Brexit Update 31st August 2018

By September 13, 2018 Brexit Updates

Top 3 developments  

    • Pound rallies as Barnier points to deal
    • Trade bloc warns UK on following EU regulations
    • Italy confronts EU Budget

UK Update

Pound rallies on the promise of a deal

The pound rallied this week to a three-week high following a statement by the EU’s chief negotiator, Michel Barnier, that the EU was prepared to offer the UK a deal ‘like no other third country’, quelling rising concern that a no-deal outcome looks increasingly probable. However, an alternative to the Chequers proposal is likely to fall on deaf ears, with the UK Government under pressure to maintain the initiative in negotiations over the future partnership agreement. De facto Deputy Prime Minister David Lidington said after Barnier’s speech that there would not be time to consider an EU alternative to the Chequers plan and that a refusal to work on its basis would result in no deal. Barnier had previously sought to deconstruct the Chequers agreement, whilst his most recent statement sought to reassert that the “single market means single market” and that there would be “no single market a la carte”. Commentators are now looking to the September and October EU Council summits to give greater clarity on what a future UK-EU partnership may look like. November has also now been touted as the most likely month for a deal to be reached with several outstanding issues still being negotiated, including on the Northern Irish border and the status of geographical indicators (GI’s) which protect named goods such as Champagne or Scotch Whiskey from being produced in a place not outlined within the GI.

SCALLOP WARS: The French Strike Back

Across the sea beds of the English Channel, a small-scale ‘scallop war’ has broken out between British and French fishermen. Equipping stones and donning boats as battering rams, French fisherman attacked British boats that had started scraping sea beds of scallops ahead of the 1st October legal green light French fisherman have for carrying out the practice. In previous years a gentleman’s agreement between both sides had ensured British boats also held out for October 1st before beginning in exchange for fishing rights. However, the prospect of Brexit is said to have resulted in the truce being broken. UK and French officials are now working to stave off further confrontations, with British fisherman saying they would take a 40-boat flotilla to stop the assault occurring again as they continued the practice. Under the Common Fisheries Policy, set to be abolished when the UK leaves the EU, all registered fleets have equal access to fish in all EU waters, bar the first 12 nautical miles from a country’s coastline, where access can be limited. France has imposed rules on its own fleets not to go beyond 12nm amid concern over scallop stocks, meaning other EU vessels can take advantage over the lack of competition in the Bay of Seine where the scallops are located. The confrontation may be a sign of things to come, with many EU27 fishing fleets relying on UK waters which will be cut off to them for fishing unless access is granted by UK authorities post-Brexit.

Trying to get a Pacific Deal

Members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have warned the UK against maintaining EU regulations if it wants a serious future part in the 11-member Pacific trade bloc which includes Canada, Japan, Australia, New Zealand and others. The UK is currently in informal talks with the Pacific trade bloc, as well as countries across the world as the Government seeks to add substance to its ‘Global Britain’ catch-line. A CPTPP official has been quoted as saying the UK would find it ‘very challenging’ to join the bloc with a ‘carve-out’ on maintaining EU regulatory standards which would ‘make a nonsense of being a member’.

Whilst the UK currently has trade agreements with countries across the world, these come with being a member of the EU, where the European Commission negotiates on behalf of all 28 states. In the event of a no-deal Brexit, the UK has sought assurances from trade partners that current rules governing trade relationships are maintained. However, the UK will need to seek to expand on these if it is to stand any chance of combatting a significant reduction in economic growth. CPTPP membership, therefore, forms an important pillar of no-deal planning. The UK, however, maintains a preference to adhere to EU regulations on goods as outlined in the Chequers White Paper, with the EU set to report on its openness to proposals in the coming weeks.

Nursing an idea

The Royal College of Nursing has come out in support of a second referendum on the final deal agreed between the UK and EU, or the decision to walk away with no deal if politicians seek to do so. Setting out the impact the UK’s exit would have on the UK health and care system, RCN Chair, Maria Trewern, said any risks that are not credibly addressed would “severely impact on our members ability to provide safe and effective care for their patients in both the short and long term”. Concerns centre on workforce sustainability, employment practices, rights and cross-border exchanges of knowledge research and skills. The idea of a second referendum has been gaining traction in recent months, with various groups coming out in support. However, the two main parties remain opposed to the idea with Labour’s Barry Gardiner saying it would undermine the outcome of the first referendum, further warning that if people felt democracy was not working then they would pursue other means. Labour is however set to consider the issue at its Conference in September

Settled Status Scheme Starts

A pilot for the Government’s settled status scheme for EU citizens wishing to remain in the UK after Brexit has been launched in the North West. The trial, which will grant settled status to those that pass the application process, is set to launch fully later this year. The trial includes 4000 people and will allow officials to test the system and make improvements ahead of the roll-out.

