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Analysis

What happens now on Brexit?

by Luke Lythgoe & Hugo Dixon | 13.06.2017

Theresa May spent the campaign avoiding the details of Brexit, despite saying that was what the election was about. She won’t be able to avoid the topic any longer, assuming she stays Tory leader. Her government will immediately be engulfed by the most important negotiations our country has had to face since World War Two.

Here’s our best guess of what lies ahead.

1. Time pressure

The EU treaty’s Article 50 gives us two years to complete our divorce. Even if negotiators first meet on June 19 or 20 as planned – something which has been thrown into doubt we’ll have only 21 months left. What’s more, the period for talks will be more like 15 months as there needs to be perhaps six months at the end for the European Parliament and ours, to ratify what’s agreed. Given the huge number of complex issues to be discussed, there will be a race against the clock.

If more time-out is needed for a Tory leadership election – or perhaps another general election – the time pressure will be severe. There’s also a risk that the EU side won’t be willing to engage seriously in the talks until they are pretty sure that May is going to continue as prime minister.

2. Look, who’s talking?

The EU is pretty clear how it will conduct the talks. The leaders of the other 27 countries have given a negotiating mandate to the European Commission which, in turn, has appointed Michel Barnier as its chief negotiator. The Commission wants the talks to take place in four-week cycles: the first for internal preparation and consultation; the second for exchange of views between the two sides; the third for negotiation; and the final for progress reports which would be published.

It’s less clear who will be speaking for Britain, even if May stays prime minister. In the past, she suggested she’d be the lead negotiator, though this was reportedly rebuffed by EU leaders. Having kept his post as Brexit minister, David Davis will likely take the lead – although some people expect Olly Robbins, the civil servant advising May and Davis on Brexit, to be the point person.

But with the election result being interpreted as a vote against May’s Brexit policies, MPs and business leaders are now calling for more consensus, perhaps even a cross-party Brexit commission to lead the talks instead of the Tory government.

3. Top topics

The EU has made clear it has three priorities: people, money and the Irish border. These are the topics it wants tackled in phase one of the talks. None will be easy.

The Conservative Party’s manifesto set out plans to pull Britain out of the EU’s single market and customs union. It also had red lines – including ending free movement of people, not submitting to the jurisdiction of the EU’s courts and not paying “vast” annual sums to the EU. It’s unclear whether it will now soften any of these policies – given the lack of majority, the likely dependence on Northern Ireland’s Democratic Unionist Party (DUP) and the fact that many Scottish Tories (who did well in the election) want a softer Brexit.

Our parliament – both the House of Commons and the Lords – will also be more actively involved in the talks than seemed likely before the election. Then, the expectation was that they would pretty much rubber stamp what May put before them. Now, it is likely they will scrutinise policies and amend them.

4. Alimony

In March, European Commission president Jean-Claude Juncker suggested the cost to the UK of leaving the EU would be “around” £50 billion. Since then a hardening of positions in European capitals, particularly around farm subsidies and loans, has led some to push this up to €100 billion (£86 billion).

Disagreement over who owes what could be an early stumbling block in negotiations. Barnier refuses to put a price on Brexit, saying any bill is not a punishment but a “settling of accounts”. Davis told ITV: “We will not be paying €100 billion.” May reportedly told Juncker that Britain didn’t have to pay “a penny”.

5. Right to remain

Will the 3 million EU citizens living in the UK and the million Brits living in the rest of the EU be able to keep their rights after Brexit? May said Britain wanted to guarantee this “straight away”. The EU wants to sort this out too. The problem is they seem to have different ideas about which rights should be guaranteed.

This isn’t just a matter about who can live where. Healthcare, benefits payments, the rights of students and workers – all these need to be considered. The Commission’s opening bid caused consternation in the Tory press: it is demanding rights in perpetuity for EU citizens currently living in the UK – including for their family members.

It’s unclear whether the election has changed things. But there have been reports that the government is considering making a gesture on citizens’ rights early in the talks.

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6. Hard border in Ireland

It won’t be easy to keep the border between Northern Ireland and the Republic of Ireland open if the Tories stick to plans to pull us out of the EU’s customs union. The fact that the government is likely to depend on DUP, which is opposed to a hard border, means that the whole question of the customs union may be reviewed. 

7. When can we talk about trade?

The EU says it is only prepared to move onto discussing trade – a central part of the second phase of the talks, as it sees it – once there has been sufficient progress on these three issues. The UK disagrees. But if the EU doesn’t budge, the government faces a potential elephant trap: agreeing at least to a formula that could result in a giant alimony payment without knowing what access we’ll get to the EU market.

