Brexit Update 10th August 2018

Top 3 developments  

• • EU considers UK proposals on Goods
  • CBI calls for scrapping of immigration targets
  • Rail Delivery Group proposes customs solution to freight build-up

UK Update

The Cost of Compromise

Following a diplomatic effort by the UK, EU leaders are said to be considering offering greater flexibility to UK proposals set out in the Chequers White Paper. Chief EU negotiator, Michel Barnier, previously described the proposals as ‘unworkable’, but proposals for the UK to remain in the Single Market for goods are said to have gained support from EU27 leaders according to the Telegraph. The cost of doing so is likely to be continued acceptance of EU standards on environmental and social protections – with guarantees that the UK will not diverge in the future. The Chequers White Paper however seeks to allow for future flexibility, despite warning of the ‘consequences’ of doing so. In support of future changes, Conservative James Cleverly MP, has said that “you can unmake treaties” when it’s in the UK’s interest to do so. Such stances however concern the EU, wary of future disruption, meaning leaders are likely to seek binding commitments if access to the Single Market is to be allowed.

UK Government digs heels in with no-deal warnings

Talk of a no-deal has been stepped up by the UK ministers, with former Brexit Secretary David Davis stating that the EU would be making a ‘massive miscalculation’ if it thought the UK won’t walk away without a deal. International Trade Secretary, Liam Fox, also said a no-deal scenario was now ‘odds on’ given ‘EU intransigence’, sending the pound tumbling. The remarks follow Foreign Secretary, Jeremy Hunt’s, warning that both sides were moving towards ‘no-deal by mistake’. The Government has also announced the future publication of 70 technical papers designed to prepare UK businesses for a no-deal Brexit, which are set to be released in September. Whilst HM Treasury will begin to put in place contingency arrangements for the financial services industry, including statutory instruments to protect capital markets and others. All of this culminates in a hardening of the UK position around the Chequers White Paper, with ministers digging their heels in as the EU prepares to issue its formal response in September.

Failure to reach compromise, in support of an agreement being formed, is likely to trigger increased preparations by both sides. However, all sides remain committed to a deal being reached and negotiating efforts have been stepped up as a result. September and October remain crucial months in determining the likely outcome of negotiations.

Rail plans to keep trade moving

The Rail Delivery Group (RDG) has called for customs areas to be set up around freight terminals in the UK to prevent build-ups at the Channel Tunnel. The creation of railway customs areas (RCAs) “would avoid the need for a single border checkpoint” according to the group, which brings together passenger and freight companies as well as National Rail. HMRC has said that it has plans in place “regardless of the outcome of negotiations” to deliver a “functioning customs, VAT and excise system that enables trade to flow” whilst “maintaining a secure border”. Combined, the plans represent some of the solutions likely to be discussed in conjunction with the final UK-EU agreement. The release of the governments Joint Rail Data Action Plan this week, which encourages the sharing of real-time data by rail companies is also expected to be capitalised on, allowing for data collection, storage and publication by UK based companies using rail networks.

Scrap migration targets says CBI

The Confederation of British Industry has called on the government to scrap net migration targets and instead introduce a system that “ensures people coming to the UK make a positive contribution to the economy.” Government policy since 2010 has focused on bringing net migration down to “the tens of thousands” from current levels. 2017 saw net migration at 282,000. The group further called for EU nationals to fall under the same rules as non-EU citizens which would mean they would have to leave after three months if they aren’t working, studying or able to maintain self-sufficiency.

The Migration Advisory Committee is currently undertaking an assessment for the government on the contribution EU citizens make to the UK. Following this, the government will set out its plans in the Immigration Bill, “taking account of the UK’s social and economic circumstance and our discussion with the EU around our future relationship”. The Chequers White Paper proposes visa-free travel for tourists and short-term business travellers. However, decisions on seasonal workers and others is yet to be decided, leaving business wondering how they will respond if additional restrictions are introduced.

Scotland delays decision on Indy Ref 2

Following a meeting with Theresa May, Scottish First Minister Nicola Sturgeon has told the Scottish Parliament she will delay a decision on a second independence referendum until October at the earliest. The decision is set to coincide with the UK Government’s planned announcement outlining the deal reached with the EU on the future relationship framework and withdrawal agreement – if one is achieved. Sturgeon said she remained “hugely sceptical” that the Chequers agreement would form the eventual basis of the UK’s deal with the EU. The likelihood of a second independence referendum is likely to rest on the outcome of any UK-EU negotiations.

Conference showdown

Labour leader Jeremy Corbyn is expected to face a showdown with members in September when they are expected to table a motion for the party to support a second referendum. The motion, drafted by Labour for People’s Vote, is said to have the support of 63% of Labour Party members, around 130 constituency Labour branches as well as several MPs.

If a full debate is allowed and a vote occurs, the leadership will not be obliged to adopt the outcome as policy. However, defiance of the membership is unlikely to end well for the leadership. The leadership may now seek to propose a neutral motion that defuses the debate, allowing for a second vote as a last resort once other means have been exhausted, such as a move to remain in a customs union. The second referendum, if ever initiated, is likely to offer acceptance or rejection of the final agreement, with a proposed third option of remaining in the EU – which neither Labour or the Conservatives currently support.

Former Airbus CEO criticises UK procurement position

Robin Southwell, former Airbus CEO, has criticised the Government for awarding billions of pounds of public procurement contracts to EU companies, despite UK companies being restricted from doing the same in the EU. Whilst the UK has been restricted access from working on the Galileo project, £3 billion has been awarded to a German consortium supplying the British Army with Boxer multi-role vehicles. The contract however, will be fulfilled with around 60% of parts supplied by the UK’s BAE systems, creating around 1000 jobs. Southwell, who is a business ambassador for the Prime Minister, has said the UK needs to use the contracts as leverage to ensure UK businesses can continue to bid on EU contracts. According to the Time the MoD has said preparing the UK’s armed forces should take precedence and outweigh concerns over EU contracts.

Upcoming Key Dates

• • 18^th October: EU Council Summit, including sign off of the EU Withdrawal Agreement
  • 29^th March 2019: UK planned exit from the European Union
  • 30^th March 2019: UK planned transition period.
  • 31^st December 2020: UK planned exit from the transition agreement.