It’s been only three weeks since the EU referendum and Britain seems to be already changing dramatically. Theresa May has already become the second woman Prime Minister in the UK’s history after Margaret Thatcher and following the resignation of David Cameron last Wednesday. The Former Home Affairs Secretary has started now forming the new government in the UK. The personalities that Theresa May decided to appoint in neuralgic positions had openly supported the Brexit vote, which reveals that the new government will undeniably support the outcome of the referendum, beyond any shadow of doubt. Besides, Theresa May herself stated that even if she was in favor of remaining in the EU, she will respect the crystal clear will of 17.410.742 British people.
UK forms a new Brexit government
Britain shows to have received the message of the financial markets and of the EU leaders. The sentiment of uncertainty is the main driving force that urges UK to start the negotiations for leaving the bloc as soon as possible. The latter has been a top priority for Theresa May who is making drastic changes to her new cabinet.
David Davis is appointed Secretary of State for Exiting the EU, a position that was created especially for the purposes of the Brexit negotiations. It must be also stated that Mr Davis was in favor of the Leave campaign, which makes also clear the intentions of the UK government. Philip Hammond is replacing George Osborne as the Chancellor of the Exchequer and will have to carry the burden of reviving the national economy. Boris Johnson, the former Mayor of London who leaded the Brexit campaign, is unexpectedly and paradoxically named Foreign Secretary and will be responsible for UK’s diplomacy globally. What is more, Liam Fox, a leave campaigner, will be the person in charge of the international trade ministry.
All the above personalities are among the key figures to consist the British government supporting Theresa May at this critical point in time and create the path for a hopefully smooth and successful exit from the EU.
Does the new government have what it takes?
The new UK Prime Minister seems to be ready to do whatever it takes to get the most out of the upcoming Brexit. As Theresa May stated earlier this week: “Brexit means Brexit and we are going to make a success of it.” But how exactly can Armageddon be smoothly implemented?
David Davis is certainly going to play a key role to that. A “revealing” article written by the “Brexit secretary” was published last Monday on the Conservative Home website. Mr Davis mentions there that Britain should be absolutely ready before triggering Article 50 of the Lisbon Treaty and lists some of the tools that Brexit provides to the national economy.
More specifically, David Davis supports a more export-led economic strategy based on higher productivity employment and more beneficial global trade agreements.
UK can cut trade deals with nations such as China, U.S. and India faster (within a two-year time) compared to the EU whose deals take many years to be concluded. The latter is supposed to bring more investments into the UK, significantly reviving its economy.
Furthermore, cutting taxes will create a more appealing business framework which will have a positive impact on economic growth. More in detail, the veteran Eurosceptic said that: “We should also continue with the programme of lessening the tax burden. In particular, I would focus on reducing taxes that have a deleterious or distortive effect on growth. The tax gained from companies moving their operations to the UK, through the people they employ and the sales they generate, will more than offset any reduced corporate tax take”.
However, even if UK makes the most of trade agreements with potential partners, it will be very difficult and will certainly need time to replace or substitute a partner of the size of the EU, which covered almost 44% of the UK exports in 2015. That reveals the magnitude of how important is the trade partnership between the EU and Britain and how difficult will be the Brexit negotiations.
Bank of England is not reacting as of yet
The Bank of England decided that it is not the time to further cut the interest rates (0.5% since 2009) and also maintained its Quantitative Easing (QE) programme at £375 billion.
The Monetary Policy Committee (MPC) voted by a majority of 8-1 and decided to provide economic stimuli but will review its policy in August 4, in accordance with its forecasts. The announcement has most likely confused Philip Hammond who was expecting a cut at the cost of credit and an expansion of the QE.
Next EU summit on Brexit
The French President François Hollande announced last Wednesday, after Theresa May became British Prime Minister, that the European leaders will convene in Italy at the end of August. Apparently, the EU leaders don’t want to lose any valuable time and are willing to start Brexit negotiations even during summer vacations.
However, it will be up to Theresa May to decide when Britain is ready to trigger Article 50 and hence kick off the negotiations of leaving the European Union.
All in all, it seems that the pressure that is being exercised upon the UK now is changing the political outlook very rapidly. The new government of Britain is staffed with strong tory personalities and will presumably give the fight for a better future for the country. And as the new UK Prime Minister said in an attempt to be more socialist than conservative: “We will make Britain a country that works not for the privileged few but for every one of us”.
The big dark question of the story always remains though why Boris Johnson did not want to become Prime Minister but was OK to be Foreign Secretary of a Brexit government. Reason and insanity have become one in UK politics lately.