Brexit Update 18th April 2019

By April 30, 2019 Brexit Updates

Top 3 developments 

  • Talks between Labour and Conservatives stall
  • Technological solution for the Irish border over 10 years away
  • Germany says Article 50 won’t be extended beyond 31st October

UK Update 

Deregulation for the nation

Talks between the Government and Labour stalled this week because of disagreements over deregulation. Jeremy Corbyn stated that Labour had outlined that any deal needed to include access to European markets and to protect environment and workers’ rights. But these demands have faced resistance from Conservatives, who are receiving intense backbench pressure to use Brexit to pursue a Singapore style model of a low-tax, low-regulation haven that would be appealing to foreign businesses and to facilitate trade deals with countries such as the US.

What is perhaps most concerning about this deadlock is that the central issues of any deal with Labour – a customs union and confirmatory referendum – have yet to be properly discussed. The pitfalls of bilateral talks such as these are that Labour and Conservatives are clearly miles apart in the vision they both have for a post-Brexit society, and they will be bitterly opposed to any compromise which might affect this.

Talks are expected to continue after Easter but there is less incentive for Labour to speed these along, as if they delay any agreement until after the UK is forced to hold European Parliament elections, they know that Conservatives will be deeply wounded by these results. Whether Labour are willing to utilise over £100 million in taxpayers’ money to score a political victory over the Tories remains to be seen, but the PM’s inflexibility to compromise on her red lines means that the Government should be held as mutually culpable if the UK are forced to hold these elections.

Having it Farage

Nigel Farage’s Brexit Party is currently leading in polls ahead of the European Parliamentary elections next month. Although the Party only formally launched on 12th April, YouGov have stated that the Party is favoured by 27% of the public. This swell of public support has almost doubled in the days since the Party launched. Now that UKIP has been toxified by allegations of overt racism, former UKIP voters have likely switched allegiance to the Brexit Party, as Farage has always been able to communicate anti-EU views in an accessible and agreeable manner to most ordinary people. Although it is undoubtedly a single-issue party, much of the leave-supporting part of the electorate will vote for the Brexit Party to send a strong message to the Government that they are severely disillusioned by its handling of the Brexit process.

This polling confirms the worst nightmares of Conservative election strategists, as the Party is likely to be obliterated in these elections. Having campaigned as the Party to deliver Brexit, its inability to do just that will be punished by voters. The Conservatives are currently polling third, with 15% of voters likely to back them, a shockingly low number for the Party in Government. Labour are polling at 22%.

exPELOSIve

In a speech in Dublin, the US Speaker of the House Nancy Pelosi announced that the US would not sign a free trade deal with the UK if we betrayed our obligations of the Good Friday Agreement. President Clinton is a co-signatory of the Agreement, which means that the US has a legal obligation to help uphold the Agreement. Free trade deals in the US also require ratification by the Ways and Means Committee, who travelled to Ireland with the Speaker. This means that this is not an empty threat.

While an open border is not explicitly written into the Good Friday Agreement, there is a unanimous consensus that an open border is essential for the Agreement to be upheld. The backstop in the PM’s deal was demanded by the EU precisely for this reason. The announcement by Pelosi throws cold water on the claims of hard Brexiteers that the consequences of a hard border in Ireland are exaggerated. In fact, it completely contradicts Brexiteer arguments, as a no-deal Brexit would not give freedom to pursue an unfettered independent trade policy as commonly suggested. Instead, it would lead to the UK facing opposition from our closest ally and potentially largest trading partner because we betrayed our obligations of the Good Friday Agreement.

Are you excited for the (British Business) Bank Holiday?

The UK Government has announced it will inject £200 million into the British Business Bank amid fears that there will be a significant reduction in funding from the EU after Brexit. The Bank works in partnership with other financial institutions to leverage capital for new loans for companies. It was set up by the coalition Government in 2014 to invest in startups, particularly in the tech sector.

Last year the European Investment Fund slashed deals with UK venture capital and private equity groups by more than two-thirds following the Brexit vote. There are therefore legitimate concerns that thriving tech startups will be starved of investment from the EU, and this injection from the Government is therefore an attempt to offset this deficit. There has been a lot of fanfare about how the UK is seen as a global tech hub, and considering the Conservatives have historically promoted small business enterprise and innovation, it would be a tragic mistake to not give the necessary support to the tech startup network in the UK. This funding will be welcomed by this community, but the inevitable question is, will it be enough?

Don’t worry, we will have solved Brexit… by 2030

Leaked Home Office documents revealed on Wednesday that a technological solution to remove the need for a hard border in Northern Ireland could take more than 10 years to implement. It is commonly agreed that if the UK leaves the customs union and doesn’t introduce a backstop, technology is the only viable solution to maintain an open border in Ireland. Even with a future trade deal between the UK and EU, there will still need to be technological infrastructure on the border to facilitate smooth and seamless trade. But this timeframe will come as a shock to almost everyone – especially those politicians who advocated to remove the backstop and replace it with technological solutions.

The Government admittedly does have some bold ideas about how to utilise technology on the border, as the leaked presentation outlines that blockchain, 5G and machine-learning technologies could be used collectively to enable customs checks to be carried out away from the border, allowing seamless collection and analysis of all relevant data. But the reality is that this solution is unlikely to be ready until 2030. Even the most pessimistic trade expert would believe that a UK-EU free trade deal could be secured by then, so this revelation further complicates an issue that has already proven to be the most polarising and challenging hurdle of the Brexit process. A customs union or backstop are the only off-the-shelf solutions that could ensure an open border at the moment, and with the technological option so far off, it is difficult to see how any other solution could receive backing from the EU or UK Parliament.

EU Update

Maas-ive revelation from the Foreign Minister

The German Foreign Minister Heiko Maas has warned that the UK will not be given an Article 50 extension beyond 31st October. At present, Germany – the most powerful member in the bloc – has been helpful in allowing the UK the time it needs to negotiate a smooth and orderly withdrawal from the EU. While Macron and Barnier were insistent that the UK should only be given a month’s extension to find a workable Brexit deal, German Chancellor Angela Merkel – ever the moderating influence – believed that the UK should be given as much time as needed. But this claim from the Foreign Minister suggests that Germany’s patience is wearing thin.

Maas then made another, and perhaps even more explosive, claim that any request to extend Article 50 beyond 31st October would be read as a signal that the UK wants to remain in the EU after all. This has been the argument made by Brexiteers all along, that any extension beyond 31st March would give oxygen to attempts to overturn the referendum result. While they are not wrong, it should be remembered that they have had three opportunities to deliver Brexit and to leave the EU on the 31st March, which they rejected each time. These comments by the Foreign Minister should give some urgency to the Government that a solution needs to be found by October, otherwise the risk of a no-deal Brexit or even a no-Brexit will be extremely high.

Upcoming Key Dates

  • 22nd May: Deadline to pass a Withdrawal Agreement without participating in the EU elections.
  • 23rd May: European Parliamentary elections
  • 23rd June: Three year anniversary of Referendum
  • 30th June: Brexit review if the UK is still a member of the EU.
  • 31st October: Current Brexit Deadline