Brexit Update 16th August 2019

By September 1, 2019 September 2nd, 2019 Brexit Updates

Top 3 developments

  • Remainer MPs are developing strategies to block Boris Johnson’s no-deal Brexit.
  • Ministers are seeking advice from 19 trade associations on how to ensure that businesses are prepared for a no deal.
  • The Irish Taioseach Leo Varadkar has refused to back down over the backstop in the lead up to talks with Boris Johnson.

UK Update

At your Beckett call

With Parliament on summer recess and not returning until 3rd September, Remainer MPs have begun drafting their strategies on how to block a no-deal Brexit now. A strategy document, signed off by both Dominic Grieve and Margaret Beckett and sent to around 300 MPs, has been leaked revealing plans to force Johnson to hold an election and extend Article 50, giving Britain the opportunity to secure a deal with the European Union or hold a second referendum. The publication of this document comes after a report from the Institute for Government (IfG) stated that MPs have exhausted most of their options to prevent a no-deal Brexit.

The document states that MPs will try to block any attempt by the Prime Minister to call an election before October 31 unless the Prime Minister agrees to an extension of Article 50. Remainers wish to extend Article 50 as, if an election takes place before October 31st and no extension has been agreed upon, the UK will leave the EU without a deal by default. The concern is then that Johnson would tactically call a general election during this time, should he lose a vote of confidence, in order to push through his Brexit strategy before a new Prime Minister could come in. Remainers believe that the Fixed Term Parliament Act would allow MPs to create a new law to force the Prime Minister to extend Article 50, rather than to try and form a new Government in the 14-day period. This is a change in strategy from last week where MPs were planning to select a caretaker PM to extend Article 50. However, it was felt that it is unlikely that a cross-party government could be achieved given all the different parties that would be involved in the selection process.

The first opportunity for MPs to take control of the agenda will be during the motion on restoring the Northern Ireland executive, which is currently scheduled for September 4th. This could allow a vote of no confidence to take place, with reports suggesting that Jeremy Corbyn will waste no time and attempt to bring down the Government as soon as the House returns. Philip Hammond, the previous Chancellor, will also be questioning every move of the new Government after a ruthless op-ed in The Times this week, calling for Johnson to commit to a deal and deliver the Brexit that was campaigned for during the 2016 referendum.

Don’t be a Bercow

A ComRes poll revealed this week that 54% of British adults think Parliament should be prorogued to prevent MPs from blocking a no-deal Brexit. At first glance, this suggests a startling indication about how detached the views of Parliament are from normal people, who just want Brexit delivered by the 31st October, regardless of the consequences. While this is no doubt true amongst some voters, when you break down this poll, the results suggest a slightly more nuanced view.

76% of 2017 Conservative voters agreed with the question about proroguing Parliament, which is understandable considering a sizeable portion of these voters will be Brexiteers. With Labour and Lib Dems however, 32% and 25% agree with proroguing Parliament respectively. Nevertheless, it is interesting that one in four Lib Dems polled – the Party that is wholeheartedly opposing Brexit at all costs – believed that Parliament should be prorogued, if necessary, to stop no-deal being blocked. Perhaps more than anything, this is a demonstration of Brexit fatigue, but it is difficult to know the entire truth with these polls, and of course, they are not necessarily fully representative or reliable.

On the other side of the debate, Speaker of the House John Bercow said this week that he would fight “with every breath in my body” to prevent Parliament from being circumvented. There is no doubt that bypassing the will of the House of Commons would spark a constitutional crisis and open up a Pandora’s Box of consequences that could leave Parliamentary power permanently reduced. Boris Johnson knows this, and in every instance has expressed his displeasure at the possibility of proroguing Parliament. Perhaps he has no intention of ever proroguing Parliament, and is simply keeping the option on the table to convince the EU that no-deal is a realistic option. But considering he has promised to deliver Brexit “do or die”, it seems that nothing should be ruled out at this stage.

Help us help you

Despite Government announcing a £108 million funding and support package to prepare companies for a no-deal last month, Ministers have asked 19 leading trade organisations representing small and large companies for practical ideas that might “drive businesses’ preparedness” before October 31, with responses expected by September 1. Many business leaders have frequently warned Government that they are unprepared for a no-deal and will not be ready come October 31st. It is estimated that 240,000 firms need to apply for new paperwork to continue trading with the EU and only about a third have done so. The uncertainty of the Brexit negotiations and the previous statements that a no-deal is a million to one chance may have left businesses complacent and therefore extremely unprepared for a no-deal, which now may only be two months away.

Government is currently reaching out to businesses and is drawing up its own plans for a bailout fund to prop up businesses in the event of a no-deal Brexit amid fears that a disorderly departure from the EU would put companies at risk. This definitely suggests that a no-deal is the clear strategy of the Government and that they are expecting disruption when this becomes a reality.

