Brexit: Is Article 50 detrimental? We’re about to find out!

Article 50: Have we reached a turning point?

brexit-article50
Brexit: Theresa May will start the preparations of triggering Article 50 in the last week of the month.

MPs voted decisively to back PM Theresa May’s plans for Brexit, scrapping the recent House of Lords amendments to the bill. Brexit secretary David Davis applauded the vote, which he said paved the way for the UK to “take advantage of its new place in the world by forging new trading links”. SNP Minister Nicola Sturgeon added further pressure to May’s Brexit woes with her announcement yesterday evening to start the ball rolling on a second Scottish referendum asking Scottish Parliament to approve a new independence vote. Number 10 hit out reminding the nation that just two years ago the people of Scotland voted to remain part of the UK and described the SNP as having “Tunnel vision.”

On the markets side, the Pound slipped this morning against the euro and hit a fresh eight-week low against the dollar on Tuesday, a day after MPs and Lords passed a bill paving the way for Theresa May to kick off the Brexit process by triggering Article 50.

14th-march-graph-article-50
As Theresa May gets ready for Brexit, the Pound slipped against its majors this morning.

The Brexit Route

brexit-article50
The Brexit Roadmap

On the 23rd June of last year, the British people embarked on what has now been classed as the most historical referendum of all time. ‘Brexit’ The decision for the UK to leave the European Union saw the country plunge into political and economic uncertainty. The British Pound plunged to fresh lows not seen since 1985 and David Cameron, who had campaigned hard that a leave vote would be an act of “economical self-harm” chose to resign with immediate effect, abruptly ending his six-year premiership.

The decision of ‘Brexit’ sent shock waves through the UK and across Europe with large businesses and political bodies expressing their fears.  The President of the European Council, Donald Tusk, said it was not a moment for hysterical reaction. But speaking on behalf of the leaders of the other 27 EU countries, he said they were all determined to maintain their unity. Large companies later revealed news of collapsed deals, possible job cuts and plans to potentially shift their bases to other countries.

Less than a month later, Home Secretary Theresa May was announced as Cameron’s successor. May vowed to make a better Britain when tasked with steering the UK out of the European Union.

In a televised speech, May stated “Brexit means Brexit, and we’re going to make a success of it,” “We need a strong, new, positive vision for the future of the country – a vision that works not for the privileged few but for every one of us – because we’re going to give people more control over their lives, and that’s how together we will build a better Britain.”

Since May took leadership, the British Pound has shown signs of appreciation moving away from lows when she revealed her plans, giving a clearer picture and alleviating some of the uncertainty that had dampened the UK’s near term outlook.

Fast forward to March 2017 and despite some setbacks courtesy of the House of Lords and much debate, Theresa May has her sights on triggering Article 50 by the end of March.

The Referendum was only the beginning of a long and uncertain process with Article 50 being phase two. The ‘Brexit’ scenario is far from over and if history is anything to go by downside risk could very much be a major factor.

Will the UK seek marriage counselling?

With Article 50 fast approaching, the consequences of ‘Brexit’ could well be increased, bringing further pressure to the already fragile Pound. There is now a lot of pressure on Theresa May. Can she live up to it? Everyone is curious and quite rightly concerned over what may happen. Mrs May must maintain her momentum so markets do not lose steam or even collapse.

Will there be fireworks? Will we witness the same shock moves seen last year?

2016 has been a wild ride with economic and political events being a huge catalyst. However, as much as the media tried to portray a Brexit gloom post-Brexit, the markets are still standing strong against the storm. The Pound’s movements since the Brexit vote have been volatile. The currency plunged after the referendum, then stabilised before falling again in October on fears the UK was heading for a “hard Brexit”. It clawed back some ground in November on signs the economy was holding up well but more recently has come under pressure as Brexit negotiations draw closer.

So, let’s look at the ins and outs of Article 50

There are five elements to Article 50 of the Treaty of Lisbon:

  1. “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
  3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.
  4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.
  5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

What will happen once article 50 is triggered?

The Brexit process is expected to take 16 to 18 months from the March trigger date. However, much of this is speculation. This would see the UK officially leaving the EU by 2019. The ‘Divorce’ is likely to focus initially on the settlement of bills followed by the agreement of a transitional arrangement. The one element that could prolong negotiations will be agreement of a trade deal.

Running the Brexit show would probably need an effective ‘’Ministry for Brexit.’’ We can only wait and see who will join the show…and if will there be any light at the end of the tunnel?