The UK has officially pulled the trigger on Article 50 and commenced the two-year negotiation process that will end in its exit from the EU.
With the activation of Article 50 of the Treaty of Lisbon, EU legislators will now convene to decide what positions they will take on a range of issues, from the rights of EU citizens in the UK to financial services passporting.
The Article 50 letter, which was signed by UK Prime Minister Theresa May yesterday, was hand delivered to Donald Tusk (pictured right), president of the European Council, at lunchtime.
May, addressing the UK House of Commons immediately after the UK’s Article 50 letter was delivered, said: “This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets—and let European businesses do the same in Britain.”
“But I want to be clear. What I am proposing cannot mean membership of the single market.”
Official negotiations between the European Commission and the UK’s Brexit team are expected to commence on 29 April. The process can take no more than two years, unless the European Council approves an extension, which at present appears unlikely.
Membership of the EU is complex, with many aspects of UK legislation intertwined with or underpinned by EU regulations and directives designed in Brussels.
UK ministers will have to simultaneously negotiate the terms of the exit from the EU, lobby for and begin discussions about a new trade deal with the 27 remaining member states, do the same with every other country around the world, and begin reforming its own laws.
The mooted Great Repeal Bill will preserve EU law in UK legislation in one fell swoop, although this is still subject to the parliamentary scrutiny that almost derailed the so-called Brexit bill earlier in March.
A leaked European Parliament resolution suggested no free trade deal will be forthcoming in the next two years, and that any post-Brexit transition arrangement beginning in 2019 can last no longer than three years.
In particular, the resolution “opposes any agreement between the EU and the UK that would contain piecemeal or sectoral provisions, including with respect to financial services, providing UK-based undertakings with preferential access to the single market and, or the customs union” and “underlines that after its withdrawal the UK will fall into the third country regime foreseen in EU legislation”.
Steve Georgala, CEO at fund administrator Maitland, believes third-party passporting is highly likely. He said: “I can’t imagine the UK not being given the same third-party passporting rights as other European nations. The UK market is the most sophisticated and regulated jurisdiction in the EU. There is too much vested interest from both sides and people want to invest in the UK.”
He added: “Whilst it’s too early to predict the impact on passporting of financial service products from the UK into the EU, it is clear that market participants are already hedging their bets as they wait to see how Brexit negotiations evolve.”
“We do think the triggering of Article 50 will have a positive impact on our business and we have already seen an uptick in requests for our third-party ManCo in Luxembourg.”
The UK voted 52 percent to 48 percent in favour of exiting the EU in June 2016, after former Primer Minister David Cameron launched the referendum to appease eurosceptic Conservative colleagues.