Brexit Update 6th July 2018

By July 20, 2018 Brexit Updates

Top 3 developments  

  • Cabinet heads to Chequers for crunch talks
  • Business warns May over no-deal
  • German interior minister warns over EU-UK security partnership

UK Update

Chequersmate

Theresa May is meeting with her cabinet today at her country retreat Chequers to gain support for her ‘third-way’ proposal for resolving customs issues post-Brexit, as well as trade issues associated with leaving the Single Market. The proposal, which ministers gained first sighting of on Thursday, has already come under criticism, with Theresa May said to have had one-on-one meetings with Ministers to alleviate concerns ahead of the Chequers summit. Boris Johnson was said to have welcomed fellow Cabinet Brexiteers including Brexit Secretary David Davis to the Foreign Office to discuss the proposal, cueing up a coordinated response when the full Chequers discussion takes place.

The third way proposal follows disagreements over both the maximum-facilitation plan, which favours a technological solution to the Northern Ireland border issue and the customs partnership proposal which would mean the UK collecting import tariffs for the EU and effectively policing the EU borders – both of which have been described as magical thinking. The third way proposes a customs-partnership plus agreement that also includes harmonisation with EU regulations on goods to ensure continued frictionless trade between the UK and EU.

Ministers have been pre-warned, following a series of meetings between Brexiteers before the event, that anyone who resigns over the issue will need to take a taxi back to London in place of their ministerial car, in what is a sign of the increased hardening of Theresa May’s position in the face of expected strong opposition. Backbench Conservative MP and Brexit supporter Peter Bone quipped that he would be on his way with “four seats available” in such an event – unlikely to draw laughs from May and the party whips in any case.

Jag you are scaring No.10

Jaguar Land Rover (JLR) has added to business warnings of the consequences of a no-deal Brexit, with additional warnings over a Brexit that does not deliver tariff-free access and frictionless trade. The latter two things are currently delivered through UK membership of both the Customs Union and the Single Market, of which EEA members (EFTA and EU member states) gain access. Under current plans the UK will not be a member of the EEA, nor does it seek to form a customs union with the EU, citing restrictions on our ability to negotiate our own trade agreements. So, for Jaguar Land Rover the risks are mounting. Ralf Speth, CEO of JLR, has said no deal would “cost JLR £1.2bn profit each year”, whilst the “right conditions” would allow it to adapt to leaving the EU, ensuring the £80bn in plans to spend in the UK is secured. Theresa May will be considering this and other warnings from Brussels as she outlines her Brexit plans to cabinet ministers, knowing the potential consequences of a messy Brexit for the UK in the short to medium term.

Talks failing to take off

British and European aerospace companies have warned that planes between the UK and EU could stop flying in March unless talks begin immediately to resolve concerns over supply chains and regulatory standards. According to The Times, the European Commission has reportedly blocked the European Aviation Safety Agency (EASA) from holding talks with the UK’s Civil Aviation Authority (CAA), who are remain increasingly worried about the lack of regulatory planning to avoid disruption. At present a transition deal, which would go ahead if an agreement is reached, would allow a continuation of current operations for aerospace companies. However, contingency planning in the event of a no-deal is said to be limited. It remains to be seen in the coming months whether the European Commission will change its view in the event of differences in stand-points between the UK and EU which could lead to no deal being achieved.

It’s about US

Concerns among Brexiteers are mounting after Downing Street suggested that plans to harmonise regulations on goods with the EU would mean a separate regulatory regime with the US would not be achievable. Describing regulatory alignment as a ‘red line’, European Research Group Chair Jacob Rees-Mogg MP has said the move would make the UK a vassal state and contradicts the Prime Minister’s own assurances over taking back control. Theresa May, who has come under increasing pressure from business in recent months, remains concerned over the impact on supply chains of leaving the EU without ‘as frictionless as possible’ trade arrangements in place. The US, which represents the largest market in the world, is keen to agree a free trade agreement after the UK leaves the EU. However, different regulatory regimes between the US and the EU on food standards and other areas mean they remain somewhat incompatible, restricting the ability for businesses on both sides of the Atlantic to trade to full capacity. The plans are likely to come up against fierce opposition, with the potential of walk-outs unless Theresa May can build consensus. The move would also come a week before Donald Trump arrives in the UK, which would likely lead to recriminations over ‘missed potential’ in the event of a UK-EU deal that would lock US exporters out.

Losing Momentum

Labour supporting Momentum and Unite have told Jeremy Corbyn he should change his stance on a second referendum following the conclusion of negotiations between the UK and EU. A majority of members from both organisations are supportive of a second vote, with votes being held for an official position to be pushed in the coming months. Corbyn has so far ruled out a second referendum, preferring a general election instead. If a general election were to be called, various outcomes are likely, including but not limited to: a Labour Government with a new Brexit stance, a returned Conservative majority possibly with a new leader or a hung parliament which would undoubtedly lead to horse trading and an application to extend Brexit negotiations and the UK’s exit from the EU. All of which may occur in the event of a second referendum also.

EU UPDATE

UK inkurz warning

Chair of the EU Council, Austrian Chancellor Sebastion Kurz, has voiced his view that he would rather see an extension to negotiations with the UK than a hard Brexit. Whilst any extension would need the agreement of all 27 remaining EU member states, it would also pose several logistical challenges including the EU parliamentary elections in 2019 which the UK would be legally bound to participate in as a continuing member. Kurz further threw his support behind Michel Barnier who is leading negotiations with the UK, including on the bloc’s view on UK ‘cherry-picking’ and attempts to divide and rule EU member states to gain a more favourable deal. As the leader of Austria’s nationalist government which includes Kurz’s centre-right People’s Party and the far-right Freedom Party, Kurz is supportive of EU unity over the Brexit issue, whilst holding stronger nationalist views on pan-EU issues such as migration.

The Seehof

German interior minister, and thorn in Angela Markel’s side in recent weeks on the migration issue, has penned a letter to the European Commission telling them that their Brexit approach is completely misguided. Seehofer, a CSU politician, the second party in Germany’s coalition government, has sought to place the security of the citizens of Europe over “all other aspects of exit negotiations”. He warned that EU negotiators should seek “unlimited cooperation” with the UK to protect the European security architecture and protect all citizens or risk their safety. Whilst this does not represent a shift in the official position of Germany in negotiations, decided by Chancellor Angela Merkel, it does show signs of dissent in the German ranks, something that is likely to be seized upon by Brexit negotiators who are seeking a comprehensive security partnership that keeps in place security aspects including the European Arrest Warrant (EAW) and full participation in the Galileo satellite programme. The UK is seeking to appeal to individual countries to force an EU shift on the issue, but with the European Commission stressing that the UK cannot benefit in the same way as a member from EU institutions, the campaign is likely to be hard fought.