Brexit Update 16th November 2018

By November 30, 2018 Brexit Updates

Top 3 developments   

  • UK-EU deal completed as MPs turn against backstop solution
  • Cabinet Ministers resign in opposition to May’s deal
  • EU stands firm on deal, with renegotiation uncertain

Quickfire Section

Who has resigned? Dominic Raab and Esther McVey are the big two names, the former May’s second Brexit Secretary, the latter her Work and Pensions Secretary. Ms McVey stated that the proposed deal did not meet the test Theresa May set out in her premiership. Dominic Raab stated that he could not support the proposed deal because it was a threat to the UK’s integrity and that there was a potential for an indefinite backstop in Northern Ireland.

Others include, Suella Braverman (Brexit Minister and former head of the European Research Group), Shailesh Vara (Northern Ireland Minister), Anne-Marie Trevelyan (PPS to the Education Minister) and Ranil Jayawardena (PPS to Justic Minister).

Will more resign?  Sources suggest that Michael Gove, Chris Grayling, Penny Mordaunt, Andrea Leadsom and Liam Fox have decided not to hand in letters of resignation as of yet as “resigning and joining a rebellion is not going to help anything”.

However, these are still ones to watch, considering how vocal Andrea Leadsom and Penny Mordaunt have been throughout the Brexit negotiations so far, there’s a possibility they could still decide to leave.

Could Theresa May resign? Not willingly. May is likely only to resign if she loses a vote of no confidence, although the 48 letters threshold required to call a confidence vote has reportedly not yet been breached but could happen as early as next week according to media reports. (See below graphic on leadership process).

Can May get her deal through parliament? This is uncertain at present. There are various ‘factions’ both within the Conservative and Labour Parties that make determining the outcome of a parliamentary vote difficult to predict.

Around 90 Conservative MPs (Hard Brexiteers and those who support a second referendum) are likely to side with the Labour Party, DUP, Lib Dems and SNP to vote against this deal. A further 100 Conservative MPs are ‘wavering’ and have not given a definite position on whether to support the PM’s deal. This group will be the target of the Conservative whips, and remain vital to May getting her deal through Parliament.

The Labour Party holds up to 40 MPs that could vote for the PM’s deal. MPs such as Gareth Snell, Caroline Flint and Laura Smith are conscious of Labour being perceived as ‘blocking Brexit’. These MPs could be pressured to vote against it by the Labour whips however, with the party supporting a push for a general election if the deal fails.

The logistical difficulty in obtaining the numbers is clear therefore. A call for all Conservative whips to return to Westminster today (Friday) suggests the Prime Minister is seeking to measure how entrenched MPs positions are and whether she holds any chance of her deal passing the meaningful vote, likely to be held on the 18th December. 

UK Update

If she stays there could be trouble, if she goes it could be double

Conservative Party MPs lined up to criticise the Prime Minister’s Brexit deal in the House of Commons yesterday, with MPs on all sides calling either for her resignation, for a second referendum, or for the government to go back and renegotiate. May stood defiant however, saying MPs faced one of three choices: to back the deal, have no deal, or (possibly) no Brexit at all.

Jacob Rees Mogg delivered possibly the most stinging line that will travel down the annals of history, saying “what my right honourable friend says, and what my right honourable friend does, no longer match”, before asking whether he should submit his letter of no confidence against her. He duly did so, along with several others, leaving the media speculating whether a confidence vote in the Prime Minister was imminent.

A tough day all in all then for Theresa May. Her chances of passing the deal remain sketchy, and her position at the head of the party appears very unstable given the amount of her own MPs who are now speaking out against her. However, given the numbers of Conservative MPs that would need to topple her, and find viable alternatives, whilst at the same time riding the chaos of uncertainty that would envelop across the country, it is unclear whether any plan to topple her would ultimately succeed. She may however decide to step aside at the 11th hour if convinced to do so by the party whips and others if they see her position as untenable.

Never gonna give you up, never gonna let you down

May was rocked by two high profile resignations from her cabinet following the publication of the 585-page Brexit deal, with Dominic Raab, the Brexit Secretary, and Esther McVey, the Work and Pensions Secretary leaving the cabinet for the backbenches. Both said they could not support the deal, mostly due to the terms of the backstop and the commitment on closer union on customs as part of the future relationship. Raab said he felt that he was locked out of 11th hour negotiations, leading to the UK conceding on the EU’s “predatory terms” that would “threaten the integrity of the UK” and on the backstop that would “indefinitely” if not “permanently” lock the UK in a customs union with the EU.

Penny Mordaunt (International Development), Michael Gove (Environment) and Chris Grayling (Transport) looked as if they were teetering on the edge over the deal, with Gove allegedly turning down the Brexit Secretary job before considering whether he would stay in the Cabinet at all. Gove had made the demand that he would need autonomy to renegotiate the deal if he was to take on the Brexit brief, and was duly turned down. He later said that he had “confidence in the Prime Minister” and would stay in post. Mordaunt is reportedly pushing for a free vote on the final deal as a condition of her staying in the Cabinet, whilst Grayling’s reasons for considering his position are yet to be made public.

There is some relent however, with other cabinet ministers including Brexiteer Andrea Leadsom, and confidant James Brokenshire coming out to defend the deal and the Prime Minister’s position. May will need all the support she can get in these dying weeks to sell the deal before it goes to a vote, or risk a potential constitutional crisis over how Government, and parliament acts next.

