“2017 may not have been fun for the UK; 2018 will be worse.” The conclusions of a global study of political risks make uncomfortable reading for the British government, with Brexit negotiations set to enter a critical phase this year.
The issues that must now be negotiated are too complex and the politics too divisiveGlobal political risk consultancy
The Eurasia Group – a leading political risk consultancy – puts the United Kingdom at number eight in its top ten list of global risks for this year. Its overall assessment of the world’s problems is bleak: despite an improving economy, “the global order is unraveling” and what it calls “geopolitical recession” is set to turn into full-scale “geopolitical depression”.
December saw London and Brussels overcome deadlock over the UK’s so-called divorce settlement relating to its departure from the EU, paving the way for talks to turn to future relations in 2018. However, “the issues that must now be negotiated are too complex and the politics too divisive,” the consultancy says.
The report warns that even issues that appear to have been agreed may still prove to be stumbling blocks.
“Northern Ireland will provide a major headache,” it predicts, saying it remains unclear how a hard border with the Republic can be avoided. Despite the UK’s commitment to keep the frontier open, the study says some type of border will have to exist and any special deal would set a “dangerous precedent” regarding other UK regions.
Negotiations over money are far from over, the Eurasia Group adds, suggesting that the deal struck so far is fragile and could unravel as “nothing is agreed until everything is agreed” – in other words, the UK will only pay its bill if it likes what it gets on trade. Even negotiating transitional arrangements after Brexit in March 2019 won’t be easy.
Will she stay or will she go?
Theresa May will probably remain prime minister in 2018, the report says – nevertheless it thinks Brexit could still cost her the job.
It describes two possible scenarios – each with “market negative” consequences – depending on what type of Brexit she seeks. A more “benign” situation would see May replaced by a Tory hardliner if she chooses to remain economically close to Europe, sacrificing sovereignty. In a more negative scenario, prioritising independence irrespective of economic risks could see a deal vetoed by a pro-“soft Brexit” parliament – ushering in a Labour government which the Eurasia Group believes “would hurt both negotiations with the EU and the UK economy.
Negotiations are set to consider post-Brexit transitional arrangements in the first quarter of 2018, followed by an outline of the future relationship. Brussels wants a final deal approved by the autumn, allowing time for the ratification process to take place before the UK’s actual departure.
The UK’s international trade minister Liam Fox has called for an end to “obsessive criticism” of Brexit, urging opponents of the country’s departure from the EU to “lift their horizons”.