Under EU rules anyone residing in another EU state for five years can apply for settled status, with the UK considering applications from anyone arriving by December 31st 2020 when the implementation period ends.

Reach for the stars

The Treasury has signed off an initial £92 million pounds for a feasibility study into the creation of a UK satellite system to rival the EU’s Galileo programme, of which the UK was a key architect. The decision comes following the EU’s refusal to allow the UK equal access to core parts of Galileo which are used for defence and emergency services purposes. Theresa May has said that the UK will withdraw support unless there is a step change in the EU’s position on the issue. Further saying such a decision on pulling funding and creating a separate system was not ‘an idle threat to achieve our negotiating objectives’. The government has said that sustained disruption to satellite navigation would cost the UK economy £1bn a day, due to reliance on GPS used in cars and other transportation. The future ‘sovereign system’ that the UK develops would draw upon the expertise and components supplied by UK contractors for the Galileo programme, saving considerable time and money compared to starting from scratch.

Kenya get a trade deal?

Prime Minister Theresa May has embarked on a trade mission to boost ties with African countries as the UK plans to go it alone on trade and ‘strengthen its global partnership’. The trip, which included visiting South Africa, Kenya and Nigeria, was the first trip to sub-Saharan Africa countries by a British Prime Minister since 2013 when David Cameron attended the funeral of Nelson Mandela. May talked trade and security with President Kenyatta in Kenya with dedicated talks on cybersecurity and investment. May reiterated the Government’s desire to increase trade with African states, which has been flagging in recent years, committing to overtake the US as the continents third largest trade partner in the next few years.

EU Update

Budget veto threat from Di Maio

Italian Deputy Prime Minister and leader of the Five Star Movement, Luigi Di Maio, has accused the EU Budget Commissioner Gunther Oettinger of disrespecting the ‘great Italian nation’ following remarks over Italy’s budget contributions and migration concerns. Italy has threatened to veto the EU’s budget, known as the multi-annual financial framework, for the 2021-2027 period unless the EU does more to address the migration issue facing Italy. Oettinger has said that the EU would not react on a daily basis to Italy’s demands, whilst also disputing Italy’s financial contribution to the EU. He said that “It’s not €20 billion a year. Italy pays in €14, 15, 16 billion a year. If you take into account what they get out of the EU budget, that leaves a net contribution of €3 billion a year”.

On the migration issue, Matteo Salvini, the Italian interior minister, further criticised French premier Emmanuel Macron’s ‘hypocrisy’ for speaking about European cooperation, whilst ignoring requests from Rome for help on migration. Macron responded by saying, “he would not cede any ground to nationalists which advocate hate speech”, bringing to light the internal differences within the EU Council at present. EU budget negotiations for the 2021-2027 period are said to be highly charged, with the EU Commission outlining that contributions by member states will need to increase to fill the shortfall of the UK’s departure and fund the many additional programmes put forward by member states.  Something made harder by Italy’s position on the issue.

German industry prepares for no-deal

The Federation of German Industries (BDI) has warned that the risk of a no-deal Brexit is growing by the day and is hoping that the UK will reverse its decision to leave the bloc, even at this late stage. Joachim Lang, head of the group, has said that business should prepare for a worst-case scenario, with German businesses exposed to any fallout. Germany exported £76 billion worth of goods to the UK in 2017 alone and is its 5th-largest trade partner. In addition, Germany has 2,200 UK based businesses with 412,000 employees. The BDI has set up a 200-expert Brexit taskforce to deal with the new arrangements that come out of negotiations to advise German business in turn. The prospect of a no-deal Brexit is likely to send shock-waves across the continent, not least in the UK. The UK Parliament, however, looks set to refuse to accept a no-deal outcome, making an extension of negotiations and membership or a decision to adopt a less comprehensive future framework for relations after the implementation period more likely outcome at this stage – despite protestations from all sides to the contrary.

Upcoming Key Dates

  • August-September: 70+ technical papers released on No-Deal preparations
  • 4th September: Parliament Returns
  • 20th September: Meeting between EU Member States in Austria
  • 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.