Brexit Update – 12th January

By January 12, 2017UK

 Top 3 Developments

Legal headaches

The verdict from the supreme court case is due shortly – with ministers preparing for a loss. So much so they have drawn up at least two versions of a bill that could be tabled after the ruling and processed quickly through the House. This isn’t the only legal woes that the Government face, a pressure group called British Influence are also pursuing legal action against the Government in regards to leaving the single market. The case is due to be heard next week, but it’s thought that further legal action could be heading the Governments way.

Changing of (EU) guard

Sir Ivan Rogers, who was due to leave his post in November, resigned as the UK’s permanent representative to the EU.

Number 10 moved quickly and named Sir Tim Barrow as his replacement, dismissing the resignation as simply Sir Ivan leaving early. However, his resignation will be a loss to the Government, and by highlighting a number of concerns that many have voiced of late when he spoke of ‘ill-founded arguments and muddled thinking’, there are worries of long and difficult negotiations ahead.

Brexit Backlash

May gave her first interview of the year to Sky News over the weekend with the aim of offering clarity on Brexit negotiations. In alluding to leaving the single market but not explicitly saying so, there remained an air of ambiguity that fed into Monday’s big policy announcement on the shared society. It has since been announced that May will be making a speech next Tuesday to talk about Brexit and her plans to actually offer more detail, it seems she can’t – or won’t – quite hit the nail on the head just yet.

UK Update

Great Brexpectations

The Prime Minister is expected to make a keynote speech next Tuesday setting out her Brexit strategy. She is set to reiterate the UK’s desire to control immigration and the desire to remove the UK from the jurisdiction of the European Court of Justice. There are also set to be some olive branches extended – with a nod to the areas where the UK wants to continue cooperation, particularly those policy areas which transcend borders – security, science and law and order.

The decision may define whether or not May can stick to the self-imposed deadline of triggering Article 50 before the end of March 2017.

The Government will then follow with the much-awaited publication of the Industrial Strategy paper, which will serve as a means of consulting with and engaging the business community on the UK’s long-term approach to supporting economic development across the regions and harnessing high-growth sectors.

Sterling takes a pounding

The fragility of the pound against Brexit-related uncertainty was especially apparent in the last few weeks. Despite the Prime Minister’s Christmas message that sought to unite the country, her comments in the New Year that Britain will not attempt to cling to “bits of EU membership” and the subsequent media murmurings of a ‘hard’ Brexit, meant that the pound traded against the dollar at its lowest level since late October.

The pound has tended to suffer every time hints that the UK could leave the single market have emerged. Although May will argue that single market access is not a binary choice, the difficulties she faces were highlighted by Jonathan Faull, formerly head of the European Commission taskforce on negotiating the reform package to convince the UK to stay in the EU before the referendum. He disputed Brexit Secretary’s David Davis MP’s suggestion last month that the UK could pay for privileged access to the single market, saying that this “is not something that’s on sale”.

Corbyn’s movement chaos

This week, Labour leader Jeremy Corbyn attempted to relaunch his embattled leadership with a major speech on Brexit. Despite briefings in the media prior to the speech which suggested that he would propose controls on freedom of movement from the EU, a change in position on this issue did not materialise. In fact, many interpreted the Labour leader’s speech as confusing the party’s position on this key issue further by saying “Labour is not wedded to freedom of movement for EU citizens as a point of principle, but I don’t want to be misinterpreted, nor do we rule it out”.

Many commentators have suggested that Corbyn’s speech highlighted the Labour Party’s ongoing struggles to hold the Government to account over the pending Brexit negotiations. Indeed, many of his comments related to Brexit were in fact overshadowed by the allegedly unplanned announcement of a cap on maximum earnings, which was swiftly clarified by his team later in the day.

Several days prior to Corbyn’s speech, the Deputy Leader of the Labour Party, Tom Watson, also failed to provide clarity on their position on freedom of movement, suggesting that it was “unfair” for the party to be asked this before the Prime Minister had set out her position.

Immigration Skills Levy? Maybe not…

The Government experienced its own freedom of movement confusion this week. Immigration Minister Robert Goodwill briefly caused a business backlash by suggesting that employers could have to pay a £1,000-a-year levy on every EU skilled worker they recruited. He suggested to members of the House of Lords that a so-called “immigration skills levy” could be introduced to encourage businesses to employ British workers.

Number 10, however, later played down Goodwill’s statement, clarifying that the Home Office is considering a “whole range of options” to reduce immigration.

Carney warns EU of Brexit risks

In what has been described by some in the media as a significant change of position, the Governor of the Bank of England, Mark Carney, stated that Brexit is no longer the biggest risk to the UK’s financial stability and highlighted instead the risks that Brexit poses to the financial stability of the EU. The Bank chief explained that the UK’s financial services sector provides a great deal of liquidity and capacity support for the EU and highlighted that a break in this could be damaging for EU Member States.

Appearing before the Treasury Select Committee, the Governor explained that the measures that the Bank had taken since the referendum, including the interest rate cut and the extra liquidity made available to banks and businesses, had worked. Additionally, in news that will be welcomed by Number 10 and the Treasury, Carney explained that the Bank was looking at upgrading its UK economic forecasts for 2017 following the recent publication of a range of positive economic data.

Independence? Not yet!

Meanwhile, Scottish First Minister Nicola Sturgeon explicitly ruled out holding a second referendum on Scotland’s independence this year. This is despite the Scottish Government having already drafted legislation and Nicola Sturgeon repeatedly warning the Prime Minister that she was not ‘bluffing’.

This news comes after the First Minister published a paper at Christmas that suggested Scotland could adopt a ‘Norway-style’ plan. This would mean Scotland remaining as part of the UK, but still having access to the single market. However, this has been strongly criticised by senior Norwegian politicians who say it is impossible.

 

European Update

EU Presidential hopefuls unified over Brexit deal

With the elections for the presidency of the EU Parliament only five days away, MEPs face an unsettling reality: no one quite knows who is going to win. Whilst Antonio Tajani of the centre-right European People’s Party is currently the favourite as the candidate of the largest Parliamentary grouping, his fellow Italian Gianni Pittella of the left-leaning Progressive Alliance of Socialists & Democrats, may just clinch it by creating alliances with the Greens and other smaller groupings.

Guy Verhofstadt, the chief EU Brexit negotiator is also running for the presidency, and has faced criticism from some sections of Parliament for entering talks with Italy’s 5 Star Movement, who are actively Eurosceptic. Whatever the outcome of the election, there was consensus between the candidates in their debate on Wednesday night, that the four freedoms of the European Union would be their key focus for any Brexit deal. Both Tajani and Pitella suggested that any deal that sought to water down these freedoms would ultimately be rejected by Parliament.

Trump interviews Brexit Supporter as US EU envoy

Ted Malloch, a professor who backed Brexit, was interviewed for the job to become President-elect Donald Trump’s ambassador to the EU. The rumoured front-runner, Malloch, was apparently recommended for the position by Nigel Farage, and said he was confident that Britain would move to the front of the queue for a trade deal with the US.

Timeline

17 January 2017

o             European Parliament presidential elections

o             Theresa May delivers speech on Brexit

23 January 2017

o             Expected publication date for the Industrial Strategy

o             Possible date for Supreme Court decision on Brexit challenge

3 February 2017 European Council – informal meeting of the 27 heads of state or government

March 2017 Article 50 to be triggered