Theresa May’s losing gamble makes Brexit even more complicated

The British Conservative Party loses its parliamentary majority in the 8 June elections.

• British Prime Minister Theresa May called for snap elections in April both to increase her party’s majority in Parliament and to strengthen her hand in negotiating Brexit terms more effectively. A successful electoral outcome would have allowed her in particular to face down the most Eurosceptic wing of her party when, despite her tough initial stance, the British government would inevitably have had to grant concessions to reach a viable agreement with the Europeans. She lost her gamble. With just 318 seats out of 650 (down from 330), and although they remain by far the leading party in Parliament, Conservatives have lost their absolute majority and will need to govern with the support of another party (probably DUP, the Northern Irish unionist party).

Even less visibility on the Brexit process.

It is possible to blame (albeit only partly) May’s failed gamble on a disavowal by some Britons of her hard Brexit strategy (i.e., a complete exit from the single market and from the jurisdiction of the European Court of Justice, a preference for “no deal at all” over a “bad deal”, and a veiled threat to use taxes to enhance the UK’s competitiveness). However, the election outcome is unlikely to make negotiations go off more smoothly. In the near term, the question arises of whether May will even hold onto her position, while it is with her that the Europeans had been preparing for months to negotiate. What’s more, a British government with a smaller parliamentary base could be held hostage by small groups of Conservative MPs (including the most Eurosceptic ones) or DUP MPs pushing their own Northern Irish agenda. And, lastly, the possibility of new elections cannot be ruled out before a Brexit deal is reached if that’s what’s needed to get out of a governance impasse. This prospect could limit the scope of any prior headway in negotiations.

The March 2019 deadline looks very tight.

• Given the time it will take the UK government to confirm or redefine its Brexit strategy, it could be hard to begin negotiations, as scheduled, on 19 June. With several months having already been wasted since Article 50 of the Lisbon Treaty was triggered, the Brexit deadline (in theory, March 2019) looks even tighter and may have to be extended (which would require the unanimous consent of EU members). This does not strengthen the UK’s negotiating stance, which has already been dented by the euro zone’s economic context (the UK’s economy is slowing, while the euro zone’s is accelerating) and its political context (the outcome of the French presidential election has eliminated the Frexit risk and improved the scope for closer Franco-German ties).

A higher level of uncertainty is therefore probably in store, that could hurt the British more than the Europeans. Temporary doubts could even flare up on whether an agreement is even possible. In the end, however, we still believe that common ground will be found, as British-EU trade regulated only by WTO clauses would be detrimental to both parties. This common ground will probably include free trade in goods, partial free trade in services, and compromises on sticking points such as free movement of persons and the UK’s contribution to the European budget.