Just when we thought that Brexit is so last season, U.K. Prime Minister Theresa May has given a speech that brought back the issue under the spotlight. Here are five updates you need to know:
The “exit” part of Brexit will officially start in March
In a much-awaited speech at the annual Conservative Party Conference in Birmingham, new Prime Minster Theresa May officially confirmed that the U.K. will invoke Article 50 of the Lisbon Treaty by no later than the end of March 2017.
If you recall, Article 50 is the bit that legally allows member states to say “Bye, Felicia!” to the European Union (EU). Since it only gives the exiting member two years to negotiate its exit terms, Britain is expected to officially leave the EU by March 2019 at the latest, well before European countries like France and Germany are scheduled to hold general elections and possibly change their leaders.
May has also promised to introduce a “Great Repeal Bill” that would reverse the 1972 European Communities Act, the law that binds EU law to the British statute book. The bill is expected to enable Parliament to amend and/or cancel legislation to better incorporate existing EU laws into British law. However, the new laws won’t come into force until after Britain has left the EU.
Reactions are mixed
Brexit fans were ecstatic over the news, as the announcement put to rest speculations of further delays and possibly a second EU referendum. Others weren’t impressed, saying that the plan lacked details.
Donald Tusk, the president of the European Council, said that the timing of EU exit talks brought “welcome clarity” to the situation but remained clear that the remaining 27 EU countries would not hold preliminary talks. Duhn duhn duhn.
Market players also showed mixed reactions. The British pound started the week with weekend gaps and fell to its weakest level against the dollar since July and its three-year low against the euro at the heels of May’s speech. Meanwhile U.K.’s stocks ended the day in the green, as a weak currency benefits exporters and U.K.-listed companies reporting in dollars.
There’s a Brexit Department!
And no, it’s not named Team Brexit. In its official website, the Department for Exiting the European Union (DExEU) says that it’s “responsible for overseeing negotiations to leave the EU and establishing the future relationship between the UK and EU.”
David Davis is serving as the department’s Secretary while David Jones is the Minister. Analysts estimate that the staff not including the government’s legal team could reach 500 as negotiations heat up.
Now that they have a deadline, the DExEU has to double its efforts to engage EU members into negotiating possible trade deals and other post-Brexit terms. In addition, it will also be responsible for researching and drafting proposals for the Great Repeal Bill.
In case you missed it, I’ve explained the actual Brexit process in a primer from a while back. Until Article 50 is officially invoked though, the U.K. must concentrate on the first part of the process, which is to make sure that the vote to exit is in accordance to its “constitutional requirements.”
This is where it gets sticky. Already Northern Ireland’s High Court is set to challenge the vote, saying that it would undermine a 1998 peace deal and cut EU cross-community funding. They also argue that the government is legally obliged to safeguard EU laws incorporated in Northern Ireland law.
Similar legal challenges have been launched in England and London’s High Court is due to hear them later this month. If you recall, 56% of Northern Ireland-ers voted to remain in the EU last June.
U.K. officials are working hard to minimize uncertainty
The biggest concern for market players is that a “hard Brexit” would leave Britain out of the single market and cause economic slowdown, enough to send Britain into a recession. If that happens, the Bank of England (BOE) would also need to ease its policies to stimulate economic activity.
PM May shrugged off these concerns, saying that worrying over the trade off between controlling immigration and trading with Europe is “the wrong way of looking at things.” She also defended the lack of details, saying that divulging plans this early in the game could compromise the U.K.’s bargaining position and make it harder to “get the right deal for Britain.”
Meanwhile Finance Minister Philip Hammond revealed that U.K. businesses which have multi-year funding from the EU will have their guaranteed payments after Brexit. In a speech, he said that
The Treasury will offer a guarantee to bidders whose projects meet UK priorities and value for money criteria that if they secure multi-year EU funding before we exit we will guarantee those payments after Britain has left the EU.
Trade Minister Liam Fox summarized their goal when he said that “What we want is the best exit for the United Kingdom, not the quickest.”
For now it looks like Brexit concerns are centered around the impact of losing the EU’s single market perks. If the government manages to shed more light on its plans to support businesses post-Brexit, then we might see limited economic blowback from exiting the EU.
But if the Brexit team continues to power through without giving much consideration to its economic impact, then investors could flee from U.K. assets faster than you can say “Blimey!”
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