ASG Analysis: Theresa May's New Cabinet: What's Next for Brexit

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Brexit: What to Expect From the New Cabinet

Last week, newly minted UK Prime Minister Theresa May appointed a portion of her cabinet. Over the next weeks, ASG will outline Brexit implications for leading sectors in the UK and EU, including issues surrounding the movement of personnel.

This is a Brexit government, with an ambitious, domestic goal of appealing to working class citizens who voted on jobs and immigration. These issues will be at the heart of the PM’s domestic agenda. Other issues will intrude, however – terrorism, global economic issues, and Russia, for instance.  This government is, with one exception, workmanlike and adaptable at the top, but its ability to project and hold its agenda as events bring other issues to the fore will be tested. Additionally, as Global Counsel in London has pointed out, the PM is changing how the UK government is organized internally, and that will create strains on implementation.

Key appointments to the cabinet include:

  • Phillip Hammond as Chancellor of the Exchequer. Hammond is seen as a safe pair of hands in government, and is expected to be technocratic and methodical in his guidance of the UK economy. His European experience has led him to advocate for bilateral conversations with key countries in Europe to explore the kinds of relationships the UK can have, beyond the constraints of Brussels.
  • David Davis as Secretary of State for Exiting the European Union. Davis will lead the Article 50 negotiations with the EU as the so-called Minister for Brexit. He has called on the government to trigger Article 50 “before or by the beginning of next year” so as to leave the EU by December 2018. Davis’ stated preference is to secure continued tariff-free access to the EU single market – a model that may prove difficult given the government’s stance on immigration controls but that reflects his opening position that Europe will want to accommodate Britain.
  • Liam Fox as Secretary of State for International Trade. The UK will not be able to sign trade deals until it formally leaves the EU, but this has not prevented Fox from initiating informal negotiations with 12 trading partners over the weekend, including Australia. Fox has announced his intention to have trade deals ready to “the point of signing” by the time Brexit negotiations conclude. Talk of early progress, however, may prove overly optimistic. The UK lacks a bench of trade negotiators and getting to a final agreement is notoriously difficult – just look at the Transatlantic Trade and Investment Partnership or Canada’s free trade agreement with the EU.
  • Boris Johnson as Foreign Secretary. The appointment of the outspoken former mayor of London surprised many. At the heart of many Brexit appeals was the idea that the UK would be more influential globally without a voice in Europe. The face, and hair, fronting that effort will be heard – he is too intriguing to be ignored. Johnson, however, has no track record of engagement on foreign policy and will work without line control over trade, aid, defense, and the relationship with Europe, which has long been the epicenter of British foreign policy since, well, since the kingdom was united. Johnson’s appointment is the clearest example of binding the Brexiteers to the process of Brexit while limiting their individual influence on the process. Johnson’s first meeting with the U.S. Secretary of State is scheduled for Tuesday. We anticipate strong affirmation of the special relationship rhetorically – even though the U.S. was clear that the relationship would be harmed by Brexit – and careful attention to non-European work central to the bilateral relationship, in particular in the Middle East.
  • Greg Clark as Secretary for the Department for Business, Energy and Industrial Strategy. This post was created as a result of a merger between the Department of Energy and Climate Change and Department for Business, Innovation and Skills, with the goal of developing a proper industrial strategy to get the whole economy firing. This will be a critical effort to form a new voting alignment in the UK, along with migration policy.

What’s next?

May is expected to complete her cabinet early this week with largely domestic focused posts. She will also travel abroad for the first time as PM, first visiting Berlin on Wednesday to begin informal talks with German Chancellor Angela Merkel, before visiting Paris the next day to meet with French President Francois Hollande.

Fox will begin to assemble staff within the newly created Department for International Trade, tasked with negotiating trade deals and absorbing the trade promotion responsibilities of the UK Trade and Investment Department. This will be challenging given that the UK ceded much of its trade function to Brussels when it joined the Union, leaving few trade experts in the UK able to assume key roles.

Davis will begin standing up the newly created Department for Exiting the EU, which will have the critical job of managing the legal and regulatory process of detangling the UK from the EU. Both of these departments will play a key role in the upcoming negotiations, and will be important for businesses to watch, and engage with, in the coming months.