Brexit Update 29th June 2018

By July 12, 2018Brexit Updates

Top 3 developments

  • May warns EU27 on intelligence sharing
  • Cabinet to meet to agree future UK-EU relationship
  • No Hard Border if Hard Brexit says Irish PM

UK Update

Security and Intelligence partnership vital says May

Theresa May has warned EU leaders at the EU Council Summit that if they cut off the UK’s access to vital security systems used for intelligence gathering, they will put both the UK’s and their own citizens lives at risk. Whilst the UK has sought to offer continued cooperation between the UK’s highly regarded security and intelligence agencies and the EU, the European Commission has stated that the relationship must change to make way for the new Brexit reality. Before leaving the EU Council summit, May asked the 27 EU leaders to give their negotiators a mandate for achieving a ‘crucial objective’ of ensuring the safety of UK and EU citizens. If a deal is not agreed on data sharing, the UK will lose access to the European Criminal Records Information System and Prüm, which helps authorities track criminals and terrorists. For perspective, the UK received 163,000 requests through ECRIS in 2017 for criminal records, and 2,500 DNA profiles were requested under the Prüm treaty. It is yet to be seen what would happen if a less efficient system was put in place.

Warships and Satellites

The UK was given a boost this week, as BAE Systems was awarded a close to £20 billion contract to provide Australia’s navy with nine new warships, beating separate bids from Spain and Italy. Describing the win as an ‘enormous boost’ for the UK economy, Theresa May went on to use it as an example of the UK building relationships with non-EU countries in preparation for its post-Brexit future. The new-build frigates will be the first exports of a British design since the 1970s and will be called the “Hunter Class”. It may not be the only defence contract that goes out in the coming years however.

Pressure is mounting on the Chancellor Philip Hammond from MP’s, including Business Secretary Greg Clark, to approve a £100 million initial spend on finding an alternative to the Galileo satellite programme, which the UK is expecting to leave after Brexit. Theresa May did not broach the issue of Britain’s expulsion from the programme when it becomes a third state at the EU Council Summit, with Government sources saying the EU knows Britain’s views on the subject well. France, which the UK has a deep defence partnership with, and several other EU member states are seeking a softening of the European Commission’s position on the issue. However, with the £100 million scoping project likely to get the go-ahead in the next month or so, the EU will need to act fast to stop a rival satellite, which is likely to be built in partnership with other UK allies such as Australia and Canada. 

War! What is it good for?

With Government Ministers publicly sharing their differences on Brexit, including their responses to recent industry statements on the lack of progress in negotiations – I’m looking at you Boris(!) – Theresa May is trying to restore order. The entire Cabinet are set to meet at Chequers in what will be a wide-ranging discussion looking at the Government’s white paper outlining future plans for a UK-EU relationship. The Prime Minister will be keen to have their full support, with the EU likely to respond negatively to much of the report’s contents given their position on cherry-picking, something that can be levelled easily at any request for cooperation.

If no agreement is found, then delays and resignations may be considered. However, with the EU keen to know the UK’s position and only a few months left to go to agree the principles of further cooperation between the UK and EU, May will need to reach an agreement that sticks, with as little collateral damage as possible.

Blair Believes Abandoning Brexit Best for Britain

Former Prime Minister Tony Blair has called for an end to the Brexit process, saying “it can and should be stopped”. Pointing to the current stalemate in talks and Cabinet divisions, Blair went on to say that Theresa May was “more a hostage than leader”, with a need to consider that the March 2019 deadline is extended at the very least. Blair’s comments reflect a report released by the Brexit Committee of the House of Commons who have called for an extension if no deal is agreed, staving off a ‘no-deal Brexit’. The Government has so far been firm in its determination to stick to the March 29th 2019 deadline, which has now been passed into UK law after the passing of the EU Withdrawal Bill. 100,000 people are reported to have marched on Parliament at the weekend to demand a second referendum, a policy supported by Tony Blair and the Liberal Democrats, but opposed by both Labour and the Conservatives.

EU Banks unprepared for Brexit says Bank of England

EU banks are unprepared for Brexit, according to the Bank of England’s Financial Policy Committee. Whilst the UK is deemed to have made “positive progress” toward managing financial services risks surrounding Brexit, including in the case of a “disorderly Brexit”, EU banks have been flagged with red warnings by the Bank. Cross-service provision of contracts and clearing that operate across borders are the most pressing issues, with EU consumers exposed to “material risk” if no provisions are introduced by the EU. The European Commission has so far been reluctant to give ground on financial services cooperation with the City, including on future mutual recognition arrangements that would allow financial services to operate largely as they do now in the short term. The EU is reluctant to give ground on the issue of financial services within negotiations, seeing continued deep integration and reliance on a future third state as a risk for the economic stability of the bloc. However, given the Bank’s warnings, there is likely to be increased pressure from EU27 states for a solution to be found.

Rate of population growth lowest since 2004

The Office for National Statistics has said that the fall in the number of migrants to the UK is the largest single driver of the lowest rate of population growth in the UK since 2004. Uncertainty over Brexit, including the future status of new EU migrants after the transition deal comes to a close is seen as one thing turning people away. This is reflected by the number of people coming to the UK in search of a job falling by 43% in 2017, whilst those migrating for a job offer they had already received remained stable.

Fail to prepare, prepare to fail

Often seen as a weapon in the arsenal of British negotiators, the EU has stepped up preparations for a no-deal Brexit and warned the UK that it should too following the impasse between both sides in negotiations. EU contingencies include allowing UK flights to land, new customs arrangements and even the possibility of extending the leave date, all aimed at minimising disruption. Industry has joined in the chorus of warnings, with Airbus saying the lack of progress had forced them to consider the future of their commitment to the UK if supply chains are affected by a no-deal Brexit. The European Council will release its own statement today, calling on member states, EU institutions and all stakeholders to prepare ‘for all outcomes’. This isn’t to say a no-deal Brexit is likely, with both sides seeing preparations as a contingency, with no side threatening walking away from negotiations at this stage.


No Hard Border if Hard Brexit

Irish Prime Minister, Leo Varadkar, has said that the Republic of Ireland is not and will not prepare for a hard border, even as the possibility of a hard Brexit rises. This is in contrast to preparations for Irish airports and seaports which are putting contingencies in place for a no-deal outcome. Varadkar has said he is looking forward to the UK Government’s white paper, which is due to be published on the 9th July, which will go some way in outlining the UK’s hopes for a future UK-EU relationship which may provide greater clarity on how to resolve the Irish border problem cause by leaving the EU’s Single Market and Customs Union.

On the ongoing negotiations with the UK, Varadkar has said that the UK will not be an equal partner to the EU post-Brexit, pointing to the size of the EU in terms of member countries and differences in both the UK and the EU’s population. As is currently occurring, the UK will negotiate with the European Commission on matters of trade when it leaves the EU, as opposed to working in conjunction with the Commission and EU member states on agreeing trade positions. Promises from all sides on not installing a hard border provides further relief to communities in both Northern Ireland and the Republic.