Brexit talks will need patience after Article 50 excitement

Ed Conway, Economics Editor

So that's it. The talking is over. Now, Britain is formally leaving the EU.

The more you think about it, the more significant this moment is.

For four decades, Britain's social and economic foundations have become more and more tightly integrated with the rest of Europe.

More than one in ten of all the laws passed in recent decades came from Europe.

Now that process will abruptly go into reverse.

The economic implications of this process are incredibly far-reaching: now that Britain can forge its own way, will it transform its economic model?

Will the process of leaving the EU damage the economy? Will all those predictions about a weaker economy and poorer household incomes come true?

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Tempting as it is to assume that once Article 50 is out of the way, we will finally get answers to these questions, I wouldn't be so sure.

In fact, the chances are the next few months will look rather similar to the last ones: we will still see lots of political noise as both the UK and the EU lay out their negotiating positions.

It will be hard, for some time, to get a sense of where things will end up (that is what happens with negotiations).

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And, in the absence of a sudden change of tack from either side, markets are likely to carry on what they've been doing since the dust cleared after the referendum: to tick over, until more clarity emerges about the eventual deal Britain will get.

Indeed, the parameters of the negotiations have been clear for some time: before any talks about the trade deal Britain could secure with Europe, some other things will have to be cleared up.

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Among these are: the divorce proceedings themselves; the question of a cash settlement between the UK and Europe; and the question of what happens to EU assets and, crucially, to EU citizens in the UK and UK citizens living in the EU.

There are big question marks over the land border in Northern Ireland.

So, for all the excitement over the Article 50 letter itself, the fundamentals are unlikely to shift in the coming days.

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Instead we will hear a lot about process.

We will hear about how the EU intends to respond, about how open they plan to be about their negotiating position, about the business to be discussed in the next summit in late April.

There will be some discussion over whether the UK can start discussions about future ties while also negotiating the divorce (Britain wants to, the EU is apparently reluctant).

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Such things are incredibly exciting to policy wonks but of less significance to normal human beings.

For most of us, what matters is that the economy has not fallen off a cliff in the wake of the Brexit vote, and is unlikely to fall off another one this week.

However, it is worth noting that the relatively robust economic growth has started to tail off in recent months.

Britain evaded a recession, but much of the consumer spending that fuelled growth in the second half of last year seems to be tailing off.

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Business investment is weak (as companies tread water to a degree as they try to work out the impact of Brexit).

Inflation is rising and wage inflation is staying put.

Probably, real wages are already falling.

In other words, the economic backdrop is likely to look a lot less rosy over the coming year or so. Not a crisis, but not the feelgood factor.

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That is somewhat inevitable. Until businesses and households have more sense of the eventual destination, they are quite rational to cut back on spending.

The bad news is that Article 50 and the Great Repeal Bill, which has its White Paper tabled tomorrow, are likely to leave the big questions unanswered.

We will need to be more patient.

You can't wind up a 40-year relationship overnight.

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