Theresa May and Brexit:

 

Less than a Year Left to go!

Since the Brexit referendum in June 2016, twenty two months have passed. Despite the political infighting within the British government about how it should exit out of the European Union (EU), there seems to be some progress achieved. However, there are still lots of loose ends to be tied up. Most importantly, the future trade agreement between the United Kingdom (UK) and the EU still remains elusive, if not, a complete fantasy. As each day passes by, the risk of the UK dropping out of the EU without any trade deal increases significantly.

Barely a year is left before Britain is officially out of the EU on March 29th 2019. Michel Barnier, the EU Chief Brexit Negotiator, has done his best to protect the EU interests and mitigate as far as possible the Brexit risks from an EU perspective. However, on the British side, Prime Minister Theresa May, her team of Brexit negotiators and the other members of her party are divided, constantly quarreling and thwarting May's attempts to move the Brexit negotiations forward. It is without doubt that if there is no trade agreement, both the EU and the UK will eventually face severe consequences. 

"The future trade agreement between the UK and the EU still remains elusive, if not, a complete fantasy."

Aftermath of the Brexit Referendum 

 

The truth of the matter is that the British government under the former Prime Minister David Cameron never thought that the scenario of the UK really leaving the EU would become an actual possibility. As a result, the close vote of 51.9% Leave to 48.1% Remain within the EU caught the government direly unprepared to deal with such a situation. For the EU, this was also a first of a kind situation. There has been no precedent to deal with this scenario, although within the Treaty on European Union, Article 50 provides the right to each country to withdraw from the Union. 

Hence, after the Brexit referendum and with the Cameron resignation, the newly formed Theresa May government thought that they could already start their Brexit trade deals with the other EU countries and the world. The result of the Brexit referendum was also a shock to the EU establishment and with the UK wanting to get a better trade deal from each and every EU countries, the risk of fragmenting further the EU unity increased; thereby putting at risk the very existence of the EU itself.

It was indeed under the strong and astute influence of the German Chancellor Angela Merkel, that the EU leadership has been able to unify and rally together to face the Brexit crisis. By telling Theresa May and her government that there won't be any Brexit negotiation with the EU, till the UK triggered the Article 50 to formally exit the EU, Merkel have been able to buy time for the EU to assess the crisis. Subsequently, the EU organised themselves to strategise and deal with the UK as a single entity. 

By doing so, the EU prevented May and her government from adopting a divide-and-rule strategy among the EU members. Moreover, for the Brexit negotiation to start, May was eventually pushed to trigger Article 50 last March 29th, 2017; thereby giving the UK two years to complete the EU exit process.

A Dysfunctional Conservative Party

 

Since the trigger of Article 50, it seems that many things and events have happened and yet, at the same time, there is this surreal perception that nothing has really changed. This may be attributed to the fact that since the Brexit referendum, the Conservative Party, led by May, has been constantly plagued with infighting. To May's credit, she has been able to still keep her government afloat, while trying very hard to wrestle a deal from the EU.

Besides managing the Brexit negotiations, May faced an uphill task of bridging the various factions of her party. The hard Brexiteers like Boris Johnson, Liam Fox and David Davis disagreed to anything that looked like the UK yielding to the EU, while others like Philip Hammond and Nicky Morgan favored a soft Brexit. 

It was probably May's overconfidence in believing she could strengthen her Brexit negotiating position within her party and against the EU, that she called for a general election. Unfortunately, this all backfired with her losing the majority in the government last June 2017. May was eventually forced to make a coalition with a small Irish party, the Democratic Unionist Party (DUP). As a result, all her Brexit plans were in shambles and her party was even more divided. 

STEEL Advisory Partners - Brexit Infogra

The loss of her government majority as well as the constant bickering among the Conversatives about Brexit drastically weakened Theresa May's position. May and her cabinet cannot agree on a common front for the Brexit negotiations. May had to spend an enormous amount of time and effort managing the conflict within her party, while the pressure for a Brexit deal kept on increasing. 

