Brexit Update 13th April 2018

By April 27, 2018 Brexit Updates

Top 3 developments  

  • Threat to Scottish Continuity Bill
  • Davis calls on ‘substantive’ progress before vote
  • European Parliament seeks clarity on future relationship

UK Update

Threat to Scottish Continuity Bill

The UK Government is said to be “considering its position” on the Continuity Bill passed in the Scottish Parliament last month. The Bill, which grants competencies across multiple regulatory and policy areas to the Scottish Government in the event that it cannot reach an agreement with the UK Government or a No-Deal Brexit is pursued, is likely to have its legality contested by Tuesday next week. Scottish Ministers went against the advice of the Presiding Officer, Ken Macintosh, in pushing ahead with the Bill, despite him setting out legal advice that it was outside Holyrood’s remit to take the powers set out in the Bill. As yet, no further progress has been made between UK and Scottish ministers on the extent of policy competencies passed from the EU to the devolved administrations – with any legal challenge to the Continuity Bill likely to further escalate tensions between the two sides, given the constitutional and political sensitivity.

Devil’s in the Detail

Brexit Secretary, David Davis, has warned that MPs could veto any final Brexit deal, including the £35-£39bn exit bill unless ‘substantive’ progress is made by both sides in agreeing what the future relationship will look like. The European Commission is pushing for a less concrete outline, with most of the relationship agreement decided after the UK leaves. The European Parliament has also sought clarity before the deal is put to a vote, whilst one EU diplomat has stated that there will be “no negotiation strands, no ‘hundreds’ of British negotiators” to achieve this. Davis has further hinted that the UK will seek to push negotiations to the 11th hour, beyond the October deadline, all the way to the December EU Council Summit in order to achieve this more substantive agreement. The warning comes during early negotiations between both teams on food, agriculture and customs controls, including the use of the Republic of Ireland as a ‘land bridge’ to the rest of the EU.

In theory, both the UK and EU Parliaments should not need the six months afforded to them by the European Commission to ratify the final deal – of which they hold an effective veto. Both the UK and EU have said the final agreement will be just that, with both sides reluctant to reopen negotiations after the conclusion of talks. However, with the UK Government holding only a small majority – and confusion over what a rejection of the final deal would mean, both sides will be keen to get the final agreement right before the conclusion of talks.

Gardiner digs a hole

Barry Gardiner, Labour’s Shadow International Trade Secretary, has been quoted rubbishing Labour’s six Brexit tests to secure their support for the final withdrawal agreement. He called the prospect of the ‘exact same benefits’ of Single Market and Customs Union membership being achieved ‘bollocks’, further setting out that Labour should be holding the Government to account on their promises rather than implying Labour could deliver those exact same benefits.

Labour committed in February to a policy that would seek ‘full access to EU markets and maintain the benefits of the Single Market and the Customs Union’, whilst only seeking to establish a Customs Union with the EU.  The six tests are deemed somewhat impossible to achieve given red lines on the side of the EU, opening up the prospect that the Government will need to mount a high-level operation to convince internal factions and MPs from across the House to vote with them if Labour whips against the agreement.

Million Milestone

This Sunday will see the launch of a £1m campaign by pro-remain groups to demand a vote for the public on the final Brexit deal. The People’s Vote, the name given to the campaign, is led by Open Britain which acts as Secretariat for the APPG on EU Relations and is supported by Tony Blair, John Major, Chuka Umunna and Anna Soubry amongst others. The campaign aims at giving the public a vote to accept the final deal or reject it and remain in the European Union.

Brexit: The Director’s Cut

The Institute of Directors have urged the Government to make Global Britain ‘as much about opportunities in Europe as it is further afield’ citing a poll of 800 company directors who pointed to stronger growth for exports to the EU than Asia or North America in the past two years. Directors were said to be encouraged by the ‘meaningful progress’ made since December but urged the Government to set out further detail of the UK’s future trading and regulatory relationship with the EU, not wanting to cut ties with European supply chains.

Right to Remain

The Migration Observatory at the University of Oxford has warned that a ‘potentially significant’ number of people are at risk of not securing their right to remain in the UK after Brexit – despite the Government offering EU citizens already living in the UK “settled status”. The Home Office is planning to support vulnerable groups such as children, the elderly and those who do not speak English, but many are feared to face falling through support efforts. The deadline for submissions is June 2021, falling 7 months before the UK ends free movement arrangements with EU27 states.

This is getting Bordering

Negotiators are embroiled in talks on how to solve the border issue in Northern Ireland, with David Davis earlier saying he had underestimated the complexity of the task. The issue, which has been continually pushed along the timetable presents a significant block in agreeing a final deal, with the Government struggling to reach a conclusive agreement with the EU on a solution. A worrying development comes from the Association of Garda Superintendents (Irish police) who have declared they will need more officers to work on the border with Northern Ireland, whilst concerns over the tax and regulatory status of firms running along the border also presents an issue for negotiators. Time is certainly running out for a solution to be found.

FCA Focus on Brexit 

The publication of the Financial Conduct Authority’s (FCA) annual plan sets out that it intends to drop non-critical projects to dedicate more time to prepare UK financial institutions for Brexit, with work expected to continue beyond the March 2019 deadline. The work will include meeting with regulated firms to better understand the risks associated with Brexit, and the threats it poses to the FCA’s work including how it cooperates with its international partners.

EU UPDATE

Bundesbank Blues

Andreas Dombret, the leader of Germany’s national bank, the Bundesbank, has said that he expects London to remain Europe’s ‘eminent financial centre’ despite moves by EU27 states to lure banks into the bloc before Brexit. Citing meetings with CEOs and bankers, Dombret expressed there was reluctance from bankers to leave London for the likes of Frankfurt, Paris or Dublin. European regulators have continued to urge banks to take ‘timely action’ to avoid disruption to cross-border derivatives and insurance contracts after Brexit, including through relocation.

The comments come alongside a POLITICO interview with Goldman Sachs head, Lloyd Blanfein, who expressed his surprise at the performance of UK economy in the face of Brexit. Whilst contingency plans have been put in place, with moves to increase staff numbers in EU27 states, Goldman Sachs has committed to continue with its new European HQ in London, said to have cost £1bn and due to open in 2019.

European Parliament seeks strong ties

The European Parliament has emerged as an unlikely supporter of the UK’s desire to have clarity on the future UK-EU relationship before the final deal is put to a vote. Following the European Parliament’s vote in March for an “association agreement” to be established between the EU and UK after Brexit, MEPs in Brussels have further thrown their weight behind a solution that preserves close relations without violating UK red lines or EU core principles. The EU Council and EU Commission have been less keen on this idea, with Council President Donald Tusk saying, “Brexit was about disassociation, not association”.

The European Parliament is mindful of Brexit negotiations, as the only directly elected chamber of the EU, MEPs will face election in May 2019, less than two months after Brexit – signalling fears that EU strong-arming could further lead to anti-EU populists entering the EU Parliament in a repeat of the 2014 Election which saw UKIP taking the largest proportion of UK seats.

Carry on trading

A study conducted by the European Committee of the Regions has warned against the negative impact of the UK leaving the EU on the German economy. Calling for a continuation of free movement of goods and minimal tariffs, Committee Chairman Karl-Heinz Lambertz, said Germany needed to do more to minimise the impact on its 50 regions. The EU Council’s negotiation guidelines for the future relationship set out a desire to continue tariff-free trade in goods, however given the UK’s rejection of joining into a customs union with the EU, checks on goods are expected before they move between the two territories, making the free movement of goods unlikely at the current stage.