Brexit Update 14th September 2018

By September 27, 2018 Brexit Updates

Top 3 developments  

    • Second tranche of no-deal papers released
    • Budget announcement delayed to stop deal conflict
    • ERG propose alternative solution for Ireland border

UK Update

Let’s Get Technical

The Government’s second round of technical papers was released on Thursday, with immediate consumer concern falling on the future of mobile phone roaming after Brexit. Whilst the government papers highlight mobile operators’ willingness to maintain current rates on EU roaming after Brexit, they maintain it is ultimately a commercial decision and something the government cannot force on them.

Other areas covered include data protection, where the government is committed to upholding GDPR in its current form. The UK would seek an adequacy agreement with the EU to allow data to keep flowing between both territories in the event of a no-deal outcome, however the Commission has made clear this is something that would be established after the UK becomes a third country, leaving businesses to rely on standard contractual clauses approved by the European Commission and the UK’s commitment to continue the data flow to the EU post-Brexit to minimise disruption. As part of the government stepping up preparations for a no-deal, despite declaring that a deal is within reach, they have sought to build bilateral links with EU countries and hold separate discussions with the Commission to discuss how to minimise disruption.

Responses to the second tranche of papers were mixed, with businesses welcoming their publication but insisting more clarity is needed on specific issues facing business. Labour insisted that their publication was a result of the uncertainty caused by a lack of an agreement at this stage and a lack of support in Parliament and the EU for the Chequers proposal.

The full list of technical papers can be found here, some of which include papers on:

Industry specific analysis of the technical papers can be requested by contacting Political Intelligence at contact@political-intelligence.com

Budget Announcement Delayed

Chancellor Philip Hammond has put off announcing the date of the Autumn budget until there is clarity over any deal struck between the UK and EU, which is expected in November. Unlike last year, when the date was confirmed on the 12th September for the 22nd November to be the budget, Hammond is keen to stop a clash with an announcement over the future deal. It is likely that any last-minute budget alterations will need to be considered based on the final deal also, dependent on the extent it looks like the Chequers plan or a Canada-style FTA, which the Government contends does not go far enough. The independent Office for Budget Responsibility (OBR), which examines the sustainability of the public finances against the budget has been put on hold until any final changes are made.

Aerospace body criticises Commission over no-deal plans

The Aerospace, Defence Security and Space (ADS) trade association representing 1000 UK members across the industry has criticised the European Commission’s stance on refusing to allow EU regulators to discuss preparations with their UK counterparts to ensure a ‘seamless transition’ after the UK exits the EU. Saying they were risking ‘confusion and disruption’ in the sector, the ADS went on to say the Commission’s refusal to allow engagement was ‘inconsistent’ with the advice given to stakeholders to prepare for the consequences of Brexit. The EU Commission has advised businesses that mutual recognition of safety standards with the UK will end after the UK leaves the EU, meaning UK-certified components will no longer be recognised as adhering to EU regulation post-Brexit.

Carney help

The Governor of the Bank of England, Mark Carney, is reported to have warned a three-hour session of the Cabinet of a 33% drop in the value of UK properties in the event a no-deal outcome results in a ‘worst-case scenario’ where mortgages and other financial products are highly disrupted. The Bank regularly runs stress tests on the UK economy, working on the basis of worst-case scenarios to allow it to plan for every eventuality.  Carney reiterated that the bank’s role was not to “hope for the best”. but to “plan for the worst”.

Mark Carney was confirmed to stay on as the Governor until 2020, gaining both praise and disapproval from across the political spectrum for remaining in post. Whilst many saw his move to stay on as a Brexit safety blanket, allowing him to help the Bank weather the storm of Brexit, others see him as part of project fear, with Jacob Rees-Mogg calling him the ‘high-priest of Project Fear’.

Boris asked to keep his head down

Where before his articles have sparked debate and often strong voices of opposition and support, Boris Johnson’s latest article for the Telegraph has drawn mostly recrimination. The article, which focused on the Chequers proposal for future UK-EU relations, likened Theresa May’s plan to ‘putting a suicide vest on the UK’, handing the detonator to the EU in turn. The former foreign secretary, who has had his private life splashed over the tabloids in recent weeks, has reportedly been asked to lower his profile by friends since the article was published. Part of this appears to be asking him to limit his appearances at the Conservative Party Conference, where there is speculation that the European Research Group will table an alternative to the Chequers proposal.

