If investors hoped for one thing after Britain’s shock vote to leave the European Union, it was clarity. But there is little.
Britain has so far been clear about what will not happen: Prime Minister Theresa May has repeated that the formal divorce notification will not be sent before the end of the year and that Britain will not get a bad deal.
“We will be getting the right deal for the United Kingdom and that is the right deal in terms of trade in goods,” May told the chiefs of Wall Street and major U.S. companies such as Citigroup (C) and Amazon (AMZN) in New York this week.
During her trip, May said the EU divorce filing would take a few months of preparation, was clear that Brexit would happen and sought to reassure the world that Britain was not turning away from the world.
Investors ranging from London-based banks and Wall Street to Japanese carmakers and small British businesses have repeatedly asked for reassurances from the British government over what Brexit will mean for them and when.
“The government’s ‘go slow’ negotiating approach, together with a reluctance to provide frequent updates, calms markets in the short-term,” Allianz economist Mohamed El-Erian said.
“To avoid disorderly volatility down the road, the government will need to pivot to a credible alternative to the current EU trading arrangements coupled with policies to compensate for possible growth shortfalls,” he told Reuters.
But aside from perturbed investors, Britain’s new leader must balance an abundance of views on Brexit: German and French leaders facing elections in 2017, a divided electorate that will vote again in 2020 and a strong pro-Brexit wing in her party and government.
May has made clear she will not give a running commentary on Brexit or lay out all her negotiating cards in public, though some aides have suggested her plan is to invoke Article 50 early in 2017.
“Prosecco Speed” Brexit?
Boris Johnson, the most prominent leader of the Brexit campaign and now May’s foreign minister, said Britain would trigger divorce by invoking Article 50 of the European Union’s Lisbon Treaty in a letter early next year.
“What we’re doing is talking to our European friends and partners now in the expectation that, by the early part of next year, you will see an Article 50 letter, we will invoke that, and in that letter I’m sure we will be setting out some parameters for how we propose to take this forward,” Johnson told Sky News television in New York.
When asked about Johnson’s comment, a Downing Street spokeswoman said: “The Government’s position has not changed—we will not trigger Article 50 before the end of 2016 and we are using this time to prepare for the negotiations.”
Article 50, a the 256-word provision drafted by a former British ambassador to the EU, has never been used so there is no legal precedent for how it works though it gives a two-year period to work out the divorce.
“You have two years to pull it off,” Johnson said. “I don’t actually think we will necessarily need to spend a full two years but let’s see how we go.”
Johnson gave few details about how to pull off one of the complicated negotiations in recent European history in such a short time. Some officials and lawyers say the negotiation could take much longer than the two-year window set out in Article 50.
He said Britain would benefit from greater free trade with the EU as it was in the interest of EU companies to give Britain, which currently accounts for about 15% of EU gross domestic product, a good deal.
“Not only do we buy more German cars that anybody else, we drink more Italian wine than any other country in Europe—300 million liters of Prosecco every year,” Johnson said.
But European leaders have been clear that there will be no freedom of access for British goods, services, and finance to EU markets without free movement for EU workers into Britain.
David Davis, May’s Secretary of State for Exiting the European Union, said earlier this month that the current system of free immigration from EU would be ended and that Britain wanted access to the single market without having to be a member of it.
There are signs of concern: When May met Shinzo Abe in New York, the Japanese Prime Minister raised the impact of Brexit on his country’s companies, asking for “due consideration to enable their businesses to continue.”
That followed a 15-page paper by the Japanese government which raised concerns about Brexit with both the British government and the EU.
“What Japanese businesses in Europe most wish to avoid is the situation in which they are unable to discern clearly the way the Brexit negotiations are going, only grasping the whole picture at the last minute,” Japan said.
“Uncertainty is a major concern for an economy; it evokes a sense of anxiety, causing volatility in markets, and results in the contraction of trade, investment and credit,” the world’s third largest economy said.