A Bolton from the blue

President Trump’s national security adviser John Bolton outlined on Tuesday that the US enthusiastically backed a no-deal Brexit and promised to negotiate speedy sector-by-sector arrangements with the UK in the event of no-deal. Bolton’s comments were a complete 180 from the promises that President Obama had said in 2016 if the UK left the EU – that they would be at the “back of the queue” for a trade deal, and these comments were taken with enthusiasm by Brexiteers who see a closer trading and strategic relationship with the US as one of the biggest opportunities of post-Brexit Britain.

It is an interesting departure from conventional diplomatic wisdom to support a no-deal Brexit in this scenario, as it is the job of diplomats to create certainty and stability, and a no-deal Brexit has the potential to disrupt both of these things. From the naked eye, it is hard to see the benefit in a key strategic and diplomatic partner (22 EU nations are in NATO) being destabilised. But, if you take a longer-term view, then it could be argued that the EU are a growing economic superpower that if combined with military force, could eventually challenge the hegemony of the US. Considering John Bolton is a foreign policy hawk, it is possible that this is the view that he is taking. Equally, it is thought that the US are going to need allies to adopt their controversial positions on issues such as the Iran nuclear deal and Huawei’s involvement in the 5G network. By throwing a lifeline to the UK in a time of need, it could be argued that this gives the US leverage to force the UK to take the US line on these issues.

Although the position of the White House was one of support, the US Congress were not so warm in their enthusiasm. It was repeated this week that the House – led by the Democratic Speaker Nancy Pelosi – would not support any trade deal that endangered the Good Friday Agreement. President Clinton was a co-guarantor of this Agreement, which means that the US is responsible for ensuring the Agreement is maintained. Considering the Agreement outlined that an open border must be kept on the island of Ireland, if a no-deal led to any physical infrastructure on the border this would be breaching the Agreement. All US trade deals must be passed by Congress, so the threat by Pelosi is valid, and a speedy trade deal with the US in the event of no-deal must not be automatically assumed.

EU Update

Never back(stop) down in a Mexican standoff

The Irish Taioseach Leo Varadkar has refused to back down over the backstop in the lead up to talks with Boris Johnson. Varadkar and Johnson are having a verbal Mexican standoff at present where Boris is stating that the backstop must go and Leo insisting that it is not up for negotiation. For the Irish Taioseach, keeping an open border and maintaining the fragile peace between the two countries is his upmost priority, and the backstop is the default measure within the withdrawal agreement to de facto keep an open border in the event of the implementation period ending and a free trade agreement not being ready to be signed. There is no way that Varadkar will ever compromise on this issue, but ultimately it is not his decision to make, as it rests with the EU Commission.

While the EU are almost certainly not going to scrap the backstop, with both sides digging in the prospect of introducing a time-limit on the backstop is looking more and more appealing. Firstly, the DUP (who voted against Theresa May’s deal all three times in Parliament) indicated that they could be willing to support a time limit, which suggests that this measure could pass through Parliament. Secondly, it would most likely be supported by Boris Johnson as it would avoid a no-deal and the political turbulence that it would cause, while also allowing him to deliver on his promise to secure Brexit by the 31st October. Thirdly, it is appealing because while it does not solve this issue, it at least kicks the can down the road for over 5 years and gives a decent window to negotiate a free trade deal.

The trade deal between the EU and Canada (CETA) took 7 years to negotiate, and considering there is already regulatory alignment between the UK and EU, it is plausible to argue that a free trade deal could be negotiated quicker than this. Therefore, an implementation period and an additional five years of a guaranteed open border between Northern Ireland and Ireland could be a compromise that everyone could stomach and could finally break the impasse. Perhaps there is a light at the end of the tunnel… but this decision depends on whether hardcore Brexiteers and EU officials are willing to support this, which is anything but guaranteed.

Banking on no-deal

A study carried out by Frankfurt University’s Centre for Financial Studies has found that the German financial sector expects a no deal Brexit and does not believe that the European Union should make any further concessions to the UK to prevent one. The study found that 86% of the senior executives in the financial sector expect a no deal and that 70% believe that there should be no further concessions.

According to the study, the mood among German bankers and financial service providers has hardened considerably against the UK over Brexit. The overwhelming position of the EU is that the Withdrawal Agreement will not be reopened, and they are unlikely to offer concession to a Government that has insulted them. The only concession that they are likely to offer is that of an extension of Article 50 for the purpose of a general election or second referendum.

Upcoming Key Dates

  • 3rd September: House returns from recess
  • 14th-17th September: Liberal Democrat Party Conference
  • 21st-25th September: Labour Party Conference
  • 29th September – 2nd October: Conservative Party Conference
  • 17th October: EU October Summit
  • 31st October: Current Brexit Deadline.

 

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