What the deal says on the backstop

UK has the option to extend the transition period (As if we are still in the EU, but without voting rights and representation) before 1st June 2020 or revert to the backstop (All-UK customs union membership) if no trade deal has been agreed by December 2020.

The transition can only be extended once and would be considered by an arbitration panel made up of 2 UK members, 2 EU members and 1 independent member (the casting vote).

Leaving the backstop will need to be agreed by both sides, with the EU needing to act ‘in good faith’ – something Brexiteers believe they will not do if the UK wants to leave.

Northern Ireland companies will have access to the EU’s Single Market ‘as a whole, without restriction’, in turn Northern Ireland will need to apply EU law on industrial, environmental and agricultural goods, opening up the prospect for checks between Northern Ireland and the UK.

Cold solace then to the DUP and Brexiteers who fear that the UK will be subject to the EU’s customs rules at the very least, or continued EU membership in all but name and representation at the most. The DUP are vehemently opposed to Northern Ireland taking a separate path to the rest of the UK, whilst Scotland’s First Minister Nicola Sturgeon sees Northern Ireland’s access to the Single Market as giving it an advantage over other parts of the United Kingdom. The SNP have been campaigning for the whole of the UK to remain in the Single Market, with their next moves over the issue, at present, uncertain.

Integrity assured says Varadkar

Irish premier Leo Varadkar has sought to assure Northern Ireland’s unionists that the Brexit deal does not undermine the constitutional integrity of the United Kingdom, and in turn Northern Ireland’s place within it. The DUP’s Jeffrey Donaldson was less sure, saying that the deal could precipitate the break-up of the union in the long term as the UK moves to sign trade deals that “Northern Ireland wouldn’t benefit from” given Northern Ireland’s need to align with the EU. Varadkar turned to the Good Friday Agreement however, saying that it would be protected along with the territorial integrity of the UK. He did finish however, saying there would be no change to Northern Ireland’s constitutional status “unless a majority of people say so”, which is, of course, what unionists worry will happen if Northern Ireland diverges from Great Britain.

Pound tumbles as uncertainty looms

The British Pound fell at alarming rate yesterday after the resignations of cabinet ministers and uncertainty over how the political path to securing support for a deal with the EU would be completed. The drop against the dollar was 1.7%, the highest drop since June 2017, with the market betting against the Bank of England announcing another rate rise. The markets now expect the next bank rate rise to occur in February 2020. The rate currently sits at 0.75%, with the next consideration for a rise due on the 20th December 2018.

CFP and CAP scrapped

The deal negotiated between the UK and EU maintains that the UK will not be bound by the Common Fisheries Policy and Common Agricultural Policy when it leaves the transition period, in a win for the UK’s fishing and farming communities. The issue has remained a key sticking point for government ministers including Environment Secretary Michael Gove and Scotland Secretary David Mundell. The issue of access to UK waters as part of the future UK-EU relationship is however likely to become a key flash point during the transition period, with EU states keen to maintain access to UK fish stocks on a more permanent basis as part of any deal.

Business asks MPs to back deal

Following a meeting between No.10 and business leaders, a number of businesses and business groupings have come out in support of the negotiated deal, saying no-deal preparations are “shockingly thin”, and MPs should just “get on with it” to bring certainty back to the UK’s economy. Aston Martin Chief Executive, Andy Palmer, said that a no-deal Brexit would lead to “tariffs and queues at the border” and would be a “disastrous situation”. A no-deal Brexit, which has been touted as one of the options if MPs to not endorse May’s plan, is arithmetically unlikely to gain support in the House of Commons, however, under parliamentary process, the Prime Minister still maintains the ability to leave the EU without a deal. The political reality of doing so is that she would likely be removed from office before doing so in any case, given cross parliament opposition to this more hard-line approach. Business has continued to voice its opposition to a no-deal Brexit.

EU Update

EU stands firm as deal concluded

EU Council leader Donald Tusk has said that the deal is “the best we can do” given May’s red-lines, leaving the prospect of renegotiation doubtful – a key concern of many MPs who want May to go back and draw further concessions. Both the UK and EU27 member states are likely to look unfavourably on the deal, with the UK concerned about the backstop, and EU states concerned over the UK’s competitiveness if it maintains access to EU markets whilst holding autonomy to negotiate trade deals and lower standards in other areas – a so-call ‘lose-lose’ situation according to Tusk.

German Chancellor Angela Merkel has said there’s “no question whether we negotiate further” saying the document on the table has been agreed by both sides. An EU official also warned that both sides had “exhausted their margin for manoeuvre under their respective mandates” further dampening the chance of the deal returning for further negotiation. Both sides will also be conscious that reopening negotiations could lead to the other side also seeking concessions, with the official saying those that push for changes “must take responsibility for what it does to the process”. A worrying indictment of the trials and tribulations ahead.

Upcoming Key Dates

    • 19th November: Europe Ministers will meet in Brussels to endorse the agreement.
    • 25th November: Most likely date of the November Summit.
    • 13th December: EU Council Summit
    • 18th December: Sources suggest this will be May’s date of a ‘meaningful vote’ in Parliament.
    • January 2019: Possible start of debate on legislation to bring EU deal into UK law.
    • 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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