Brexit: what pitfalls lie ahead for Theresa May?

What a difference a year makes. During her January 2017 Lancaster House speech, Prime Minister Theresa May insisted that Brexit negotiations would be a success, because “we are a great, global nation with so much to offer Europe and so much to offer the world”.

Fast-forward to December and it seems the UK has remarkably less to offer than it once hoped.

“For those who care to look, the signs are everywhere. Brexit is dissolving Britain’s status in the world,” says Politics.co.uk’s Ian Dunt.

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Now, as 2017 draws to a close, the consensus is that 2018 will be an even thornier bed of roses.

“Everyone involved in Brexit must expect the unexpected and prepare for a breakdown in relationships as Britain and the EU27 are forced to address uncomfortable trade-offs,” says the Financial Times, adding that “the more Britain overplays its hand, the greater is the danger of a catastrophic ‘no deal’ outcome”.

So what threatens to scupper May’s hopes of Brexit success?

Transition delay

EU chief negotiator Michel Barnier says any transition period would have to be completed by 31 December 2020 - the end of the EU budgetary period and three months before the UK government’s preferred date.

As the terms of the transition arrangement become clearer, all the indications are that “it will seem pretty much as though the UK is still a member state, with the crucial difference that it won’t have a vote or a voice in EU decisions”, says the BBC’s Kevin Connolly.

The UK may not be happy with that arrangement. Environment Minister Michael Gove has talked about the possibility of the UK leaving the Common Fisheries Policy early. Foreign Secretary Boris Johnson has argued that while Britain could be bound during a transition by all the EU’s existing rules, it would not be by any new ones passed after Brexit day.

But any time spent haggling over the terms of transition “will, in effect, be subtracted from the time available to discuss the overall future of EU-UK relations, including trade, security and defence”, says Connolly.

“Businesses, banks and the city will be putting the Government under huge pressure to get the transition sorted in order to give them the certainty they need to plan for the future.”

Whatever happens, “neither side will want a cliff edge in two years, or three, if the new trade deal is not quite ready either, so there will need to be some mechanism to extend transition. And that will raise the fear among some Brexiteers that transition will be forever,” says the New Statesman’s Stephen Bush.

‘End state’ problems

May still intends to seek a sector-by-sector free trade deal with the EU, “in flat contradiction of the EU’s unchanging insistence that cherry-picking is not on offer”, says The Guardian.

As if to underline that point, the European Commission is preparing to offer Britain a simple Canada-style trade deal in 2018, with little access for service industries, on a take-it-or-leave-it basis, reports the FT.

According to the newspaper, EU diplomats have watched the UK cabinet discussions about a future trade deal with “rising alarm”, as Brussels is not prepared to contemplate “untested trade models which combine regulatory freedom with single market benefits”.

The FT quotes a succession of EU officials who feel the debate in Britain about “end state” relations is not realistic. “One senior EU diplomat expressed concern the UK side ‘would still be in Brexit La-La Land’, contemplating magical options for the future,” the paper says. “They expected the first months of 2018 to involve some ‘unicorn slaughter’ as Britain’s illusions were confronted.”

Question of timing?

Some believe matters will not be settled conclusively in 2018 - the cut-off point for negotiations, if each side is to ratify Brexit by the UK’s planned leaving date of March 2019.

It is possible that the EU and UK will agree only a broadly worded text by October. “This will not cover every detail of the long-term ‘end state’ relationship. More discussions will have to take place. They will not end quickly. Like a bad itch, this will irritate hard-line Brexiters in the UK,” says the FT’s Tony Barber.

In fact, it’s possible that Brexit “will be so damaging to Britain’s economy in the short term that no politician will feel comfortable actually pulling the UK out of the bloc when push comes to shove, both for the sake of their own reputations, and the UK’s economic health”, says economist Samuel Tombs.

The Treasury put the long-term impact on tax revenue at around £35bn for a Canada-style arrangement, according to the New Statesman.

Tombs says he believes that negotiations will eventually agree to a transition deal to smooth Britain’s passage out of the EU, but that once Britain reaches the intended end of the transition period, it will then stay in the EU.

“A transition deal - which keeps the UK inside the single market and customs union but gives it no say over its rules - is the only viable outcome in 2019,” Tombs said.

“The UK likely will go into a transition deal intending it to last for only two years, but we see a high chance of it becoming permanent.”