Brexit Update 11th May 2018

By May 24, 2018Brexit Updates

Top 3 developments  

  • May seeks to break cabinet division on customs arrangement
  • MSPs to vote on Brexit Bill
  • EU braced for anti-establishment Italian Government formation

UK Update

Mayday as Cabinet calls for away day

Following cabinet deadlock over the future of the UK’s customs relationship with the EU, Theresa May is introducing new techniques to build consensus before a policy is decided. The Brexit war cabinet will be split into groups to consider the two options currently in front of them for a future customs arrangement, namely the technological solution known as ‘maximum facilitation’ and the customs partnership, which would allow businesses to apply for rebates after paying EU customs tariffs if goods are destined only for the UK – Something Boris Johnson declared was ‘crazy’. The proposal for the exercise was agreed across the cabinet divide, with ministers having to argue their opposite view to help them understand the merits and potentially come to a consensus by a meeting next week.

Briefings this week have focused on the possibility of an extension to the customs union currently shared with the EU to allow sufficient time for an alternative customs regime to come into place. However, the EU is unlikely to look favourably on such an outcome given their preferred option of the UK remaining in a customs union indefinitely, which is building support in the UK Parliament. With the EU Council set to meet in June, progress so far on the issue of customs risks bringing negotiations to a standstill, threatening the Government’s position as Brexit looms closer.

MSPs to vote on flagship Brexit Bill

Members of the Scottish parliament (MSPs) are to vote next week on whether to give their consent to the UK Government’s flagship EU Withdrawal Bill, currently passing through the House of Lords. With a defeat expected, given opposition from the SNP, Scottish Labour, Greens and Liberal Democrats, Cabinet Minister David Lidington has said “the door is still open” for an agreement to be made between the two sides. Lidington went on to urge MSPs to consider the deal the Welsh Government agreed to, as a way of “ending any legal uncertainty for businesses in the UK”. Scotland’s Brexit Secretary responded by accusing the UK Government of undermining devolution with its proposals. Failure to gain the Scottish Parliament’s support for the Brexit Bill will be another setback for the Prime Minister as she seeks to take all sides with her as she tries to deliver Britain’s eventual exit from the EU.

Space Oddity

The Government is seeking to invest in the development of the UK Space Industry following its exit from the EU, with provisional planning for a UK GPS satellite to rival the EU’s Galileo if future cooperation and access to its more sophisticated military capabilities is not secured. £100 million has also been set aside to build a new National Satellite Testing Facility, whilst the Government’s ambition is to control ten percent of the world space industry by 2030 – a tall order given the advanced space programmes currently operating across other countries.

Tomorrow Never Dies

Theresa May has decided to further postpone key votes by Parliament on Brexit legislation, with concern rising that the Government will be forced to enter a customs union with the EU if it loses votes as it currently stands. Beyond agreeing that the UK should leave the customs union, the Government remains unsure of what alternative route to pursue. After agreeing a position in cabinet, May will need to convince Parliament that they are planning a viable alternative to win support before a vote, now expected in the autumn.

Jeremy Corbyn called on Theresa May to hold the vote sooner rather than later, with Labour’s position on forming a customs union with the EU already given support by the House of Lords.

Fine! Leave!

The Electoral Commission has fined Leave.EU £70,000 following a ruling that it broke electoral law in the 2016 EU referendum. The Commission found that the campaign group, which sat outside the official pro-Brexit campaign, failed declare ‘at least’ £77,380, whilst co-founder Aaron Banks described the fine as a ‘politically motivated attack’. Leave.EU was also exonerated from its dealings with Cambridge Analytica, the company accused of misusing data off the social media company Facebook, with only “initial scoping work” recorded. The fine marks the largest fine by any of the groups involved in the referendum campaign, with the Lib Dems fined £18,000 and the Remain campaign fined £1,250 by the Commission over breaching spending rules.

ITC warns of UK vulnerability in Trade Defence

The International Trade Committee (ITC) has warned that the UK needs to do more to ensure it is prepared for the fights ahead as an independent state negotiating trade deals. As a member of the EU, trade defence and negotiations are headed by the European Commission, with trade defence falling under EU regulatory oversight. The UK’s Trade Remedies Authority (TRA) needs to be bolstered according to the ITC, who believe the issue is ‘as serious as the Irish border issue’, with the threat of the UK ‘not lasting beyond the first battle in a [future] trade war’. Under World Trade Organization Rules, countries must have an appeals process in place, such as those that would be set under the TRA. This allows a country to challenge defensive measures taken by other countries to protect their goods – such as is currently occurring because of Donald Trump’s defensive measures in his ongoing trade war with China and others.


Italy moves closer to Government formation

The EU is bracing itself as Italian anti-establishment parties Five-Star Movement and Lega move closer to forming a formal coalition agreement, meaning a new Government for the EU’s fourth biggest economy. The move, which is reported to have left the markets and EU leaders surprised, would all but put a dampener on France’s calls for sweeping reform to the European Central Bank, with the two parties spending plans running in contradiction to the fiscal responsibility rules of the EU – namely running a deficit above 3% of GDP. The parties have until Sunday to form an agreement, otherwise the countries’ President, Sergio Mattarella, will call another election in a re-run of March’s election which resulted in the current stalemate.