29 November 2018

Government analysis: All Brexit scenarios lead to lower long-term UK growth compared to remaining in the EU

The Government’s analysis of the long-term economic impact of Brexit, published yesterday, found that all Brexit scenarios would reduce GDP growth compared to remaining in the EU. However, it also found that “the economy will continue to grow in the long run” under all scenarios modeled. This includes the Government’s Chequers proposal, a Norway-style agreement, a traditional Free Trade Agreement and a No Deal Brexit. The analysis finds that a deal similar to the framework set out in the joint UK-EU Political Declaration would lower UK GDP growth by between 2.1% and 3.9% over 15 years, compared to remaining in the EU under current arrangements. It also suggests a No Deal outcome would reduce GDP growth by between 7.7% and 9.3% over the same time period. These figures include effects from trade, migration and regulatory changes directly related to Brexit.

Elsewhere, the Bank of England yesterday published its analysis of the economic effects of the Withdrawal Agreement and the Political Declaration on the future relationship between the UK and the EU in addition to the impact of leaving the EU without a deal. The Bank’s analysis found that that between mid-2016 and the end of 2023, GDP would be lower by between 1.25% and 3.75%, depending on the closeness of the economic partnership reached. In No Deal scenario, GDP would be lower by between 7.75% and 10.5% over the same time period. The Bank’s stress tests on the UK financial system, also published yesterday, found that British lenders would withstand a global recession more damaging than a No Deal Brexit.

Meanwhile, Commons Leader Andrea Leadsom wrote to her constituents describing the Prime Minister Theresa May’s Brexit deal as the “only one on the table… [offering a] route to a good future relationship.” Leadsom continues, “My conclusion is that I must support the deal, and our prime minister.” May will appear before the Commons Liaison committee at 9am this morning to answer questions on the impact of the Brexit deal agreed with the EU.

Separately, an editorial in the Financial Times says that the Government’s Withdrawal Deal “is imperfect but ultimately pragmatic, which is why the Financial Times, reluctantly, offers conditional support.” It argues, “To reject it, as the majority of MPs seem inclined to do, is a high-risk strategy. It assumes credible and superior alternatives, which are not at hand.”

Source: HM Treasury Bank of England The Financial Times

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Survation poll suggests growing public support for Brexit deal

Public support for the Brexit deal has grown significantly over the last two weeks, a poll published yesterday by Survation for the Daily Mail suggests. Among respondents who had “seen or heard any details” of the Government’s Brexit Withdrawal Agreement with the EU, 41% said that they supported the deal, compared to 37% opposed. This represented a 10% swing in favour of the deal compared to an earlier Survation poll from 15 November, and included a clear plurality of Conservative voters, with 50% supporting the deal and 29% opposed. Asked how MPs should vote on 11th December, 41% of respondents said they should vote for the deal, with 38% saying MPs should vote against. Those who said MPs should vote for the deal included 62% of Conservative voters, and 39% of Labour voters.

However, the Survation poll also showed significant popular support for a ‘People’s Vote’ referendum, with 48% supporting a vote and 34% opposed. Moreover, asked how they would vote in various second referendum scenarios, the poll suggests that in a choice between the current Brexit deal and a No Deal Brexit, voters would back No Deal by 41% to 35%. Voters would also choose Remain over the Brexit deal by 46% to 37%, and Remain over No Deal by 50% to 40%. In a three way referendum, 44% would opt for Remain, 29% for No Deal and 22% for the deal. However, in the latter scenario, leaving with the deal was the most common ‘second preference’ vote, with 47% selecting it as their second preference, compared to 24% for No Deal and 9% for Remain.

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Minister warns about impact of No Deal Brexit for public security

Security Minister Ben Wallace will warn today about the consequences of a No Deal Brexit scenario for public security. In a speech he will say,  “A No Deal situation would have a real impact on our ability to work with our European partners to protect the public.” He will add that the Government’s Brexit deal “strikes the right balance to keep everyone safe…It will be an ambitious partnership that ensures we can continue to work with our European partners in tackling our shared threats.”

Separately, writing for The Sun, former MI6 chief Sir Richard Dearlove and Falklands War veteran Major General Julian Thompson say that the Prime Minister’s Brexit deal will “compromise” vital British intelligence, adding, “It puts at risk the fundamental Anglosphere alliances, specifically the vital Five Eyes Alliance [with the US, Canada, Australia and New Zealand] and thereby threatens Western security.”

The Government yesterday published its official analysis of the impact of different Brexit scenarios for future UK-EU security and law enforcement cooperation. It notes, “A No Deal scenario would not provide the same levels of capabilities envisaged in the deal scenario… [and] would risk increasing pressure on UK security, law enforcement and judicial authorities. In the event of No Deal, the UK would no longer have any access to EU data platforms, or have guaranteed channels for obtaining law enforcement information.” It adds that in a deal scenario, “Operational cooperation on security, including law enforcement and criminal justice, will continue largely as it does now for [the transition] period.” House of Commons Home Affairs select committee chair Yvette Cooper said, “This assessment makes clear the substantial security risks from No Deal, but it does absolutely nothing to tell us what the security risks are in the Prime Minister’s deal. This isn’t being honest with everyone.”