8. Cliff edge

May said she could complete our divorce and agree a comprehensive trade deal with the EU in the 21 months left under Article 50. But it’s hard to find anybody else who agrees. The best we’ll be able to do is agree a “framework” for our future trading arrangements.

So we’ll need a transitional deal making sure we don’t fall off a cliff. To get one, the government may have to swallow more bitter pills. The EU insists that during such an arrangement existing “regulatory, budgetary, supervisory, judiciary and enforcement instruments” would apply. Before the election, this would probably have contravened May’s red lines. But, again, now it’s uncertain whether there may be more flexibility on these matters. 

9. Final trade deal

The EU took seven years to sign a trade deal with Canada. An EU-UK deal might take less time because our regulations and standards are already aligned with the EU – and both sides would have a strong interest in doing a deal given the volume of trade across the Channel. On the other hand, we’d be looking for something more ambitious than what Canada got. What’s more, if the talks descend into acrimony, reaching a final deal could take longer.

What we do know is that any trade deal won’t be as good as our current status inside the EU’s single market. A new free trade agreement might allow us to export our agricultural produce and manufactured goods without tariffs, but new restrictions are likely to be put on exports of services, which make up 80% of our economy. There are other thorny questions too, such as how to settle disputes should they arise. Again, there are now questions over whether the issue of leaving the single market may be reopened. 

10. Not just trade

We will want a new relationship that doesn’t just cover trade. Other areas where we’ll want to cooperate include: fighting crime and terrorism, especially after the recent wave of attacks; sanctions against Russia; access to nuclear materials; environmental standards; and scientific research. If there’s no time to reach full deals in these areas, we’ll need transitional agreements for them too.

Before the election, May threatened to quit the EU with no deal at all if she didn’t get what she wants. This would be madness. But now that she has failed to secure a majority, the Tories probably lack the authority to carry out this threat. However, Barnier has urged that Britain must start talks “very quickly” or risk crashing out of the EU with no deal. The current political turmoil, plus the enormity and complexity of what’s ahead, suggests a “no deal” scenario cannot be completely discounted yet.

5 Responses to “What happens now on Brexit?”

  • There are more than a million UK ex-pats in Europe. I think you’re only counting the pensioners. In fact total number is at least 2M and nearer 3million if you count all those who have moved to Europe without telling the UK authorities. I.e., those, like my son, who live in Europe but work in the UK. They will all be equally impacted.

  • Brexit was a stupid and unwise concept, drawn up by some of farages cronies with funding provide by some billionaires interested in creating chaos to ensure currency speculation would increase their wealth.
    Nothing to do with UK sovereignty, which was never under threat anyway , or any of the other myriad of fears thrown at the electorate.
    All of the ‘facts’ given to the electorate before the referendum were false claims, and the then PM, and his government, did nothing to control the lies.
    He was so stupid he thought he would win, and brexit would not happen.
    So then he ‘goes away’, and a new PM is brought in, who voted remain, because her husband is in financial investment, he has convinced her to, in effect, carry on with farages cronies plan, to ensure enrichment for the Mays.
    She calls an election to ensure she can push brexit at any cost, because she knows she has some dissenting mp’s who can scupper her insane drive to brexit at any cost!
    She loses her majority in parliament, and so now is planning to get into a power sharing agreement with ultra right wing mp’s from Northern Ireland. So she can continue to enrich the Mays at public expense.
    Hopefully Corbyn and his mid to left wing friends in other parties can out vote May and her cronies, or we will have another election within months, where Labour will win a majority and form a Labour government.
    The Mays will then slink off with their ill gotten gains and retire to a tax haven.
    With a fair wind, the new government will realise that brexit is a stupid concept, they cannot do any deal which is better than what we already have, and peace will reign in the whole land!
    As we continue our EU membership and work to improve the functioning of the EU with our fellow members!

  • I only wish Mr Greenwood’s conclusion would come true in practice, that is that we stay in the EU. It was therefore very depressing to hear Ken Clarke on the radio this morning saying that Brexit would be going to happen in any event. With friends of Europe like this who needs enemies?

    • I too was astonished to hear Ken Clarke say that Brexit was now unstoppable, saying that the vote for Article 50 in Parliament had sealed the issue. He must know that no Parliament can bind its successor. Why has he given up his principled decision? Is he angling for a peerage from Theresa May at the next (and imminent) dissolution?

  • Don’t forget the 759 agreements the EU has with 168 third parties. The UK needs to sort all of that out just to tread water. The continuing rights of EU/Swiss citizens will be just 1 of those agreements so not exactly trivial.

    Oh yeah, and the Great Repeal Bill. Nobody really talks about that much but without it the UK will cease to function as a developed nation.