Johnson has regularly been tipped as a potential successor to May, gaining the support of Brexiteer MP’s and a large proportion of the Conservative Party membership. However, the likelihood of his succession is limited at this point given the need for any premier to harness the support of a majority of parliament to support any proposals. Something made harder by a limited government majority of 11, made possible only with the support of the DUP.

Borderlands

A 19-page paper outlining how the UK and EU could avoid a hard border between the UK and the Republic of Ireland in the event of a no-deal Brexit was released by the European Research Group on Wednesday. The group is highly opposed to Theresa May’s Chequers proposal, something ERG Chair Jacob Rees-Mogg called a ‘dying duck in a storm’ as opposed to a dead duck. The ERG’s plan for the border was touted as building on existing precedents for borders between the EU and third states and proposes:

      • Agreement on equivalence of UK and EU regulations for all agricultural goods on the island of Ireland and the creation of a ‘Common Biosecurity Zone’ between Northern Ireland and the Republic of Ireland (ROI), allowing for the ‘smooth movement’ of these products across the border.
      • For other goods, an extension of existing customs procedures is proposed, with larger companies joining ‘trusted trader schemes’ to clear goods for import and export.

The group contends that maintaining a Common Biosecurity Zone is not contentious, whilst pushing the trusted trader scheme used in regions such as the US-Canada border. Whilst the proposals gained support from the Democratic Unionist Party (DUP) of which May’s government relies on for support in votes, others threw scorn on the proposal. The European Commission has rejected the idea that medium and small-sized companies would be ‘waved through’, whilst the ROI government condemned the plans as ‘simplistic’ and ‘arrogant’ of the ROI’s position and obligations as a continued member of the EU.

The paper further puts the pressure on Theresa May who is expected to be confronted with increased opposition from the ERG and others in the lead up to finalising a deal with the EU. If an agreement is forged, now expected in November, it is likely to harness acrimony across Parliament leading to a headache for Theresa May and the whips office whose responsibility it will be to get the agreement through. The Irish border issue, however, hangs heavy over the final weeks of negotiations, with the EU refusing to allow a sign-off on a deal unless a credible backstop is tabled by the Government and is acceptable to the EU side – a high bar indeed given the positions of both.

EU Update

State of the Union

EU Commission President Jean Claude Juncker used his final State of the Union speech to signal that the European Commission would not stand in the way of a deal being done on Brexit, but that the Chequers proposal of retaining access to the Single Market for goods without respecting the other freedoms was not on the table. He reiterated earlier points that post-Brexit, the UK would not be an ‘ordinary third country’, but a ‘very close neighbour and partner in political, economic and security terms’ signalling the EU’s desire to maintain these relationships post-Brexit. Although the extent of the relationship is yet to be determined.

Swedish Elections

Despite projections that Sweden’s anti-immigration Sweden Democrats party would take a high proportion of the vote in elections this week, they returned only 11% of votes, compared to the Social Democrats who returned 28.4% of the vote. This did, however, represent a fall of 2.8% of the vote from four years ago, leaving them with their lowest percentage since 1908. This reflects a continued trend across the EU, with national elections returning smaller percentages for centre parties as left- and right-wing parties and ideas gain traction.

Unlike in the UK, the Prime Minister of Sweden is selected by the Speaker of the Parliament following an election and is presented to the Swedish Parliament. A majority vote against (175 members) will invalidate their candidacy, whilst less than that number will lead to their appointment. This means a Prime Minister does not need majority consent, but instead only needs less than 175 members to not reject their appointment. This is known as negative parliamentarism. Under the proportional representation system, the anti-immigration party will gain 11% of seats within the Parliament, unlike in the UK where members of Parliament must gain a higher proportion of the share within a constituency than their contenders to gain a seat.

Upcoming Key Dates

  • August-September: 70+ technical papers released on No-Deal preparations
  • 20th September: Meeting between EU Member States in Austria
  • 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.