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Belfast Newsletter: Northern Ireland Loyalists are "extremely hostile" to Brexit Deal

Representatives linked to Loyalist paramilitary groups in Northern Ireland have told the Northern Ireland Office (NIO) that they are hostile to the Government’s Brexit deal, the Belfast Newsletter reports. The representatives met officials at the NIO last Thursday. David Campbell, a former Ulster Unionist Party (UUP) politician and Chairman of the Loyalist Communities Council, a body which encourages Loyalist groups away from criminality, told the newspaper that “The members [of the Council], some of whom voted to remain, were extremely hostile about the deal, and were urging the officials to convey to the prime minister the real need to get a definitive power for the UK to end the backstop unilaterally, if need be.” Campbell stressed that the Loyalist groups were committed to the peace process, and said that “This is very much political opposition.”

Meanwhile, the leader of the Democratic Unionist Party, Arlene Foster, told BBC Radio 4 this morning that the Government should “stop wasting time” on the Withdrawal Agreement. She said that there was a “huge democratic deficit coming our way if we agree to this deal, because we’ve got no say over the rules that will apply to Northern Ireland.” Asked whether the DUP would prepared to support a Norway-plus style arrangement, Foster said that the party was “not prescriptive” about alternatives to the present deal.

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Norwegian PM offers to help UK join EFTA

Norwegian Prime Minister Erna Solberg indicated yesterday that she would be prepared to help the UK re-join the European Free Trade Association (EFTA) after Brexit, telling Reuters, “If that is what they really want, we will find solutions in the future.” Solberg added, “To find a good agreement is important for all European countries and I hope that we will see an orderly deal that doesn’t disrupt economic affairs in Europe.”

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John McDonnell: Second referendum “inevitable” if Brexit deal rejected by Parliament

Shadow Chancellor John McDonnell said that a second referendum on Brexit is “inevitable” if the Prime Minister’s deal is rejected in Parliament and there is no prospect of a general election. Speaking to the BBC yesterday, he said that Labour “Want a deal that will protect jobs and the economy,” adding that if the Government cannot achieve this, “We should have a general election… If that’s not possible, we’ll be calling upon the Government then to join us in a public vote.”

Meanwhile, the Labour Party have tabled a proposed amendment to the meaningful vote. The amendment “resolves to pursue every option” which would prevent the UK leaving the EU either without a deal, or on the basis of the negotiated Withdrawal Agreement. This comes after it was confirmed yesterday that MPs will be able to table amendments before the meaningful vote, which the Government had previously hoped to prevent.

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Philip Hammond: Macron’s comments over post-Brexit fishing arrangements aimed at “domestic audience”

Chancellor Philip Hammond yesterday responded to French President Emmanuel Macron’s earlier remarks that the EU would have leverage to secure access to UK waters, saying “I understand why President Macron felt the need to say what he did. He’s obviously got his own domestic audience, and his domestic audience was getting a bit frisky on Sunday as I remember the events in Paris.” Hammond described Macron’s comments as “slightly bizarre” because “the backstop arrangement would give him no ability to access British waters.”

Separately, French protests on Sunday were caused by rising fuel taxes and have left two people dead and over 600 injured.

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UK and US reach post-Brexit open skies aviation agreement

The UK and the US yesterday reached agreement on an open skies aviation treaty, which will come into force after Brexit and allow UK and US carriers to operate once the UK leaves the EU-US open skies agreement. The UK is also in negotiations with Canada to strike a similar bilateral treaty. The Department for Transport stated, “The deal ensures that planes flying from the UK will continue to enjoy the same access they currently have with the US, ensuring the UK maintains its place as Europe’s most important aviation hub.” Transport Secretary Chris Grayling said, “This new arrangement and those concluded with 8 other countries around the world [Albania, Georgia, Iceland, Israel, Kosovo, Montenegro, Morocco and Switzerland] are proof that the UK will continue to be a major player on the world stage after we leave the EU.”

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EU calls for "restraint" to ease Russia-Ukraine tension

In a statement made yesterday on the developing tension between Russia and Ukraine in the Azov Sea, the High Representative of the EU for Foreign Affairs says,  “The European Union expects Russia to ensure unhindered and free passage through the Kerch Strait to and from the Azov Sea, in accordance with international law. We call on all for utmost restraint to de-escalate the situation immediately.” The statement also “reiterates [the EU’s] full support for the independence, sovereignty and territorial integrity of Ukraine within its internationally recognised borders.” This comes amidst reports of disagreement among EU member states as to whether new economic sanctions should be levelled at Russia for its aggression against Ukraine.

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Lobby group claims City of London will lose up to €800bn in assets to Frankfurt

The City of London is expected to lose between €750 and €800bn in financial assets to Frankfurt between now and March 2019, according to lobby group Frankfurt Main Finance. This comes after it was confirmed that 30 banks and financial firms have chosen Frankfurt as their new EU headquarters. With other firms planning to spread their operations across a number of European cities, including Dublin and Paris, Frankfurt Main Finance believes that the number of firms expanding or setting up offices in Frankfurt will be closer to 37.

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