Article 50 - triggering a change

29/03/17

Now that the UK Prime Minister has triggered Article 50, the two year negotiation period begins. Here we look at what this means in practice and what to expect in the months ahead.

What is Article 50?

Article 50 is a section of the 2007 Lisbon Treaty and it is the mechanism for leaving the EU. Only the departing member state can trigger Article 50 to begin the exit process.

Theresa May’s letter will trigger a two-year period where the UK, the remaining 27 EU member states as well as the institutions of the EU (the Commission, the Council, the Parliament) will negotiate the terms of our exit. The two year time frame can only be extended by the unanimous agreement of all member states.

Article 50 has never been used so there are some disagreements about how it works in practice, for example, whether the two-year period is designed exclusively to resolve the ‘divorce settlement’ or if it also covers negotiations on the future trading relationship.

What happens next?

In the next month the EU Council will respond to Theresa May’s letter and set out the ‘rules of engagement’ for the negotiation. Importantly officials on both sides will now be able to engage in formal conversations about negotiating positions and red lines. Up until now there has been a very clear rule of ‘no negotiation without notification’.

The UK Government has committed to providing as much certainty as possible for businesses, throughout the negotiations, however, it is unlikely that there will be any significant updates in the near term. We will probably know the shape of the deal in Autumn 2018, as this is when the deal will need to be submitted and approved by member states and the European Parliament.

If the Government is successful in the negotiations then we will complete both the exit agreement and the new trade deal within the two year timeframe.  Government has recognised the importance of an implementation phase to help businesses and public services adapt to the new model. The Brexit Secretary has said the implementation phase will last no longer than 2021 and some sectors may not have any implementation period.

There is a risk that the UK leaves without a new trading relationship, in which event we would revert to the WTO rules.

We've included a timeline of events and milestones below - and explore the process in more detail in the article, How will the Brexit negotiations work in practice?

Deal or no deal?

The UK Government has set out its ambitions for a new strategic partnership with the EU, a bespoke deal unlike any other model adopted with other countries. Although the final deal will be subject to agreement by the 27 EU member states, the Government has said it will seek to:

  • Secure a comprehensive Free Trade Agreement with the EU
  • Remove tariffs and tariff-barriers to ensure ‘frictionless’ trade between the UK and the EU
  • Agree an ‘implementation phase’ to give businesses time to plan for change
  • Guarantee the rights of UK citizens in the EU and EU citizens in the UK as early as possible in the negotiations
  • The UK is also keen to continue collaboration with the EU in areas such as security and defence and research and development

The twelve negotiating objectives

  1. As much certainty as possible
  2. Control over laws
  3. The Union
  4. Common Travel Area
  5. Control over immigration
  6. Right to remain for UK nationals living abroad and EU nationals living in the UK
  7. Protecting workers’ rights
  8. A trade deal with the EU
  9. Trade deals with other countries
  10. Continuing to lead on science and innovation
  11. Continued cooperation on crime, terrorism and security
  12. A phased implementation process

Potential deal outcomes
 

 

‘Deal’ - Comprehensive FTA

‘No deal’ - WTO

Degree of business and economic disruption

Medium

High

Membership of the Single Market

None

None

UK leaves Customs Union and can strike own free trade deals

Yes

Yes

Implementation phase

Yes agreed with EU

None

UK follows EU rules and regulations

Only in areas where equivalence is necessary to secure market access

Only in areas where equivalence is necessary to secure market access

Contribution to EU budget

Possibly

No


Many have asked whether we will have a ‘hard’ or ‘soft’ Brexit. It is clear that the UK will have a radically different trading relationship with EU. The main difference between the ‘hard/messy’ and ‘soft/clean’ scenarios is whether businesses and the economy have enough time to manage the transition and minimise disruption on growth and trade.

As well as seeking to negotiate an implementation phase with the EU the UK Government will provide businesses some degree of legal certainty by transposing the existing EU rule book (the acquis) into domestic law. This will be done through the Great Repeal Bill, to be introduced at the Queen’s Speech in June. In particular the legislation is expected to continue the current model of employment rights and environmental standards, meaning businesses have to plan for minimal change in these areas.

 

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