British Prime Minister Theresa May announced over the weekend that Britain would trigger Article 50 of the Lisbon Treaty by March 2017. This is the formality that markets, the EU and the citizens of Britain and Europe have been waiting for since the UK voted, on 24 June 2016, to leave the EU.
Article 50 is the formal notification of Britain’s intention to leave the European Union. Once Article 50 is triggered, the UK begins negotiations on the terms of leaving the EU with a full 2 years to sever ties.
In effect, triggering Article 50 means the clock starts the running on the UK exit. After the 2 year period, the various Treaties that govern membership of the EU no longer apply to Britain. The terms of exit are to be negotiated between Britain’s 27 counterparts (member EU states), and each will have a veto over the conditions making agreement a very difficult exercise.
The final agreement will also be subject to ratification in national parliaments, meaning, for example, that any single EU country’s MPs could derail the entire process.
There has been a lot of talk surrounding the terms of a British exit from the EU. Some within the EU want to make it very difficult for Britain by taking a hard line in negotiations in order to make an example of Britain and deter other countries from wanting to leave the EU.
Others take a more pragmatic view saying Britain imports more from the EU than it exports so it would be detrimental to Europe to take a hard line and do itself economic damage.
A key factor in the negotiations is the free flow of people within the EU and the sovereignty of borders. The UK wishes to maintain sovereignty over its own borders and this appears to be a major hurdle for retaining access to EU markets. In particular the massive financial markets industry is concerned about not having employees being able to work freely across continental Europe and Britain.
Overall the fallout from the BREXIT vote so far has been much more subdued than was painted by the ‘Stay’ supporters. This has led to analysts suggesting that Britain will ultimately be in a very strong position if it can successfully navigate the complexity of an EU exit.