In Other News – A View from Abroad – 9/1/2022

September 1, 2022

A View from Abroad
The first week of every month, In Other News will now feature a short op-ed heavily informed by the European perspective. We hope that these special monthly pieces will offer our readers an enriched understanding of global events and allow for a more robust international risk calculus.

Myriad challenges await the next UK Prime Minister, who will need to shape what Brexit looks like moving forward. On September 5, the prolonged Conservative Party leadership contest in London will conclude, and the next UK Prime Minister will be declared. On his way out, Boris Johnson hailed a victory for Brexit, but the new leader, likely to be current Minister of Foreign Affairs Liz Truss, will be welcomed by wide-ranging political and economic challenges that are being amplified by some of the Brexit policies. In particular, the issue of Northern Ireland will need to be effectively resolved for the UK to resume good relations with the EU. While long term political prospects for the Conservatives are uncertain, and another round of elections are required within 28 months, the UK’s economic security will be pinnacle to the next leader’s success.

Several years after Brexit, the UK has yet to implement effective import controls, and EU companies have easier access to the UK market than British companies to the EU. Small and medium UK enterprises are suffering from an enormous amount of red tape, and British exports and economic growth have stagnated. Further, in addition to serious global challenges like sharp inflation, rising interest rates, high consumer energy costs, supply chain disruptions, unstable exchange rates, personnel shortages, climate change, migration, steeply rising house prices and other knock-on effects of the Ukraine-Russia war, the situation in Northern Ireland is unique and it’s hindering opportunities for UK prosperity.

According to the Ireland/Northern Ireland Protocol under Brexit, Northern Ireland is granted access to both the British and EU markets, with corresponding export and import controls. But the British government has attributed problems in Northern Ireland to the agreement, and implementation of the Protocol remains politically fraught. Political standstill in Belfast is the result. The EU and the UK have tried to negotiate the issue, but with no success. A new phase in scientific corporation in the Horizon program has been put on hold and agreements in the financial and data-protection sectors are also stalled.

Further, both the UK and EU have accused each other of breaking earlier commitments, and it’s turned into a heated legal battle. The EU hopes that Washington will put pressure on London to help resolve the issue, but the UK government hopes the United States will refrain from doing so. This challenge awaits the new Prime Minister, but it also provides a chance to reestablish good relations moving forward.

Indeed, as the future of the Conservative party in the UK remains undetermined, and another round of elections will occur in just over two years, it’s likely that the new Prime Minister will move closer to the political center. Liz Truss, who was originally a Liberal Democrat and initially on the fence about Brexit, could be flexible enough to navigate the new political reality, but it remains to be seen if she can win in general elections against a newly invigorated Labor leadership that’s aiming for a united front with the Liberal Democrats. Regardless of who takes the helm, however, the next Prime Minister will be met with great demands and the critical opportunity to define what Brexit looks like in practice over the coming months.