Brexit Update 19th October 2018

By October 30, 2018Brexit Updates

Top 3 developments  

  • EU Summit fails to deliver breakthrough
  • Agreement reached with Spain on Gibraltar
  • “People’s vote” campaign marches for second referendum

UK Update

No breakthrough at EU Summit

Theresa May returns from Brussels today without having secured a conclusion to the Withdrawal Agreement, which remains 90% complete. The controversial Irish backstop conundrum forms a core part of the remaining 10%. On whether the whole thing could fall apart over the issue, Michel Barnier said “yes”, with the complexity of the UK political situation limiting manoeuvrability on May’s part.

Where before May had sought to hedge her position between Brexiteer MPs and Remainers, whilst seeking to maintain the constitutional integrity of the UK’s internal market, through seeking a time-limited backstop, talk now moves to an extension of the transition period. The thought behind the move, as outlined by Michel Barnier, is to limit the possibility of the backstop coming into force by allowing longer for trade negotiations to be concluded between the UK and EU. Whilst May has not rejected the idea, it still goes no way in resolving the UK and EU’s disagreement over the length of time a backstop must be in place. This is a major (major) stumbling block.

SNP leader, Nicola Sturgeon, has given her support to an extension of the transition period, whereby the UK would remain effectively in the EU in all but name, whilst not holding representation in its decision-making bodies and continuing to pay into the EU’s budget. Brexiteers, as expected, are not happy at the proposition. EU leaders will now leave the challenge in the hands of the negotiators who reconvene next week to try and find a resolution. If ‘substantial progress’ is made, an ‘extraordinary summit’ may be called. Watch this space.

Scotland Tories Threaten Resignations

Scotland’s Conservative leader Ruth Davidson and Scottish Secretary David Mundell have both threatened their resignations in a formal letter to the Prime Minister if Northern Ireland is offered a separate deal to that of the rest of the UK. There had previously been talk that the EU wanted Northern Ireland to remain partly in the EU’s Single Market as part of the backstop, with Michel Barnier telling DUP leader Arlene Foster, Northern Ireland would have the best of both worlds with participation in both the EU and UK’s internal markets. Such an outcome not only angers the DUP who have threated withdrawal of their votes in Westminster if they have a separate arrangement than Great Britain, but also the SNP who have pushed for continued participation in the EU’s Single Market. A second independence referendum in Scotland would remain a very real possibility in such a circumstance, something both Davidson and Mundell want to avoid at all costs.

Sinn Fein to demand reunification referendum if no deal

Sinn Fein has said it will demand a referendum on reunification of Northern Ireland with the Republic of Ireland if the UK and EU failed to reach a deal that ensured an open border on the island. Party leader Mary Lou McDonald has said that introducing a hard border would be so damaging to peace and prosperity in Northern Ireland that they would not sit back and let it happen.

Both the UK, the Republic of Ireland and the EU have committed not to introduce a hard border in any circumstance, leaving all sides plans for the border in a no deal scenario to comply with WTO rules and EU law (in the case of the Republic of Ireland) a closely guarded secret. Whilst all sides recognise that they will do all they can to keep the border open, both the UK and EU are seeking a proper agreed solution to offset any lesser arrangement under a no deal scenario. Under the Good Friday Agreement, a referendum on reunification can only occur if there is a clear indication of support.

Steady as a Rock

Spain’s Government have said that an agreement on the Rock’s orderly withdrawal from the European Union is now complete, and will “no longer present a problem” to the wider Withdrawal Agreement.  Whilst joint-sovereignty has been off the table in negotiations with Spain, there are to be a new set of “practical measures” drawn up with Spain on tax cooperation, police and customs cooperation, the environment, citizens’ rights and tobacco. Spain and the Gibraltar government will continue to hold specific bilateral talks on these and other areas in the coming weeks.

Specific protocols to keep the borders open in Gibraltar, Northern Ireland and UK Sovereign Base Areas in Cyprus are to be set out in the Withdrawal Agreement, due to be concluded before the end of the year. Gibraltar’s Government has however said that it stands with the UK in preparing for a no-deal, insisting that “no deal is better than a bad deal”.

