Theresa May may have triggered article 50, yet negotiations cannot effectively start until the EU political landscape has settled. Indeed, with major elections being held across the continent, most notably in France and Germany, 2016 is proving to be an eventful (if slightly chaotic) year that could well spell success or failure for a UK deal.
An arena where anything goes
Over the past few weeks the four lesser horsemen of Panic, Bias, Ignorance and Shouting took control over the political debate in France, tainting it with scandals in the press and online troll operations to the point that it has become difficult to decipher the candidates' positions on a number of crucial topics, including their stance on the EU. The UK government is holding its breath however, as it is not too far-fetched to say that the stance of France's future leader, whomever they might be, will play a large part in dictating Brexit negotiating terms.
Out of the four main candidates whom, according to the most recent polls, have a shot at qualifying for the second tour (François Fillon, Emmanuel Macron, Marine le Pen and Jean-Luc Mélenchon), there is no ideal situation for the Brexiteers. There are, however, options that would hurt the EU's bargaining power in the sense that a weakened alliance isn't as formidable an opponent as a cohesive bloc of solidarity. Depending on the outcome, the potential exodus of companies from the UK towards the continent could also be reversed.
Status quo vs. paradigm shift
At first glance there is a clear schism between Emmanuel Macron and François Fillon on the one hand, and Marine le Pen and Jean-Luc Mélenchon on the other. Essentially, although each candidate prones a deal that should benefit France, it boils down to continuity and a statu quo regarding the state of the EU in terms of membership versus a new paradigm which could lead to an eventual disembodiment and crumbling down of the union.
"Populist and nationalist ideas are cutting the continent in half, they are the pinch of the hourglass."
Marine Le Pen puts forward economic protectionist measures, instauring trade barriers, tightly controlled immigration, and calls for nations to regain their sovereignty as well as a Frexit referendum (and we don't need to remind to anyone here what sort of results such a referendum is likely to produce). Le Pen's program relies heavily on leaving or at least renegotiating the terms of the EU partnership. As has been the case in history, both recent and century-old, populist and nationalist ideas are cutting the continent in half, they are the pinch of the hourglass. Jean-Luc Mélenchon has a similar approach, presenting the EU as being anti-democratic and tyrannical: his complete rebuttal of European treaties (stability pact, TAFTA, CETA, TISA) and calls for disobedience of the agreements in place and general strategy of being a wild card could end up in an exit referendum (again, likely to happen if put to the vote). He aims to negotiate, and negotiate hard. His meteoric rise in the polls over the past few weeks has made markets wary.
On the other end of the spectrum we have the liberal Emmanuel Macron, the only truly pro-european candidate, seeking a greater partnership with Germany (following up on Hollande's plea for a two-speed Europe at the Versailles summit last March?). His vision is one of a powerful and reinforced EU, he has stated that France would welcome UK talent, and he will defend a harsh negotiation line with the UK "Britain should not get preferential treatment after it leaves the block". As for François Fillon, there would be no talk of France leaving the EU either. Aside from a few sovereignty adjustments and a focus on immigration and security, few changes are to be expected. In terms of Brexit however, he is against the delivery of a financial passport and in favour of swift negotiations, and although he does believe in firmness he will seek to maintain a strong bilateral relationship.
"Britain's short term interest could seemingly lie with the victory of Marine Le Pen or Jean-Luc Mélenchon, a result that would weaken the EU and potentially open the door to separate trade agreements with France"
Britain's short term interest could seemingly lie with the victory of Marine Le Pen or Jean-Luc Mélenchon, a result that would weaken the EU and potentially open the door to separate trade agreements with France, but only on the condition that there would in fact be a Frexit, and that protectionist measures do not affect trade too much. However this would open the Brexit Pandora's box even further and pave the way for even more isolationism from each country in the EU, fostering doubt on the markets, weakening Europe as a whole and leaving it vulnerable to economic, political and diplomatic pressures from powerful outsider states. This, in the long run, makes for a dangerous playground, as Britain and the EU will still need each other commercially: further uncertainty is sure to be detrimental to all parties. Realistically, and given the EU's negotiation history over large-scale issues, Britain should hope for the victory of either one of the more "stable" candidates (Macron or Fillon), even though an easy way out will never be on the table, a stable outcome would be preferable to an all-out reshuffle of the powers in play.
What consequences can result for UK based companies aiming for the continent and French businesses considering leaving France?
From Britain's point of view, one of the main issues remains the uncertainty, be it economic or legal, be it through industry specific issues (financial passport for banks, airlines having to relocate headquarters or sell shares to continue operating on European routes etc.) or through the prism of the current not so reassuring general feeling of "what will happen next?". Talks of headquarters and jobs relocation have not fallen on deaf ears and both France and Germany are actively campaigning to entice UK-based businesses (especially the startup scene) and entrepreneurs to relocate and create value. This, in France's case, could very well change however should Emmanuel Macron or François Fillon fail to win the election. In fact, the exact opposite may happen: Marine Le Pen's domestic economic program would be a disaster and Jean-Luc Mélenchon's is likely to provoke further uncertainty in regards to France's welcome capacity (aside from promising opportunities in the renewable energies fields) and both capitals and workforce might then try looking at greener pastures.