8 November 2017

EU27 ambassadors begin internal discussions on Brexit trade and transition

EU27 ambassadors will meet in Brussels today to begin internal preparatory work on the second phase of Brexit negotiations, which will address the future UK-EU relationship. According to a leaked document drawn up ahead of the meeting, discussions today will focus on the scope and length of transitional arrangements, as well as whether the EU’s “four freedoms” will be applied during an interim period. Reuters reports one senior EU official who said the UK would have to abide by EU laws during the transition period, but would have no influence over them, as “anything else would be too complicated.” EU ambassadors will also discuss the future bilateral relationship, in particular whether to aim for one comprehensive agreement or separate treaties in areas such as trade, defence and security. But Politico’s London Playbook reports that German Chancellor Angela Merkel and French President Emmanuel Macron are keen to avoid “the impression of an automatic transition to phase two.”

Separately, the House of Commons Brexit select committee will meet with the EU’s chief Brexit negotiator, Michel Barnier, and the European Parliament’s Brexit coordinator Guy Verhofstadt in Brussels today. This comes ahead of the next round of Brexit negotiations tomorrow.

Elsewhere, speaking at the launch of Frankfurt’s bid to host the European Banking Authority, German Finance Minister Peter Altmaier said that Brexit was unlikely to be a “win-win situation” for both sides.

Meanwhile, a new poll conducted by ORB International for The Telegraph shows that UK public confidence in the Brexit negotiations and Prime Minister Theresa May’s handling of them has reached an all-time low. Asked whether they approved of the way the Government is handling the negotiations, only 34% said that they did, as opposed to 66% who said they disapproved. The poll also showed that for the first time more people think that Britain will be worse off as a result of the Brexit vote than better off. The Prime Minister’s approval rating stands at 26%, down from 34% following the snap election and 44% at the beginning of June.

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Government’s sectoral impact studies to be published in "no more than three weeks”

Responding to urgent questions in the House of Commons, Brexit Minister Steve Baker said that the Government’s sectoral analyses of the Brexit impact on the UK economy will be published in “no more than three weeks.” He added, “Our analysis is constantly evolving and being updated – it is not, nor has it ever been, a series of impact assessments examining the quantitative impact of Brexit. It will take the Government some time to collate and bring together this information in a way that is accessible and informative to the committee.” Questioning the government’s announcement, Shadow Brexit Minister Matthew Pennycook asked, “Ministers cannot use semantics and double-speak to avoid the clear instruction that this house has given. There can be no further delay. Ministers just need to get on with it”


Deadlock over divorce bill persists, Italian Undersecretary of State says

Brexit Secretary David Davis travelled to Rome yesterday to meet Sandro Gozi, the Italian Undersecretary of State for European Affairs. This comes as part of a diplomatic effort to win European countries’ support ahead of a new round of Brexit negotiations set to start this Thursday. Speaking after the meeting, Gozi said Davis “didn’t tell me anything specifically new on the financial aspects,” adding, “I told David Davis the next negotiation round will be very important, notably on the financial obligations.” Gozi nonetheless said he believed progress had been made on the issue of citizens’ rights, although differences remained on family reunification and voting rights. On the bilateral approach recently adopted by the UK in an attempt to unblock the negotiations, Gozi stated, “Our negotiator is Michel Barnier, he is doing a good job,” but added that “it’s also helpful, as the issue of citizens’ rights has shown, to maintain regular bilateral talks with the British government.”


Financial Times: Wall Street banks warn US government of Brexit "point of no return"

According to the Financial Times, a group of large financial institutions with London operations, led by Wall Street banks, have warned the US Commerce Secretary Wilbur Ross about the lack of clarity on Brexit. The banks criticised the UK’s unstable government and slow progress in Brexit planning, and warned they may start moving jobs out of the City. The Financial Times report banks were particularly concerned about the lack of clarity over whether transitional arrangements will be secured.

Catherine McGuiness, policy chair of the City of London Corporation and present at the meeting, said, “The fear of a crash-out is rising. We need action, not warm words. We really need progress.” Commenting on the estimated number of banking jobs moving out of the UK, McGuiness added, “We think it’s around the 10,000 mark. That’s not the end of the story […] we really should not underestimate what a critical moment we’re for at this sector.”


