The government’s exit strategy from the EU faces obstacles as divisions grow within May’s party, and as Parliament gets a final say in withdrawal.

Strangely, progress on Brexit has occurred despite missteps on the part of the U.K. government. In fact, the missteps have had the consequence of forcing Tory Brexiteers to work more quietly behind the scenes.

British Prime Minister Theresa May lost a key vote on a bill to withdraw from the EU in mid-December. The House of Commons setback on Brexit means members of Parliament must approve any final deal with the EU before withdrawal begins. This vote will be a key piece of legislation that aims to transfer EU law into U.K. law when the country leaves the bloc in March 2019.

The setback for May comes after the U.K. and the EU secured a significant breakthrough in negotiations earlier in December. The key problem is the hard Brexit wing of the Tory Party, and the party remains divided on how the U.K. will leave the EU.

The agreement with the EU includes provisions to protect the post-Brexit residency of EU citizens in the U.K., and Britons living among EU member nations. This deal represented a full capitulation by the U.K. government to Brussels’ original demands. Britain also retreated on the resolution of the border between Northern Ireland and the Republic of Ireland. It was another classic example of what the U.K. government got wrong. Brexiteers thought Germany would intervene on Britain’s behalf on the border issue.

The first phase of talks was the easiest, and the coming trade negotiations will be much more difficult as the U.K.’s position remains weak. The EU’s initial offer was to reproduce the free trade deal with Canada. Such a deal would not cover financial services — a key concern for the London financial market. Negotiations will not be completed until March 2019, and a transition will take several years. It’s even possible that as this drags on, the next election will return to power a government that does not rely on votes in Parliament to take the next steps, as May’s government currently does. That would pave the way for a softer Brexit, which will be in everyone’s interest.

The coming trade negotiations will be much more difficult as the U.K.’s position remains weak.


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The acceleration in global growth witnessed in 2017 will continue well into 2018, but with significant changes in its components.