What happens once Theresa May triggers Article 50?

The government has committed to triggering Article 50, formally starting Brexit, by the end of this month. This means that Britain will be outside the European Union by spring 2019, unless both sides agree to extend negotiations or to introduce some sort of phased withdrawal. Last night's defeat for the Government in the House of Lords won't affect this timetable: either there will be a concession to address the concerns of peers, or the House of Commons will reject the amendment.

So far, Brussels and EU member states have broadly held the position that Brexit negotiations cannot start until the UK notifies them of its intention to leave. Nonetheless there have been some gambits from Europe—most significantly the Commission’s argument that Britain will have to pay a “divorce bill” of around €60bn, and the often-repeated line that the UK cannot have as good access to the single market from outside as it does from inside.

The first stage of negotiations will be to agree the form that the process itself will take. Discussions to this end will probably coincide with the period of elections in France and Germany. By the autumn, elections will be out of the way and negotiations proper can begin. The European Commission wants first to resolve Britain’s outstanding financial liabilities—the €60bn question—before discussing any future arrangement on trade and other cooperation. The UK argues both deals must be negotiated in parallel.

Over the next few weeks we will find out which side wins the struggle over process but there is some suggestion that Europe’s biggest power, Germany, supports parallel discussions. In July last year, at a joint press conference in Berlin with Theresa May, Angela Merkel went out of her way to call for “parallel processes.” She said: “you cannot completely cut off the bonds [with the UK] and then after a long winding negotiated process come up with how one sees the future relationship.”

Divorce battles often come down to money and Brexit seems likely to follow that pattern. In a bizarre move the Commission’s spokesman has even compared the divorce bill to a situation where you go “to the pub with 27 friends: You order a round of beer, but then you cannot leave while the party continues; you still need to pay for the round you ordered.” The analogy—which evinced confusion about how rounds work—would be read rather differently in the UK. People would ask why the UK was paying for 27 friends in the first place. And that’s exactly the problem: the UK is one of the EU’s most important net contributors and so resolving the question of money is very important to Brussels.

Equally, the question of the UK’s EU contributions was central to Vote Leave’s winning campaign and so it would be difficult for May to sign a huge cheque without securing significant pro quos for her quids. And this debate is just about meeting our current commitments. What we will pay in future in another question altogether. Still, there’s surely a way through, with the UK paying for bits of its new “strategic partnership” with the EU, on defence cooperation and joint research programmes for example.

The question of the rights of EU citizens will be high on the negotiation agenda. Theresa May has so far refused to guarantee that EU citizens can remain in the UK unless she can secure reciprocal protections for UK citizens currently living, working and studying in the EU. The major roadblocks to agreeing this have reportedly come from Germany and European Council President Tusk. Yesterday the House of Lords insisted that the Government offer protections now for EU citizens here in Britain. It's possible that MPs will over-turn the Lords. Either way there's an obvious solution to be reached: Commission sources suggest that UK nationals in the EU will be given residency rights for a specific country and we will surely end up with Britain offering EU nationals already here equivalent rights.

In terms of the actual discussions, the key interlocutor from the EU side is Michel Barnier: the European Commission’s Brexit negotiator. Often painted as a dangerous Britain-hater by the UK media, he’s a seasoned Brussels man. From the UK side, Olly Robbins, a polished and very amusing Whitehall high-flyer, is the most important official. He is the Prime Minister’s “Sherpa” or diplomatic representative during the negotiations, and will be supported by the respected new UK ambassador to the EU, Tim Barrow.

How will the discussions go? All of this is uncharted territory: no country has ever left the EU and Article 50 has never been used before. That’s both an advantage and a disadvantage. It’s therefore very hard to make any confident predictions. We might be done and dusted in time but we also know the government has floated the idea of transitional phasing over certain areas including migration controls.

Businesses will rightly want to have the greatest possible clarity about what’s going on to allow them to make plans. But the UK government will be determined to keep its cards close to its chest to avoid weakening its negotiating position.

At Tuesday’s Cabinet the Brexit Secretary, David Davis, instructed his colleagues to make preparations for what he suggested was the “unlikely” event that the UK and EU fail to reach a deal. A couple of things are going on here. Firstly, the UK Government is acting tough and playing “bad cop”. The briefing of this story is designed to add credibility to Theresa May's threat that no deal is preferable to a bad deal. In a negotiation you never want to give the other side the impression that they have you over a barrel. Secondly, Davis’s instruction is  sensible in policy terms. If the UK does fail to reach a deal, careful planning could mitigate many potential problems and uncertainties.

Two years doesn’t leave much time. If we wind the clock forward to September, when we will know who is running the EU27’s two biggest powers, only 18 months will remain. Although we know some of what the UK wants out of its future relationship, the EU itself doesn’t have a settled vision of what sort of organisation it will be in the future—let alone how Britain should relate to it.

There’s an enormous amount to get done: here in the UK with crucial votes in parliament on the enormous Great Repeal Bill (really about bringing EU law en masse into UK law), at the negotiating table in Brussels, and in member states themselves (which may have to ratify an agreement and pass domestic laws). What we do know is that there’s every economic reason to get a strong deal. Politics will, however, matter more than economics in the months ahead. And politics is in flux right across Europe.