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Brexit

Published: 03 January 2017

Brexit: What to look out for in 2017

2016 taught us that predicting the future is a tricky business but now we are in 2017 there are a number of events coming down the tracks that will affect the UK’s stance towards Brexit. For businesses, these events will shape our future trading relationships with Europe and the rest of the world.

The first event is likely to be the Supreme Court Judgement in the Brexit/Article 50 case. Back in October 2016 the High Court decided that the government did not have the power to exercise Article 50 without the approval of Parliament. This was seen by many (and particularly large sections of the UK press) as a controversial decision. In fact it was an old fashioned separation of powers argument – the problem being that the UK, unlike virtually every other country in the world, does not have a constitution that is written down in one place. The key to the High Court judgement was (uncontroversially) that there are three branches of government: Parliament, the executive (effectively the Prime Minister and her cabinet) and the judiciary. It has been established law for centuries that laws creating or taking away rights of individuals are made and repealed by Parliament and not the executive acting by itself. The High Court identified several categories of laws that would cause people to lose rights when Article 50 is invoked and concluded that it therefore required the approval of Parliament.

The Supreme Court heard the Government’s appeal against the High Court Judgement in December and their own judgement is due in January. The outcome of the decision is not likely to affect the Brexit decision. The political mood seems quite clear that Parliament will vote in favour of any legislation to give the government power to invoke Article 50. The most that is likely to happen is that the government’s self imposed deadline of the end of March 2017 for exercising Article 50 may slip a little.

More significantly, we can expect to see more detail of the Government’s Brexit negotiating position in the first months of 2017. The Government has so far held declined to give any details of its strategy for the Brexit negotiations. Opinions are divided over whether this is a legitimate tactical position or a smokescreen to cover the lack of a coherent policy. The Prime Minister has said she will disclose more details in 2017. Disclosure of the Government’s negotiating position is crucial for businesses that need to start implementing plans for the post-Brexit world. Businesses need to know what they are planning for. If the Supreme Court upholds the High Court’s Judgement requiring Parliamentary approval to trigger Article 50 then it is likely that more of details of the Government’s position will be disclosed and this will be a welcome development.

The main event of 2017 will almost certainly be the triggering of Article 50. The Government has promised to invoke Article 50 before the end of March 2017 although this could be delayed if a bill has to pass through Parliament. The actual event will take the form of a letter signed by the Prime Minister notifying our intention to leave. That starts a two year process to negotiate a separation agreement at the end of which (unless all 28 countries agree otherwise) we cease to be a member of the EU. All the discussion around Hard Brexit/Soft Brexit/Bespoke Brexit etc. hang on what can be negotiated in these two years.

A key factor in the negotiating dynamic will be: is the Article 50 notification revocable? In the arguments before the High Court and Supreme Court both sides claimed that the Article 50 notification can’t be revoked. Their respective positions may have been tactical rather than legal and the question is a complex one with no clear answer. Ironically, the question will ultimately have to be decided by the European Court of Justice. A group of lawyers in Dublin are looking to crowd fund a case to determine whether Article 50 is in fact revocable through the Republic of Ireland’s courts and then on to the ECJ. If this case gets going then it is unlikely to capture many headlines but it is worth watching out for because it may well have profound consequences.

At some point during 2017 the Trump Government’s position on global trade will evolve. This will be largely symbolic in the short term but if the Trump Government signals that the UK is near the front of the queue for trade discussions then the UK Government’s confidence will harden and this could lead to a harder Brexit. Conversely, if the US shows little interest in a deal with the UK then this may be a taste of things to come with the 50 of so other trade deals around the world that will cease to apply to the UK once Brexit is complete.

Finally, from the left of field it is worth watching out for an obscure argument over Article 127 of the EEA Agreement. The European Economic Area is the treaty between the EU members as separate signatories and three of the four members of the European Free Trade Area. Essentially, membership of the EEA means membership of the single market. Article 127 of the EEA Agreement is the provision to withdraw; it is the equivalent of Article 50 of the EU Treaty. There is a legal question over whether the UK can withdraw from the EU Treaty but remain a party to the EEA Agreement and therefore stay in the single market. This is a bit of a long shot but certainly worth keeping an eye on in 2017.

"This is exactly why we like to work with people who understand the industry and can identify potential issues and create solutions."

Jon Saltinstall, Senior HealthCare Banking Consultant, Lloyds Bank