This weekend British Prime Minister Theresa May announced that the UK will start the official two-year Brexit process before the end of March 2017. The PM also announced the advent of a Great Repeal Bill to end the authority of EU law whilst converting its provisions into British law on the day of exit from the bloc. 

Leaving aside the question of whether this means the date of the UK’s departure from the EU will be 1st April 2019, this is the first concrete development on Brexit since the UK’s 23rd June referendum vote. What impact does it have for the other party in this geopolitical divorce, the EU? The answer is complicated because the marriage involved some 30 others, from national governments to EU institutions.

The European Council represents the 27 sovereign states the UK will directly negotiate with. Traditionally the larger member states have dominated the Council, but Brexit has changed this balance of power. Germany is facing social and political challenges due to migration, France is economically weak and politically distracted, and the UK is no longer at the table other than as a supplicant. Indeed, given that any Brexit deal requires unanimity amongst the remaining 27 member states, all parties have leverage. What will Spain want regarding Gibraltar? What will the Polish, now in an increasingly anti-EU phase and with over half a million citizens living in the UK, want for their cooperation? Or Greece, in light of its ongoing economic travails? Multiplied across 27 national capitals it could become uncomfortable to watch the Brexit sausage being made in the Justus Lipsius building.

What the member states have been agreeing on though, especially in non-English media commentary, is that they are not simply going to give the UK whatever it wants. The optimistic pronouncements of Liam Fox, e.g. “It is in everybody's interest that… we have at least as free a trading environment as we have today”, and the plans of “Road to Brexit” blueprint, strike almost everyone in Brussels as being out of step with reality. In fact, following Sunday’s announcement, “hard Brexit” is now being talked about quite seriously. 

The Commission and the Parliament are both lesser players in Brexit, something which has frustrated them and generated increasingly noisy and strident assertions of their relevance. The Parliament has a vote on the final Brexit deal and on this basis has been demanding a role in the negotiation process, though it seems it will only secure observer status. It has appointed an outspoken former Belgian Prime Minster and arch Euro-federalist, Guy Verhofstadt, as its negotiator. Mr Verhofstadt is a man for whom mere observation usually does not suffice, but he is far from liked by the right-wing British politicians in the Brexit negotiating team, and his leverage is further reduced by the unlikelihood that Parliament would vote down such a critical deal once agreed by 27 member state governments. 

The Commission has greater leverage than the Parliament. It has an unparalleled grasp of the detail of the treaties and legislation, so the Council will need to come to it for guidance and advice. Furthermore, the Commission acts as the de facto rule maker in areas that are critical for the UK’s Brexit deal, i.e. financial services. The Commission’s appointment as their Brexit negotiator of Michel Barnier, a French former European Commissioner for financial services, seems be a reminder to the Council (and the UK) of this reality. Nonetheless, the initiative and authority of Brexit remains with the Council, and the most immediate Commission action is likely to be discussions with the Parliament, bringing Barnier and Verhofstadt together in an event that some may claim makes the case for Brexit in and of itself.

There had been some argument that Article 50 should only be activated in late 2017, due to elections in France (April and May 2017) and Germany (September 2017) distracting major member states. In France, although the anti-EU Front National will do well by leveraging Brexit and other EU crises such as migration and low economic growth, the next President of France is likely to be an experienced, mainstream figure comfortable with the current pro-EU French position but willing to exploit this opportunity to undermine France’s old rival and erstwhile ally, the UK. In Germany the position is more complex, as industry wants to retain its present positive relations with the UK, whilst most voters seemingly want the UK to experience the consequences of its decision to leave the EU. Again, although the election may see a surge for the anti-EU Alternative for Deutschland party, the likely outcome is a coalition of right and left, probably led once again by the ever cautious but determined Angela Merkel. 

The business community in Europe needs to be aware that the announcement on Sunday is indicative for many in Brussels of the UK propelling itself towards hard Brexit, irrespective of efforts by the Council or leading member states. There is uncertainty whether this is a very hard-nosed negotiating strategy, to push the EU into compromise, or a reflection of a hardened British position in light of the Prime Minister’s stated view that “Brexit means Brexit”. The coming months may help both sides clarify their positions but for now things remain unresolved even if they have, finally, moved forward.

Theo Moore

Theo Moore is deputy managing director of APCO Worldwide's Brussels office and head of APCO's financial practice in Europe. Read More