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Theresa May's pledge to deliver Brexit is about to encounter a big hurdle

Britain had a tough time finding common ground when it intended to remain in the EU – it's going to have an even tougher time now

Thursday 28 July 2016 17:00 BST

Theresa May meets with German Chancellor Theresa May to discuss the terms of Britain's withdrawal from the EU (Getty Images)

Theresa May has spent the last few days talking to various European leaders about the terms of Britain's withdrawal from the European Union.

On Thursday, the prime minister will head east where she will meet with the leaders of Slovakia and Poland —Robert Fico and Beata Szydlo. It is on this leg of her European tour that May is set to face her toughest task yet.

Slovakia and Poland — like the rest of the nations in eastern Europe — are completely at odds with one of the key reasons Britain voted to leave the EU: the free movement of people.

6 ways Britain leaving the EU will affect you

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1/66 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more

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6 ways Britain leaving the EU will affect you

No immediate change in immigration status

The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay

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6 ways Britain leaving the EU will affect you

Higher inflation

A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum

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6 ways Britain leaving the EU will affect you

Interest rates might rise

The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output

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6 ways Britain leaving the EU will affect you

Did somebody say recession?

Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018

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6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget

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One of the major reasons Leave politicians and supporters cited for backing a Brexit was Britain taking back control of its borders. As things stand, EU citizens are free to migrate around the 28-nation bloc as they please.

The hope of British government is that it will be able to negotiate a Brexit deal with the EU which means it will retain access to the single market without having to sign up to the rules and obligations of the free movement agreement.

However, as leaders of eastern European nations, Fico and Szydlo are extremely unlikely to be supportive of this sort of arrangement. Their close ally, Czech Republic, has already warned that it would not back a deal which would entitle Britain to single market access without a commitment to the free movement of EU citizens.

"For the new arrangement, we will have two red lines: One, the four freedoms work together and cannot be separated," Czech Europe minister Tomas Prouza said last month. "And two, reciprocity: the same advantages for both sides."

Jean-Claude Juncker, the President of the European Commission, has also told Britain from the start that the country would not have access to the single market without accepting freedom of movement.

"There will be no access to the internal market for those who do not accept the rules – without exception or nuance – that make up the very nature of the internal market system," Juncker said.

Theresa May says she has an 'open mind' over Brexit negotiations

Then there is the important issue of the rights and benefits of eastern Europeans currently living in the UK.

It is estimated that 1.2 million eastern Europeans currently live in the UK, many of them coming from Slovakia and Poland, according to the Financial Times. Eastern European leaders are worried that the rights of these people could be damaged if Britain manages to pull out of the free movement agreement.

"For the Polish government," Szydlo said last month, "the most important issue will be the fate of Polish citizens who live in Great Britain. We will try to negotiate that they maintain the privileges they got on their arrival."

Fico, Szydol, and other leaders probably have every reason to be concerned, given the confusion which surrounds the future of EU nationals living in the UK at the moment. Speaking on ITV earlier this month, May refused to guarantee the rights of EU nationals to stay in the country once a Brexit is officially underway.

Slovakia, Poland, Czech Republic and Hungary all blocked David Cameron's attempts to curtail benefits for migrant workers during the former prime minister's efforts to renegotiate the UK's EU membership earlier this year.

The situation has not changed. Britain had a tough time finding common ground when it intended to remain in the EU, and it's going to have an even tougher time doing so now it wants to leave.

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Read the original article on Business Insider UK. © 2016. Follow Business Insider UK on Twitter.

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