As a result of the historic Brexit vote, the United Kingdom has found a new prime minister in Theresa May. As the new UK leader, May has a long to-do list, not least ensuring the UK economy does not fall into recession, owing to the economic uncertainty created by the Brexit vote.
Aside from temporarily injecting some fiscal stimulus into the economy, what May must absolutely do before anything else is begin and conclude Brexit negotiations with the EU as quickly as possible. Until this process is complete, it will be impossible to negotiate any trade agreements with Canada, the US, and other key players in today’s international trade architecture. In this sense, it is important to remember that the negotiating stances adopted by these economic partners will depend on the type of economic relationship the UK will have with the EU. Furthermore, the UK is legally forbidden from officially negotiating free trade agreements with other countries as long as it remains a member of the EU.
As long as businesses, investors, and entrepreneurs do not know what the new rules of the game look like, they will pivot to countries other than the UK to launch new ventures or grow existing ones. Such a lack of investment and job creation will only cause the UK economy to stagnate, if not regress. How long does May want her compatriots to endure such hardship, particularly when the world economy is already weak?
The absence of clear indications outlining the UK’s future relationship with the EU is also dangerous for the UK’s own survival as a country. I am sure May will not want to go down in history as the last prime minister of the United Kingdom. The leadership in Scotland has indicated it prefers to remain in the EU and is exploring the possibility of a second referendum on Scottish secession from the UK. In Northern Ireland, there are concerns about the status of the open border that exists with the Republic of Ireland, with many calling for the whole of Ireland to be reunited once again. If the outline of a Brexit deal that adequately addresses Scottish and Northern Irish concerns could be agreed upon quickly, it might help prevent the UK from disintegrating.
This is why May and her cabinet colleagues need to invoke the EU treaty’s article 50 immediately, so the Brexit negotiations can begin by September. EU leaders have been very clear there will be no negotiations, formal or informal, until the UK has officially informed its EU partners it is leaving the union as per article 50. May should, therefore, revise her commitment to launch the Brexit process in 2017, as this would mean six months to a year of additional economic uncertainty and stagnation for the UK.
If May is envisaging launching new elections in the next year or so in order to reinforce her political position while the Labour Party is in disarray, a prolonged economic stagnation or recession could undermine her chances of winning a majority government, which would give her free rein to lead a post-Brexit UK into the world. The last thing the UK needs is a politically unstable government negotiating the trade and economic arrangements that will determine the country’s economic future.
At the heart of the UK’s present and forthcoming economic malaise is the economic and political uncertainty created by the Brexit vote of June 23rd. Therefore, if May wishes to remove this cloud of uncertainty hovering over the UK, she immediately needs to notify the remaining 27 EU member states that her country is officially intent on leaving the union in order to begin negotiating as soon as possible the UK’s new relationship with the EU.
The sooner the UK’s new rules of economic and political engagement with the rest of the world are established, the sooner the UK economy can move on from the damage imposed by the unfortunate Brexit decision. Otherwise, her tenure as UK prime minister might be shorter than she thinks.
This article first appeared 15 July 2016 in the Toronto Star.