5 September 2018

EU warns member states against engaging with the UK bilaterally on Brexit

The European Commission urged the EU27 member states not to engage with the UK about Brexit on a bilateral basis, and warned diplomats against attending a series of Brexit seminars for London-based EU27 representatives organised by the UK government, Politico reports. The EU reportedly fears that the seminars could be used to negotiate ‘mini deals’ in case the UK and the EU do not reach a deal, with a European official quoted saying, “No deal means no deal. No deal does not mean that we will negotiate a series of mini deals.”

Elsewhere, German Chancellor Angela Merkel yesterday said that a “very intensive trade deal” was the most likely result of Brexit negotiations, adding, “We don’t want the discussions to break down…But we also can’t fully rule that out because we still have no result. But I promise you that we will use all our force and creativity to make sure a deal happens.” This comes as Germany has started preparations for a ‘no deal’ Brexit by hiring additional customs staff.

Separately, the Daily Telegraph reports that EU chief Brexit negotiator Michel Barnier told the House of Commons Brexit Select Committee during a meeting in Brussels yesterday that the UK Government’s Chequers proposals were “not acceptable,” proposing instead an agreement based on the EU’s free trade deal with Canada.

Meanwhile, Brexit Secretary Dominic Raab told the House of Commons yesterday that EU counterparts were “engaging seriously” with the UK Government’s Brexit proposals and that there was a “a wide range of positive and constructive feedback,” adding that the UK is not “going to roll over for Brussels.” Raab however did not rule the scenario of a regulatory border in the Irish Sea between Northern Ireland and Great Britain as a possible ‘backstop’ arrangement for the Irish border issue in Brexit talks.

Source: Politico I Politico II The Daily Telegraph BBC News Bloomberg

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Mervyn King criticises “incompetence” of UK planning for Brexit

Former governor of the Bank of England, Mervyn King, criticised the “incompetence” of the UK government’s preparation for Brexit, adding that this had undermined Britain’s negotiating position. He said that it “beggared belief” the UK was discussing stockpiling medicines and food, noting, “A government that cannot take action to prevent some of these catastrophic outcomes illustrates a whole lack of preparation.” He also warned that the “biggest economic challenges” facing the UK, including funding for social care, the NHS and pensions, were not being properly discussed due to the focus on Brexit.

Elsewhere, Permanent Secretary at the Department for Exiting the European Union (DExEU) Philip Rycroft told the House of Commons Brexit Committee that “there are plans in place” for the possibility of the UK leaving the EU without a deal. Rycroft said plans “are at a level of detail which satisfies the team at DExEU … We are constantly monitoring those plans to make sure they are kept up to date.”

Meanwhile, according to a Reuters survey asking economists about the probability of a ‘no deal’ Brexit, the chances of this scenario stand at 25 percent, remaining unchanged from a similar poll conducted in August.

Separately, Bank of England (BoE) governor Mark Carney yesterday told the House of Commons Treasury Select Committee that fewer than 20 percent of UK companies were currently preparing for a ‘no deal’ Brexit scenario. Carney also suggested he could stay on in his position beyond June 2019 in order to “support a smooth Brexit and an effective transition at the Bank of England.”

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EU27 leaders plan “carrot and stick” Brexit negotiations at Salzburg summit

The EU27 are planning a “carrot and stick” approach to Brexit talks at the EU summit in Salzburg on 19-20 September, The Guardian reports. It cites an unnamed EU diplomat saying, “The first part will say that the Chequers proposals were welcomed and that we are talking about the future: an unprecedented deal which will be our best effort at an internal market in goods,” adding, “The second statement will be a very stern warning. It is clear that the British game plan is to push [the Irish border issue] back, but they need to step on it now, and stop playing around.” This comes as the paper also reports that several EU diplomats and officials have described key parts of May’s Chequers proposals, including a ‘common rulebook’ on goods and the Facilitated Customs Arrangement (FCA), as “dead in the water.”

Meanwhile, Downing Street yesterday suggested that May will seek direct contact with European leaders during the upcoming months, with her official spokesperson saying the final decisions in the Brexit talks “will be taken at a political level by the European council, so you can obviously expect a continued and strong engagement with fellow European countries.”

