Britain’s divorce from the EU is underway, but the complex negotiating process has just begun. We believe a mutually beneficial deal can be reached—as long as both sides focus on the risks of failure.

The phoney war is over. After Prime Minister Theresa May triggered Article 50 of the European Union (EU) Treaty, the clock is now ticking. Unless an extension is agreed, the UK will leave the EU in March 2019.

It’s probably not worth getting too excited just yet, though. Dissolving the 44-year long economic and political relationship will be a thorny process. The immediate focus of negotiations will be on the terms of the divorce—particularly the controversial bill the UK needs to pay to settle its accounts with the EU. This is likely to take priority over the nature of the future trading relationship between the UK and the rest of the EU.

SHORT WINDOW FOR A COMPLEX DEAL

Little substantive progress should be expected before Germany’s parliamentary elections in September. This leaves only a short window to negotiate a complex trade deal, and why most informed observers think a transitional deal is likely.

The jury is still out on the terms of the future trading relationship. The UK will prioritize immigration and judicial sovereignty over access to the EU single market. And the EU has, rightly, stressed that the UK can’t be allowed to cherry pick the bits of EU membership it likes, while discarding the rest.