Brexit Update 28th September 2018

By October 10, 2018Brexit Updates

Top 3 developments

  • Labour sets conditions on support for second referendum
  • EU to match UK immigration restrictions says Verhofstadt
  • UK plans for impact on aviation sector of no-deal Brexit

UK Update

Brexit policy change from Labour

Following what has been perceived as a largely successful conference, Labour has committed to support a second referendum if the final UK-EU agreement is voted down by Parliament and Theresa May opts not to hold a general election. In the same vein, Labour doubled down on its commitment to reject the final agreement unless it satisfies all 6 of their tests, with Rebecca Long-Bailey saying it would require a miracle for them to support the government’s final deal.

On the contents of such a referendum, it was less clear. However, Shadow Brexit Secretary Keir Starmer went off script to state that ‘no one was ruling out a vote remain’ in a future ballot to head off a no-deal scenario. Other Labour figures such as John McDonnell sought to distance themselves from the comments, speaking instead about respecting the result of the last referendum – opening the possibility of a deal/no-deal referendum. The policy is set to remain fluid, however, with the Labour Party taking a staged approach to Brexit, wanting first to hold their own negotiations with the EU to try and find an agreement. Something that could only come to pass if a snap General Election is called and they are returned as the majority party. With no walking holiday’s planned, polls differing week-to-week, and the risk of falling below their 2017 election result, it is however unlikely May would call an election before first considering her other options.

Tit-for-tat on immigration

Guy Verhofstadt, who represents the European Parliament within Brexit negotiations, has warned the UK against adopting a skills-based immigration policy which would differentiate between EU citizens. The cabinet has agreed a ‘skills, not nationality’ approach to immigration, set to be announced at Conservative Conference, which would end the current regime under free movement that allows EU citizens of all skill sets to reside and take up employment in the UK, providing they secure employment within a set period. Instead, the UK will not differentiate between EU and non-EU nationals in its future immigration policy, unless a separate agreement is made as part of future negotiations.

Speaking to the Prime Minister and Home Secretary, Verhofstadt said that any restrictions on EU nationals “would apply reciprocally to UK citizens moving to the EU 26” when accounting for the Common Travel Area (CTA) with the Republic of Ireland that allows free movement of all UK/ROI citizens between each territory to live and work. The reciprocity understanding is said to be shared with EU officials representing member states, meaning UK citizens without the skill sets required in the EU being restricted in their ability to live and work in EU states post-Brexit.

Other parts of immigration policy under discussion included the ‘right to return’ principle. Currently, EU nationals who gain settled status in the UK will lose that status if they leave the UK for five years or more. Verhofstadt is pushing for the UK government to offer a lifelong right to return and gave an indication that the EU, in turn, would be more likely to offer those residing in the EU before the end of the transition period the right to move between member states to live and work as a result.

Come fly with me…

The launch of the third tranche of the no-deal technical papers delivered a rather blunt assessment of the effects of a no-deal Brexit on the aviation sector, with ‘UK and EU licenced airlines losing their automatic right to operate air services between the UK and the EU without seeking advance permission’. Moody’s, a leading rating agency, has highlighted aviation as one of the four sectors set to be most at risk from a no deal, but with minds turning to the knock-on impact on both sides of the channel, the Department for Transport are scoping out the viability of bilateral agreements between the UK and individual EU states to keep planes flying.

The DfT has indicated that the UK envisages granting permission to EU airlines to continue to operate between the UK and EU in a no-deal scenario and would ‘expect EU countries to reciprocate in turn’. From November it is likely to become clearer whether such arrangements will be advanced if the current ‘impasse’ between both sides in finding a more comprehensive solution is not resolved.

What comes after May

Theresa May is the “right person to lead the Conservative Party through the next few months”, but a new leader may be needed in Spring 2019 according to former Conservative leader Michael Howard, who was speaking on the subject at an Oxford University Conservatives alumni event. Howard followed the comments by saying that things could change if May defied ‘all odds’ and delivered a Brexit deal with the EU that satisfied both Parliament and the British people, in which case she may find her position strengthened to the point that she could lead the party into the 2022 election. Whilst the official position of the Prime Minister remains that she will lead the Conservatives into the next election, threats to her position are well documented. Added to this the Conservatives performance in the 2017 election, when the PM’s popularity was shown to be higher, and it is clearer to see that the Brexit negotiations are likely to be a make-or-break on her future prospects to retain the leadership and support.

Brexit: A+ ?

Alongside Pro-Brexit politicians including David Davis and Boris Johnson, the Institute for Economic Affairs (IEA) launched its ‘Plan A+’ for a future trade relationship between the UK and EU. The deal warns that if the UK doesn’t grasp the ‘huge opportunity’ of Brexit a ‘new normal’ of limited economic growth will prevail. The paper goes on to propose a deal based on the EU-Canada CETA agreement, which took 7 years to negotiate. Criticisms of the proposals focused on the lack of assessment of the consequences of adopting a proposal that has divergence from EU regulations at its heart, as well as the likelihood of an Anglo-Irish backstop for the border being made operational and acceptable to the EU.

However, with only months to go until Brexit, the framework for a future agreement needs to be nailed down to stand any chance of being passed ahead of the UK’s exit date. May’s own Chequers proposal has been widely rejected by the EU and others, whilst the Canada or Plan A+ deal is unlikely to gain majority support from across Parliament given Labour’s preference for a customs union between the UK and EU. In this respect, the more time taken to agree on a deal with the EU will mean less time taken to try and gain support in Parliament for a deal – or to change tack if such support is not forthcoming.

EU Update

Kauder stayed, kauder gone

Over half of the governing German Christian Democrat party’s MPs lined up to depose German Chancellor Angela Merkel’s right-hand man, Volker Kauder, in the German Parliament this week. The vote, coming after public polling put the CDU at its lowest support levels since its founding in 1945, is seen as a vote of no confidence in the chancellor, with the opposition calling the vote the twilight for the end of the chancellor who has governed for close to 13 years.

The splits within the CDU not only risk undermining internal policy within Germany but also in further impacting Germany’s influence within Brexit negotiations. The UK is currently seeking allies in advancing its Chequers proposals, with France the most vocal opponent of an agreement that hands many of the benefits of membership over to the UK without being a member – namely on the introduction of a regime that allows the free movement of goods. Germany, whilst also standing alongside France in its position, is seen as critical to advancing talks.

Upcoming Key Dates

  • 18th October: EU Council Summit, including sign off of the EU Withdrawal Agreement
  • 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.