Elsewhere, Downing Street yesterday distributed a dossier to Cabinet members, defending the Chequers proposal and calling to “come together, agree a pragmatic Brexit that most people can support and get on with it.”

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David Davis to support alternative Canada-style proposal for UK-EU relationship

CityAM reports that former Brexit Secretary David Davis will formally support a new report by UK think tanks and lawyers, due to be published this month, which proposes a Canada-style free trade agreement with the EU. The “Alternative Brexit Plan” is expected to call for full regulatory autonomy for the UK, as well as full control over tariffs and trade agreements. It will also reportedly contain proposals to solve the Irish border issue, and criticise the UK government for giving in to “EU obstructionism” in negotiations. Davis is expected to pen the forward to the paper.

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GMB union backs second referendum amid fears of “economic chaos”

The General Secretary of the union GMB, Tim Roache, yesterday announced the union’s support for a referendum on the final Brexit deal, arguing that “how we leave the EU is as important as the decision to leave in the first place.” Roache said, “People voted for change – they voted to take back control. They did not vote for economic chaos or to put jobs and hard won rights on the line,” adding that “a [Conservative] hard Brexit would be a disaster for GMB members.” The Guardian reports that GMB sources say this “could be in the form of either a general election or a second referendum on the final deal if there was no election forthcoming.” The GMB is the first major union to publicly announce its support for a second referendum.

Elsewhere, Greater Manchester Mayor Andy Burnham will today say that the Brexit process should be suspended if parliament “cannot unite” around a negotiated exit from the EU. He is also expected to voice he support for a second referendum “on the proposed no-deal departure” in this event. He will say, “A price would undoubtedly be paid in terms of social cohesion but it would be a necessary one to protect the damage to people’s jobs, families and lives.”

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Recent poll reveals that only 17% of voters expect to get a good deal out of Brexit

A recent poll conducted by Professor Sir John Curtice of Stratchclyde University shows that fewer than one in five of the British public expect a good deal out of Brexit negotiations. This has fallen from 33% in February 2017. The survey has also found that 51% expect the UK economy to be worse off as a result of Brexit, up from 39% in June 2016. In addition, 81% of 2016 Leave voters would back Brexit now with 12% saying they had switched to remain. On the other hand, only 6% of Remain voters have changed sides, with 90% sticking by their original decision. 

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EU aims to set in place new digital tax within the year

A proposal to adopt a 3 percent tax on digital companies’ turnover will be discussed at this week’s meeting of EU finance ministers in Vienna. According to a document seen by Reuters, the current Austrian EU presidency intends to implement a temporary plan to increase levies on digital services by the end of this year. To alleviate fears over capital flight and a loss of tax revenue, Vienna has proposed reducing the scope of the tax, for instance no longer applying it to the sale of users’ data. Only firms with a global annual turnover of 750 million euros and EU revenue of at least 50 million euros a year would be subject to such tax plans. European officials estimate that around 200 companies would be affected by this tax reform.

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Henry Newman: The question of the future UK-EU relationship isn’t crucial to Britain’s withdrawal – the Irish backstop is

In a piece for ConservativeHome, Open Europe’s Henry Newman writes, “Despite the profusion of new groups forming to oppose the Chequers plans and recent critical comments by Michel Barnier about those plans, the question of the UK’s future relationship with the EU isn’t actually directly crucial to Brexit itself…In terms of the negotiations, the only determinant of whether we leave with a deal, and hence with a transition or not, is getting the Withdrawal Agreement over the line.” He argues that the central obstacle blocking the progress of the Withdrawal Agreement is the Irish ‘backstop’. He notes, “Some argue that the UK can sign off on an undesirable version of the backstop, confident in the knowledge it wouldn’t be used. But that seems a very risky strategy. On the other hand, the EU side are refusing to accept a backstop applying to the whole of the UK. So the options for a fudge are limited, even though one is sorely needed.” He writes that although a breakthrough this month is unlikely, “[Prime Minister Theresa] May will hope that the Government’s Chequers plan will convince the EU that the UK is willing to compromise to deliver a good Brexit, and therefore that she should have some goodwill.”