Devil’s in the detail for Britain’s divorce from the European Union
Process for so-called Brexit to begin in March, but business sector is no wiser on its impact at a time of declining economic growth
Britons caught their government badly unprepared with their vote to leave the European Union. For four months since then, the business sector has been waiting for clarity on the way forward for planning and investment. Theresa May, catapulted into the prime ministership by the referendum that ended the career of her predecessor David Cameron, has revealed the first piece of the puzzle. She says Article 50, the mechanism for Britain to leave the EU, will be triggered by the end of March, starting two years of negotiations for a new deal.
Business, however, laments the lack of detail about how May thinks Brexit will look. She has left her options open. This is understandable given the EU’s rejection of important concessions for Britain before the vote. She can expect tough negotiations. The nature of the referendum campaign, with its focus on migration, virtually ruled out the dream of Britain remaining in the single European market, though May pledged to strive for business to trade with and operate within it. But she also reaffirmed the need for controls on migration and an end to the jurisdiction of the European Court of Justice. The EU sees free movement and the court’s jurisdiction as non-negotiable.
Britain faces negotiating both an exit from the EU and a new trade deal, not to mention other bilateral deals, within a two-year deadline, amid rising protectionism and downbeat IMF global growth forecasts influenced by a China slowdown, Brexit and the US election. That said, the IMF, having wrongly predicted a post-referendum crash in the world’s fifth-largest economy, now says it will be the fastest growing of the Group of Seven leading industrial countries this year. But it still sees trouble further ahead. It expects uncertainty about the divorce settlement with the EU will make businesses more cautious and that the fall in the pound sterling to a 31-year low will hit living standards. It remains to be seen whether the size of Britain’s economy and the resilience revealed by economic surveys gives May a negotiating advantage with a Europe still struggling for sustained recovery from the financial crisis.