Tough Times For The Brexit Queen

Ever since Theresa May became Britain’s prime minister in the wake of last year’s fateful EU referendum, she has sought to define herself—and her government—as something more than just the executors of the “people’s will” in carrying out Brexit.

Theresa May’s legacy hinges on how she handles Brexit.

Yet the shadow of that vote hangs over everything she does: At the EU council meeting in December she cut a lonely figure, as other EU premiers chatted to one another.

Even her broadly successful meeting with Donald Trump in Washington a month later was seen through the prism of Brexit, with the British media asking whether she would be entertaining Trump if she weren’t so desperate for a UK-US trade deal. Although she may be loath to admit it, Brexit will be her defining legacy, however it turns out.

All pretense will have to be cast aside as May triggers Article 50, starting the two-year process to leave the EU. She will do so as economic dark clouds start to gather, ending a surprisingly benign nine months, when UK companies performed better than anyone had dared hope.

Food and fuel prices have since risen, resulting in inflation rising by 1.8% in the year to January 2017, with forecasts of 3.5% inflation possible by year end, reflecting the 15.7% depreciation that has hit sterling since June. Consumer spending, which has been the biggest driver of the UK economy, is slowing, with retail sales falling 0.3% in January instead of rising by almost 1% as expected. The contraction comes on top of a 2.1% decline in retail sales in December.

Meanwhile, General Motors has entered talks to sell its European arm, Opel-Vauxhall, which employs more than 4,500 workers in the UK, to France’s PSA Group (formerly Peugeot Citroën).

Many fear the new owners may close the UK operations arm given future uncertainties. And this is just the start, before talks begin and investors start to panic at what the future may bring.

The British premier has earned a reputation for being cautious, but many also fear she is unimaginative and unyielding. A late, but now apparently enthusiastic convert to the Brexit cause, May could come to realize that its illusory gains—control over Britain’s borders and courts—are not worth the very real price of losing free access to markets, which account for two thirds of British GDP.