Non, non, non

France has refused to enter into bilateral talks with UK border officials to resolve plans for the France-UK border in the case of a no-deal Brexit. Head of HMRC, Jon Thomson, told MP’s this week that he could offer no assurances that “all will be fine” if the UK leaves without a deal, with much resting “in the hands of the French”. The UK has already said it will not increase checks on goods entering the UK from France.

In a sign that France is preparing for the worst, 700 additional customs officers are due to be recruited, with extra border facilities installed according to the Minister in charge of customs. Infrastructure plans include a new scanner that can scan freight trains passing through the Channel Tunnel according to Budget Minister Gerald Darmanin. Darmanin went onto say that UK goods could face up to four separate customs procedures, compared to one today adding an additional two minutes per truck. It remains to be seen if France would be open for entering a bilateral discussion to avert further delays at the border if the UK leaves without a UK-EU deal.

Ready when you are, says the US

The Trump administration has formally notified the US Congress that they are ‘well prepared’ to move forward with US-UK trade negotiations as soon as the UK has left the European Union. The announcement, made on the same day of the EU Council meeting, appears to be timed to give May added certainty that the US will be ready to pick up the pieces if trade with the EU is hit because of negotiation disagreements.

The ‘UK-US Trade and Investment Working Group’, set up to lay the groundwork for future trade talks, which can only take place after the UK leaves the EU, has been exploring the possibilities of a future trade deal in recent months. The Government has also launched a public consultation, seeking the views of business and consumers on what a future FTA should look like. International Trade Secretary, and Brexiteer, Liam Fox has even given tentative support for an extension to the transition period to allow the UK to conclude trade talks with the US and other states before it finds itself in a ‘cliff edge’ situation.

It is important to note that the UK will be under pressure to conclude trade agreements with the EU and other states during the transition period, with the current end date in December 2020 adding additional pressure on the UK side which could impact the UK’s leverage. Concluding a UK-EU trade deal will also arguably remain most important, given the integration of markets, before further bilateral agreements can be fully concluded.

AstraZeneca to ‘reconsider’ position if no deal

Pharmaceutical company AstraZeneca have warned that they will need to seriously reconsider their future presence in the UK if Brexit negotiations do not deliver a deal that will bring about certainty.

AstraZeneca’s Leif Johansson, a non-executive Director, said that any agreement would need to ensure Britain did not become ‘an isolated island in the middle of the Atlantic Ocean’ to continue to attract investment. The European Medicines Agency conducted a survey earlier this year finding that many drug manufacturers remain unprepared for Brexit, whereby they may need to test and register drugs in both the UK and EU to continue to sell them in both territories.

Red lines? We have some too says Ford and Nissan

Car manufacturers Ford and Nissan have warned that uncertainty is disrupting their businesses. Ford went further, announcing a U-turn on its previous position to weather the storm and stay put, saying a no-deal Brexit was now a “red line”. A Canada style trade deal was also rubbished by Ford’s European Boss Stephen Armstrong, saying that it would introduce ‘time consuming customs and border checks’ which would undermine their just-in-time manufacturing system. Concerns over supply chains through Europe is a repeating theme amongst car manufacturers, and aerospace companies such as Airbus who warn of the impact a no-deal Brexit would have on their profitability.

London March for a “People’s Vote”

This Saturday thousands of people from across the UK are set to enter London to take part in a large march calling for a second vote on EU membership. The People’s Vote campaign is seeking to give people a second opportunity to decide on whether to remain in the EU now that negotiations have progressed further. Both Labour and the Conservatives remain committed to resolving a deal with the EU, with Labour supporting a second referendum only if they cannot enter government and negotiate a deal through a snap general election. Whilst many support a further In/Out referendum, others support the idea of a deal/no-deal referendum. The likelihood of a second referendum at this stage remains unlikely given a lack of majority support in Parliament.

Upcoming Key Dates

  • 13th December: EU Council Summit
  • 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.