EU citizens will be given two-year “grace period” to apply for settled status

The UK government yesterday published a paper outlining details on the administrative procedures for EU citizens in the UK seeking to obtain settled status. The document commits to give EU citizens a two-year grace period after the UK leaves the EU to make an application for settled status, during which freedom of movement will also be retained; to ensure the cost of the application is no more than that of a British passport; to give EU citizens a statutory right of appeal if their application is unsuccessful and to not require EU citizens to have held comprehensive sickness insurance or to provide fingerprints. Secretary of State for Exiting the EU, David Davis, said, “We have been clear that safeguarding the rights of EU citizens is our top priority in our negotiations…We will support everyone wishing to stay to gain settled status through a new straightforward, streamlined system.” The document, however, also provides for stricter deportation rules after Brexit. Under these new rules, EU citizens sentenced to more than one year of jail could be deported. Under current rules, EU citizens can only be deported if it can be demonstrated that they pose “serious threat to the fundamental interests of society.”

Separately, the Financial Times reports this morning that Home Secretary Amber Rudd is leading a new cabinet push to remove international students from the government’s immigration targets.


ECB: 50 banks have discussed relocation with supervisors

The head of supervision at the European Central Bank (ECB), Daniele Nouy, said yesterday in Frankfurt that around 50 banks have discussed relocation plans with EU authorities and about 20 of them are in some stage of assessment by supervisors on the continent. She said, “Maybe they have not signed the formal requirement,” but they have made a “pretty comprehensive application that can be turned into a formal one very, very fast.” Nouy explained that in some cases Brexit plans had been discussed with Euro-area supervisors a number of times, saying, “They are improving their understanding of the situation.”


Commission calls for “credible” black list of tax havens

Following the tax avoidance schemes revealed in the recent publication of the so-called “Paradise Papers”, the European Commission called for an agreement among member-states on the EU tax haven black list. The EU Finance Commissioner Pierre Moscovici said that governments need to “rapidly adopt a European tax haven list”, which is also “credible.” He added, “There is no point in just having one country on the black list tax havens.” Moscovici stressed the importance of moving forward with Commission proposals to address aggressive tax planning by bankers, lawyers, and law firms.


CBI deputy chairman: No deal Brexit is "not plan B, but plan Z"

In an interview with German business magazine Handelsblatt, the deputy chairman of the Confederation of British Industry (CBI), Josh Hardie, yesterday criticised the idea of a ‘no deal’ Brexit. Hardie said, “If there is no deal, this would not be plan B, but plan Z. This is not an option we should consider.” He added that falling back on WTO rules “would have very serious consequences for the British economy – even for those companies who don’t think they are affected, because they don’t have direct contact to the EU market. They will also be affected through their supply chains.” CBI members were united in their desire for “a deal which allows them to trade with the same regulatory requirements, and a deal which allows them to employ the people they need for their companies”, Hardie argued, “I think it is realistic to achieve agreement [on transition] before Christmas. Of course both sides have to move in the negotiations.” On contingency plans already triggered by companies, he said, “These are decisions that can be reversed.”

Elsewhere, Germany’s acting finance minister Peter Altmaier said Germany will not ask for the election of the new Eurogroup President to be postponed, while the country is going through coalition negotiations. He said, “If we were to postpone [a decision] every time a coalition is established, we will perhaps never take a decision.” Altmaier added, “This cannot be a choice according to political party lines and to geographic lines and cannot be a decision to package deals [with other EU jobs]. It has to be decided on its own merits. This has to be the guiding principle.”


Henry Newman: Will nothing change during the transition?

In a blog for UK in a Changing Europe, Open Europe’s director Henry Newman writes, “The ‘nothing-will-change’ transition period is the single most significant development in stated Whitehall Brexit policy since the Lancaster House speech.” He argues, “It’s important that the transition period is just that. It should take the UK out of the EU and last only a limited period. The CBI’s and Labour party’s calls for open-ended transitions should be rejected. Such options would also hand too much leverage to the EU.” But he adds, “A short transition period of rule-taking may be a sensible compromise.” He argues, “Accepting the need for an “implementation period” does not resolve every issue. More fundamentally, a transition will only provide real surety, if its outline is clear sooner rather than later. Yet, a transition cannot not be fully locked down until the end stages of Brexit negotiations, because “nothing is agreed” until “everything is agreed”.” His piece calls on the Government to provide more clarity: “Is the plan to stay in that transition in its entirety for the whole of its duration? Or is it possible that the UK might exit different aspects in a phased manner – say, leaving a customs union sooner, while maintaining other elements of the transition for longer. To answer these and other questions, the Government should soon publish a position paper outlining greater detail on its proposals for a transition period, even if it is currently considering various alternative policy options.”