A year passed since Article 50

Right after the referendum, there was probably overconfidence within May's party that with Brexit, Britain could exhort all the EU countries to get into a deal, that would be to the advantage of the UK. However, both the EU and UK negotiation teams came to realise that the Brexit challenge was seriously underestimated. While the UK wanted to go straight into a trade deal discussion, the EU under the Brexit Chief negotiator Michel Barnier wanted to have a phased-in approach. First, Barnier wanted to discuss the separation and what the UK would owe the EU for exiting, before considering a potential post-Brexit trade agreement with the UK.

While the negotiations stalled, Jean Claude Juncker, the European Commission President, Donald Tusk, the European Council President and Michel Barnier were united in their positions and 

demanded that the UK must settle its bills with the EU before exiting. Juncker previously suggested that the UK should pay about €60 billion. This amount outraged the hard Brexiteers, since they previously campaigned that with Brexit, the UK would owe nothing to the EU.

After the UK general election in 2017, not only May's negotiating position for a Brexit deal was seriously weakened, but also her inability to gather her cabinet around a common ground made any progress on Brexit very arduous. Moreover, her coalition partner DUP forced her to amend her plans, especially about having a hard border in Ireland. As a result, she had to soften her position with the EU. To be fair, Michel Barnier and his team had to also compromise and provide May enough leeway to push any proposition or agreement forward. 


Eventually, after all the tussling, scuffling and battling with her cabinet members and the EU Brexit team, May pushed forward and finally had a breakthrough last December. May and her Brexit team together with Barnier and his team managed to find some common ground and agreed on some main items about the EU-UK separation. 

According to the EU,

"nothing is agreed until everything is agreed." 

The agreement last December moved the negotiation to the next phase about the post-Brexit trade agreement between the EU and UK. But this agreement had been hard won since Theresa May had to make some serious compromises, including the payment of a Brexit 'Divorce' bill of about €45 billion and having no hard border in Ireland. 

Deal or No Deal Brexit

 

According to what Michel Barnier planned for a phased-in negotiation, in 2017, almost all the Brexit discussions were centered on the challenges and issues about the EU-UK separation. With no discussion on trade, May and her team knew that time was fast running out. Hence, last September, May requested for a two year transition period, after the formal Brexit on March 29th, 2019. 

 

With the agreement last December, Barnier eventually agreed to a transition period. However, instead of two years, it will only last twenty one months, ending on December 31st, 2020 and during that time, the UK will abide by the EU regulations. Subsequently, the UK should be able to completely dissociate itself from the EU.

Moving on to the trade discussion last February 2018, Barnier wanted to get the Brexit negotiations on track and issued a draft of a tentative Brexit treaty. This was meant to spur his British counterparts to move the discussions so that they could progress towards an agreement for the EU summit in October. However, there were still many issues of contention like putting Northern Ireland within the EU customs territory.

In the end, she may not have any more choices

but will be pushed into a scenario, that

"no deal for Britain is better than a bad deal",

with the UK dropping hard out of the EU. 

While both sides have agreed on many items related to the UK leaving EU, there are still many other issues, that seem very hard to agree upon. Time is fast passing by and keeping to the schedule for a formal agreement for the EU Summit by October looks very challenging. Moreover, according to the EU, "nothing is agreed until everything is agreed." 

 

Last March, both side managed to reach an agreement on the 21-months transition period till December 31st, 2020. During that transition, although Britain will be technically out of the EU, it will still remain under EU regulations so that it does not face a cliff edge scenario. However this transition agreement was contingent on the broader withdrawal deal between the EU and UK. 

 

As for Theresa May, she is constantly fighting her adversaries and trying hard to overcome all the adversities along her path, but whether her "Brexit means Brexit" plan will turn out as what she initially thought is yet to be seen. In the end, she may not have any more choices but will be pushed into a scenario, that "no deal for Britain is better than a bad deal", with the UK dropping hard out of the EU. 

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