Brexit Update 12th October 2018

By October 25, 2018 Brexit Updates

Top 3 developments  

    • May seeks opposition support on final deal
    • New technical papers released
    • Customs union seen as possible key to unlock talks

UK Update

Forever in the National Interest

Theresa May has asked opposition MP’s to put the “national interest first” when, and if, a final Brexit deal comes before parliament in the coming months. The Government has reportedly been sounding out how many opposition MPs currently would support a deal, against the wishes of their party, if it came to a vote, with up to 30 MPs expected to do so.

Labour has dismissed the figures, saying there is no evidence that such a rebellion would take place. At present, the party looks almost certain to reject the Government’s deal as it does not satisfy their six tests, which includes a deal that secures the ‘exact same benefits of the customs union and single market’. Instead, they are seeking a defeat of the bill, before pushing for a general election.

May will need as much support for her final deal as she can, with both the DUP and Brexiteers threatening to vote against the deal, possibly meaning she will need just over 40 opposition MPs to see the deal through given the low working majority of the Government. The EU in the meantime remains concerned over the chance of a deal being put through Parliament, with member states putting pressure on the Commission to ramp up no-deal preparations even further.

New No-Deal Technical Papers Released

The Government has released a new tranche of no-deal papers designed to prepare the country for leaving the EU without a deal. The government has set out that it believes there will be no fundamental change to cross-border trade of gas with the EU in the event of a no-deal, but there will be a disruption in Northern Ireland if the Single Electricity Market cannot continue. Other subjects covered in the papers include:

      • Trading and moving endangered species protected by CITES
      • Breeding animals
      • Commercial fishing
      • Exporting objects of cultural interest
      • Taking horses abroad
      • Funding for British Overseas Territories
      • Meeting rail safety and standards
      • Consumer rights
      • Sanctions policy
      • Accounting and auditing practices
      • Existing free trade agreements

Customs Conundrum

The Prime Minister is seeking to unlock talks next week by promising to bind the whole UK to a customs union with the EU post-2020 if no solution to the Northern Ireland border issue can be found during the transition period. Brexit Secretary Dominic Raab is one of several cabinet ministers understood to be resisting indefinite membership of a customs union, with Brexiteers calling for it to be time-limited to coincide with the next general election in 2022.

May held a cabinet meeting on Thursday to seek agreement on her proposed backstop solution, with cabinet ministers tight-lipped so far on what the exact details were. If the EU insists that Northern Ireland remains in the customs union or single market indefinitely to keep the border open, with no counter-proposals, then May could find herself unable to offer such a solution. David Davis has further warned that the party faced ‘dire electoral consequences’ if the Chequers deal became the basis of a deal.

Derivative Disruption

The Bank of England has warned that the EU risks exposing savers within the EU27 to massive disruption if it does not allow trillions of pounds worth of derivatives contracts to remain valid after Brexit. The financial policy committee (FPC) within the bank has said the EU needs to act fast to resolve an issue that will also affect insurance contracts and the transfer of personal data, before reiterating that there has been “considerable progress in the UK to address risks, but only limited progress in the EU”.

DUP threaten May’s premiership

The DUP has threatened to withdraw support from Theresa May if she agrees a backstop with the EU that would see additional regulatory checks between Great Britain and Northern Ireland introduced. In a sign that they were not blinking on the threat, DUP MP’s abstained on an amendment to the Agriculture Bill, the first time they have done so since forming a confidence-and-supply agreement with the Conservative Party in 2017. They have also further threatened to vote down the budget in November if Theresa May agrees with the EU that Northern Ireland can remain effectively in the Single Market, whilst the rest of the UK leaves.

Brexiteers cry foul

Brexiteers have warned that “project fear” round two was on its way as the Government moves closer to securing a deal with the EU next month. It is believed that the deal will be compared to a no-deal scenario in communications, without consideration for other options such as the ‘SuperCanada’ deal proposed by Brexiteers. An economic study is also expected to be released by the Treasury, Cabinet Office and other departments soon after negotiations end which is designed to sell the plan to MPs and voters, with a focus on increased tax revenues and growth compared to leaving without a deal. Given negotiations will have drawn to a close at this point however, it is unclear how credible proposals for returning to the negotiating table to secure a SuperCanada deal or closer relationship will be, potentially pushing a future deal/no-deal vote the Government’s way.

To be in Union or United?

Following polls suggesting most Scots favoured independence if the UK left the European Union, SNP leader Nicola Sturgeon has backed a second Brexit referendum, whilst confirming that SNP MPs will vote against any Government UK-EU deal. Secretary of State for Scotland, David Mundell, said the SNP leader “needed to be clear why she was supporting no-deal, when she says [it’s] the worst outcome”. The Government has continually tried to frame the ‘meaningful vote’ on any UK-EU deal to be brought in front of MPs as a vote for the Government’s deal, or a vote for no-deal. Most opposition parties reject this however, opening the possibility of a drawn-out campaign in the coming months as both supporters and opposers vie for the deal to be voted up or down.

Yes, but no… but yes

International Development Secretary, Penny Mordaunt, refused to explicitly back Theresa May’s Chequers proposals when questioned on four occasions. The proposals, which the Prime Minister asked her ministers to support or leave the Government at the Chequers Summit at the beginning of summer, have proved deeply unpopular with many in the party. Mordaunt is thought privately to be more in favour of a Canada-style trade deal, making her unlikely to support further compromises to the EU. On the final deal being agreed, Mordaunt has said “we don’t know where this is going to end up”, which is reason enough possibly not to tie herself firmly to any potential deal.

Japan support for UK accession to CPTPP

Japanese premier Shinzo Abe has said Japan would welcome the UK “with open arms” into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after Brexit as he urged compromise between the UK and the EU to avoid a no-deal Brexit. Abe said that the UK would retain its ‘global strength’ when it leaves the EU, despite losing its position as the gateway to Europe, with the opportunity to strike new free-trade deals with fast growing economies.

Abe is keen for the UK and EU to “avoid a so-called disorderly Brexit”, but remains conscious of the inability of the UK to strike free trade deals if it remains part of a customs union with the EU. The CPTPP has wide ranging provisions, many of which are able to help UK exporters post-Brexit. However, without majority ratification as exists today the potential for joining the partnership does not offer the level of certainty that would allow it to be held up as comparable to anything offered by the EU at present.

Upcoming Key Dates

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

 

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