the real shock to the system occurs when the baby is born.