Brexit Update 22nd February 2019

By March 5, 2019 Brexit Updates

Top 3 developments 

  • May returns to Brussels to continue renegotiations over the backstop.
  • The Prime Minister and EU Commission President released a joint statement on their dedication to resolving the backstop issue.
  • The Brexit Delivery Group campaign to take no deal off the table.

UK Update

Back to the Future Relationship

The Brexit Secretary met with EU officials this week to focus on ‘alternative arrangements’ to solve the impasse on the Irish border. The Malthouse Compromise – the plan to scrap the backstop and replace it with technology and an extended transition period – was discussed as a potential option. This was notable because earlier this week it was reported that the PM had ruled out this option, which enraged Tories because the Malthouse Compromise is the only option on the table that has attracted broad support from both pro-EU and Brexiteer wings of the Party.

Brexiteers have admitted that part of the reason they voted against the Government last week was through frustration that the PM had not seriously considered the Malthouse Compromise. The introduction of the Malthouse Compromise by the Brexit Secretary to the official negotiations was therefore a signal from DExEU that they see it as a workable solution. However, the EU ruled out the Compromise as an option that can form part of the Withdrawal Agreement, claiming that the necessary technology does not yet exist. At this late stage they are also unwilling to scrap the backstop and replace it with an option that is unproven. Tweaking the current legal text around the backstop is still the preferred solution.

Interestingly however, there was agreement that this plan could form part of the discussions around the future relationship with the EU. A senior member of the European Research Group and former DExEU Minister validated this by saying that the Malthouse Compromise was still “alive and kicking”. This is a confirmation that although technological solutions are unlikely to be used as an immediate solution to prevent a hard border, technology could be an essential part of the infrastructure of the Irish border when the UK secures an FTA with the EU.

Sheikhdown of UK-EU Statement

Ahead of the EU-Arab summit in Sharm al-Sheikh on Sunday, Theresa May and Commission President Jean-Claude Juncker issued a joint statement pledging to continue exploring “alternative arrangements” and “legal assurances” to the backstop. It is noteworthy that the statement focused on the Political Declaration, as opposed to the Withdrawal Agreement, suggesting that May has accepted that the Withdrawal Agreement will not be reopened.

Whilst the two leaders “reconfirmed their commitment to avoiding a hard border on the island of Ireland and to respect the integrity of the EU’s internal market and of the United Kingdom”, May’s allies have been careful to downplay suggestions that the Prime Minister will give another meaningful vote to Parliament next week as it implies significant progress has occurred during negotiations. This coming week will be critical for the Prime Minister as without significant process she has little chance of preventing Parliament taking control of the Brexit timetable, with at least twenty ministers announcing that they are prepared to vote for the Cooper amendment, removing the threat of a no deal.

Go Your Own Way

A group of MPs have resigned from their existing parties to form a new centrist grouping – ‘The Independent Group’. The group, which is not yet a formal party, was created on Tuesday by seven then-Labour MPs, inviting others with similar values from all political parties to join them. Members of both the Labour and Conservative Party have joined the Independent Group, with membership now standing at 11 – the same as the Lib Dems.

Whilst the three then-Conservative MPs (Anna Soubry, Heidi Allen and Sarah Wollaston) stated that their reason for joining the Independent Group was over Brexit and the Conservative Party transition to the right, it would be wrong to see the split from the Labour party as solely Brexit-driven with the former Labour MPs criticising Jeremy Corbyn and the party’s handling of its antisemitism crisis. However, the timing means that Brexit will dominate the agenda of this new parliamentary group. It is currently unclear what impact the Independent Group will have on the Parliamentary complexion and the negotiation process, but it does mean that May now has another group to appease.

Japan goes on a Fox-Hunt

Jeremy Hunt and Liam Fox angered Japanese trade officials this week after sending a letter that was accused of being “high-handed” and “desperate”. The letter stated that “time was of the essence” and that flexibility was needed on both sides in order to secure a UK-Japan free trade deal. This was interpreted by the Japanese as an accusation of foot-dragging, as the UK are trying to roll-over the existing EU-Japan free trade agreement before 29 March. The UK will be shut out of this agreement if we leave the EU with no-deal, and it is almost certain that there will not be enough time to roll-over this deal before our exit date.

The UK has so far only replaced 7 of the EU’s 69 free trade deals, accounting for £16bn out of the £117bn of UK trade with these nations. It is common practice to approach trade deals from a position of strength, but the UK is in a very weak position at the moment and nations are taking a harder line in order to exploit this vulnerability. There is little appetite in Japan to soften its stance, and it is unlikely that any nation will be willing to compromise on their terms when the UK is so desperate to get trade deals over the line.

Honda speeds off

Fear is mounting over the number of companies leaving Britain due to predictions that a no deal Brexit will have disastrous effects on the UK economy. Honda is the latest firm that has chosen to shut their Swindon plant by 2020, cutting 3,500 jobs. Whilst the company itself has argued that the closure is all about “global trends and not Brexit”, the media and British public view this move as a continuation in the ‘project fear snowball effect’ with more and more companies losing faith in the UK negotiations. The Dutch government highlighted the extent of the snowball effect by gloating that it had helped 42 companies make the switch from the UK to the Netherlands in 2018 and is in talks with more than 250 others about making a move.

 

The extent of project fear has led to Parliament and other groups campaigning to take no deal off the table, with the union Unite arguing that the ‘rigid process’ with the EU has led to ‘chaotic Brexit uncertainty’. The Brexit Delivery Group, which consists of about 100 Tory MPs, are the latest group to protest against a no deal, writing to the Prime Minister calling for a free vote next week to take no deal off the table. Simon Hart and Andrew Percy, the two leaders of the group, have told the Chief Whip that they will force an extension of Article 50 if a deal cannot be secured, arguing that the reputation of both the Government and Conservative Party depends on a smooth exit from the EU. However, the Prime Minister views no deal as a valuable tactic to persuade Parliament to vote for her deal. It will be interesting to see if May keeps this option on the table as time runs down on future negotiations.

EU Update

We’re sorry, but the 29 March departure of the UK from the EU has been delayed

The EU Commission President Jean-Claude Juncker said this week that “no one in Europe would oppose” the extension of Article 50. This was the first time that the EU Commission have taken a definitive stance on this issue, and clarifies that they would be willing to delay Brexit in order to prevent a chaotic no-deal. It is technically not up to the EU Commission to make this decision, as any extension of Article 50 would require unanimous agreement of the EU27. But Juncker’s position on this is undoubtedly important, and his comments will reflect what most of the European countries are thinking.

Juncker also confirmed that any extension to Article 50 could lead to the UK participating in the European Parliament elections in May, stating that he could not rule it out as there is no timeframe for such an extension. Although this would cause significant headaches in Brussels, it is clear that they view the alternative – a no-deal Brexit – as far more damaging to the EU27 and the wider European project. The PM has continued to rule out the possibility of the UK seeking to extend Article 50.

Upcoming Key Dates

  • 24th February: EU-Arab Summit
  • 26th February: May returns to House of Commons with a new withdrawal bill
  • 27th February: MPs vote on an amendable motion if the Withdrawal Bill does not pass Parliament
  • End of February (TBC): Theresa May and Jean-Claude Juncker meeting.
  • 13th March: Spring Statement
  • 22nd March: One week until Brexit
  • 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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