There had been growing business and political confidence, since December 2017’s first phase Brexit deal, that such a transition deal can be secured, potentially quickly by March. But this is becoming tougher, in part because of the significant, continuing divisions in May’s government.
While the prime minister had been temporarily buoyed in Westminster by December’s deal, she remains in a weak political position overall. And it is this that makes her already poor hand of cards on Brexit even more difficult to deal, let alone win with, against Brussels in coming negotiations not just over the transition, but also any final settlement with the EU 27.
May had hoped last June that a big general UK general election victory would allow her to smooth over the deep divisions in the Cabinet and forge a consensus on Brexit strategy. But there is significantly less chance of that now, despite’s December’s deal, and the fundamental disagreements within her senior ministers on the nature and length of any transition may not ultimately be resolved until the second half of the year at the earliest.
Underlying these key disagreements — between pragmatists such as finance minister Philip Hammond and ideological Brexiteers such as foreign secretary Boris Johnson — is the deeper, crucial issue of what the UK will actually transition to in terms of its relationships with the EU 27. Remarkably, more than a year and half after the Brexit referendum, May’s government appears to have no firmer idea of where the nation is ultimately headed than when she gave her landmark Lancaster House speech in January 2017, and indeed the first time the Cabinet had a formal discussion on this topic was in December.
A sign of continued disagreement over such fundamental Brexit issues among senior ministers came when Hammond refused earlier this year to rule out the UK remaining in the European customs union. This put him at odds with May, who last year ruled out retaining any “bits of EU membership” post-Brexit and asserted instead that she would like a harder exit, leaving the customs union, single market, and common commercial policy and tariff while seeking a “bold, ambitious free trade agreement” with “the freest possible trade on goods and services … that is as frictionless as possible.”
As Merkel indicated on Friday, until London has addressed these first-order exit questions — with the associated trade-offs such as a potential “harder border” in Ireland — with greater clarity, Brussels may drag its feet in forthcoming transition negotiations. And this, alone, could rule out a deal by March, which will disappoint UK and European businesses looking to plan ahead for the post-spring 2019 business environment.
This will be a historic year for the UK and Europe, and Brussels holds most of the trump cards.
To be fair, European Commission President Donald Tusk has said that May is becoming “more realistic” about the trade-offs that will be necessary in the final negotiations. Nonetheless, it is unclear whether May’s collective negotiating demands — should she ultimately press for a hard Brexit — can be realised from the EU in the timeframe of Article 50 given its own robust negotiating positions.
This is especially so given May’s weakened political standing after June’s UK general election, when she lost her parliamentary majority. Indeed, it remains possible that her government could fall in 2018.
So with a significant amount now beyond her power, even more rests on whether the remaining 27 EU states will ultimately offer outlines of such a deal on attractive enough terms for her to accept. Here, much may depend upon whether the EU 27 fragment in 2018 with their Brexit preferences, or alternatively that they shows the same degree of strong unity and common interest as they did in 2017 vis a vis the UK, as Merkel indicated on Friday would be the case.
Last year, the perceived existential threat from Brexit seen by some continental politicians, alongside the in-built advantages for Brussels within the two-year Article 50 process, handed the initiative to the EU 27. For example, under Article 50 it was for them alone, not the UK, to decide last December whether “sufficient progress” was made in the first phase divorce talks to justify moving to the next stage, fortifying the bloc’s already strong position.
And as well as adjudicating the process in this way, Brussels has also controlled the timetable. This is exemplified, for instance, with the decision of Brussels to delay until this later this year substantive talks on the future UK-EU relationship, including over trade, putting the transition talks first, despite the fact that London wanted the sets of talks to proceed in parallel.
Taken overall, with London now raising the stakes in securing a final deal, and transition, 2018 will be huge and historic not just for the UK but also the EU. Delivering a smooth departure will need clear, coherent strategy and thinking so all parties can move toward a new constructive trade and security partnership, as May outlined in her Munich speech, that can hopefully bring benefits for both at a time of significant global geopolitical turbulence.
Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics