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Under-Secretary at the Department for Exiting the EU, Robin Walker, said yesterday that the UK was “very close” to agreeing a deal on a transition period, adding, “We recognise how important it is to secure the deal on the implementation period as soon as possible. I want to stress that we are very close to a deal at this time.” Meanwhile, The Daily Telegraph quotes an EU diplomat who said, “It is clear that the United Kingdom has a strong will to reach an agreement on the transition period.” Agreement on a transition could be struck at the March 22 European Council summit.
Elsewhere, European Commission President Jean-Claude Juncker is today addressing the European Parliament outlining his position on the EU’s negotiating guidelines for the future UK-EU relationship.
The Telegraph Politico London Playbook
International Trade Secretary Liam Fox yesterday said that the UK would work with the European Commission to devise a “measured and proportionate” response to US tariffs on aluminium and steel, adding, “Our current membership of the European Union means that the European Commission will be coordinating the European response.” He also stressed that countries with strong security relationships with the US could apply for tariff exemptions, or that businesses in the US could apply for exemptions for products with national security implications. Fox will this week travel to Washington to meet US trade representative Robert Lighthizer, where he said he would make “that case for the UK as part of the EU.”
The Daily Telegraph
In a speech yesterday, CBI president Paul Drechsler said that Labour’s plans to nationalise some key industries would have as many negative effects on the UK economy as a no-deal Brexit, with potential investors “reaching for their coats.” Drechsler also called on Labour to provide evidence that nationalisation would deliver a better service for consumers. “So you want to nationalise energy, rail and water, and bring public services contracts back in house? Let’s see the evidence that it will deliver a better service to consumers at a lower cost,” he said.
A new report by Oliver Wyman and Clifford Chance estimates that UK exporters could face annual tariff and non-tariff costs of £27 billion if the UK and the EU fail to secure a trade deal after the Brexit transition period. The paper finds that around 70% of costs arising from trade barriers would be concentrated in five industry sectors: financial services, automotive, agrifood, consumer goods and chemicals. The report also estimates an annual impact on EU exporters of £31 billion from tariff and non-tariff barriers in trade with the UK under a no-deal scenario. If the UK and EU establish a new customs union, the report forecast that costs would be reduced, falling to £17 billion for UK businesses and £14 billion for EU businesses.
Elsewhere, a study by EY Item Club suggests that the year ahead will present a mixed picture for financial services in the UK. Equity markets and fixed income assets are forecasted to perform well in 2018, but challenges remain particularly in consumer credit, as well as in residential mortgage and business lending markets. Inflation is expected to fall from 2.7pc in 2017 to 2.5pc in 2018, resulting however in an only limited 1.3pc lift in consumer spending.
By the time the UK leaves the EU in March 2019, it will have spent an approximate £2bn on preparations for Brexit, the Institute for Government estimates. At least £1.3bn of this will have been spent by the six ministries most heavily involved in Brexit preparations, the report suggests, who will have hired around 10,000 extra staff by then. The biggest staff expansion is taking place at the Department for Environment, Food and Rural Affairs, whose staff numbers increased by 65 percent since June 2016, reversing cuts made over the course of the previous eight years. The report expects Her Majesty’s Revenue and Customs to increase staff size by 11 percent between June 2016 and March 2019, and the Home Office by 9 percent.
The European Commission yesterday set out its plans for developing the Capital Markets Union (CMU), which the Commission expects to be in place by the time the UK leaves the EU in 2019. Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness, said, “We want to make it easier and cheaper for companies, especially small and medium-sized ones, to get the financing they need. A deepened single market will help companies to do that and will allow them to grow. The Commission is delivering on its commitment to put in place the building blocks of CMU. The European Parliament and Council must now do their part. The Commission stands ready to work with them to adopt all legislative proposals by 2019.” Commission Vice-President for Financial Stability, Financial Services and Capital Markets Union, Valdis Dombrovskis, added, “By the time Brexit happens, the preconditions for a true single market for capital need to be in place.”
Federation of German Industries (BDI) Managing Director, Joachim Lang, has urged the European Union to agree a customs union with the UK to limit the impact on trade after Brexit. Lang said, “From a political point of view, a trade agreement is clearly more realistic… But the idea of a customs union should not just be discarded, because from an economic point of view a free trade agreement does not go far enough.” He added, “At this stage, there should be much clearer ideas on the table about how things will continue after Brexit… The time pressure is enormous.”
In a joint op-ed for the London Evening Standard, Conservative MP Anna Soubry and Labour MP Chuka Umunna write, “Given a free vote, we believe our colleagues would support Britain staying in both the single market and customs union.” They continue, “Many Leave voters are not so much regretting their vote as wanting to be sure we now do the right thing — they are worried we won’t and so they are right to want, along with the rest of us, a vote on the final deal.”
Germany’s acting Finance Minister, Peter Altmaier, yesterday said that Eurozone members had not yet reached agreement on the project of a European banking union. He said, “I don’t think we will have a common approach on this tomorrow as there are still too many unsolved questions,” adding, “We can only make progress if in those countries where there are many bad loans and many unsolved issues remain, the risk of a new banking crisis is reduced.” This comes as German Chancellor Angela Merkel and incoming Finance Minister Olaf Scholz are expected to travel to Paris later this week, where they will meet their French counterparts to discuss European reforms.
Meanwhile, representatives of Germany’s new coalition of Christian Democrats (CDU), Christian Social Union (CSU) and Social Democrats (SPD) yesterday officially signed the coalition agreement.
In an op-ed in the Financial Times, Lorenzo Fioramonti, the proposed Five Star Movement Minister for Economic Development in Italy, argues, “We [the Five Star Movement] intend to operate within the Eurozone framework and engage in constructive dialogue with all the institutions.” Fioramonti adds, “In a European context marred by the rise of rightwing extremism, Five Star should be seen as a bastion of stability, having managed to channel popular discontent towards a progressive agenda of social and economic reforms.” He concludes, “Our ambition is to reconnect the EU with its founding values of solidarity, sustainability and peace. Far from being isolationists, we strive for an interconnected Europe truly capable of promoting the wellbeing of its citizens and the rest of the world.” The Five Star Movement was the single most voted party in the Italian 4 March elections.