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Chancellor Philip Hammond has insisted that Brexit will not be “postponed or delayed”, and has said the government remains committed to formally leaving the EU in March 2019. Speaking after a meeting with Brazilian finance minister Henrique Meirelles, Hammond said, “As Michel Barnier, the EU negotiator says…the clock is ticking, we are already in a timescale that has to end on March 29 2019, which is when Britain will leave the European Union. There’s a discussion going on about how we then move from full membership of the European Union to a future relationship with the European Union and that’s a debate, a discussion that will go on through these negotiations.”
Separately, the London Evening Standard reports that Hammond’s interview in Le Monde, where he promised that the UK would remain recognisably European, signified that the Treasury is confident of a good deal. A Treasury source was quoted claiming that Hammond’s comments in January to Die Welt, in which he said that if the UK left the EU without a trade deal it “could be forced to change [its] economic model…to regain competitiveness,” were over-interpreted as a threat. Conservative MP Jacob Rees-Mogg has expressed dismay at the reported softening of tone, saying, “Let’s hope something has been lost in translation. We are at our highest level of tax as a percentage of GDP since the 1960s. This is not where we ought to be and it should be coming down. It’s not a question of unfair competition, it’s a question of an efficient economy.”
Elsewhere, after conflicting reports last week from cabinet members on the timescale by when freedom of movement will end, Downing Street yesterday released a statement saying that free movement will end as the UK leaves the EU, suggesting that post-Brexit immigration policy will become clearer as legislation is presented to parliament. The spokesman said, “It would be wrong to speculate on what these [policies] might look like or to suggest that freedom of movement will continue. Free movement will end in March 2019.”
The Telegraph London Evening Standard Die Welt The Times BBC News
Taoiseach Leo Varadkar has said that he still hopes the UK will pull back from its plans to leave the EU single market and customs union, citing this as the best solution for avoiding a border on the island of Ireland or between Ireland and Britain. Asked if he thought there was a chance Brexit would not happen, Varadkar said, “Well I still hope that it won’t happen. Brexit is a British policy, not an Irish one. It’s the United Kingdom that’s decided to leave and, as far as I’m concerned when it comes to my work in Brussels, working with other European prime ministers and presidents, it’s part of my remit to keep the door open, not just to the European Union but also to the single market and also to the customs union should they decide to go down that route and that, I think, would be the best outcome for Ireland and Northern Ireland and Britain.”
Elsewhere, DUP Chief Whip Sir Jeffrey Donaldson has urged Varadkar to soften his stance on the UK’s exit and cooperate to find a solution. Speaking to BBC Radio Ulster, he said, “What won’t solve the problem is megaphone diplomacy from Dublin. I think the Taoiseach needs to recognise that going back to the politics of the 1970s and 80s in Anglo Irish relations isn’t going to help anyone. We have to co-operate here. A solution has to be one that is agreed and that means Dublin has to have an input.” He added, “If Dublin refuses to co-operate on this inevitably we are going to end up in a different arrangement that could result in some sort of hard border. Now that’s not in Dublin’s interests – the Irish economy would suffer greatly if we can’t find an agreed way forward. So I would say to the Taoiseach, who is coming to Belfast later in the week – he needs to be at the table.”
Meanwhile, a report by Ireland’s Department of Finance has said that plans to avoid a hard border with Northern Ireland would have to be abandoned if the UK exits the EU’s customs union without a transitional deal. The report argues that a “cliff-edge Brexit” would necessitate the immediate imposition of customs posts on the border, but suggests that it was “most unlikely” a fully operative border could be introduced by March 2019, which could lead to “delays and gaps” in customs procedures. The report also suggests that high tariffs to trade between the UK and Ireland after Brexit would “also be an incentive to criminality.”
The Press Association
The Irish Times
The Financial Times reports that new analysis by consultants Oliver Wyman finds that Brexit could increase annual costs in the wholesale banking sector by 2-4 percent and the industry would need to find $30-50bn of extra capital to support new European entities. The consultancy stuck to its estimate from last year that 12,000–17,000 wholesale banking jobs would be lost under “a hard Brexit in which UK-based banks lost privileged access to the EU.”
Elsewhere, Treasury Select Committee chairman Nicky Morgan has written to the Bank of England asking it to reveal how City firms are preparing for Brexit. The MP has written to the chief executive of the Prudential Regulation Authority (PRA), Sam Woods, calling for a summary of company contingency plans and details on whether those plans pose a threat to financial stability.
Meanwhile, HSBC’s Chief Executive Stuart Gulliver said yesterday that its Brexit contingency plan would cost $200m-$300m for moving up to 1,000 jobs to Paris. He also noted that the requirement for the bank to ringfence its UK consumer banking operation would include more costs on top of the $500m already incurred.
The Financial Times
The Financial Times 2
Oliver Wyman report
Open Europe research
In an article for the Daily Telegraph, former Conservative leader William Hague has warned against an abrupt exit from the EU, saying, “There is the clear potential for Brexit to become the occasion of the greatest economic, diplomatic and constitutional muddle in the modern history of the UK, with unknowable consequences for the country, the Government and the Brexit project itself.” He added, “The biggest danger is a slowdown in the economy that becomes associated with Brexit or is exacerbated by it.”
Hague praised Philip Hammond’s approach: “The attractions of the Chancellor’s plan, which sounds similar to joining the EEA as a transition, are immense.” He dismissed the idea that this was a “soft” position, claiming that this was merely a way to “rescue Brexit from an approaching disaster.” He said that Hammond “deserves the support of even the most ardent Brexiteer.”
The Times reports that Chancellor Philip Hammond is preparing to use the autumn budget to indicate that public finances will not be balanced before 2027, the end of the next parliament under the current timetable. The Conservatives had committed to eliminating the budget deficit by 2025 at the last election. This move is thought to signify the Treasury’s acknowledgement of upcoming spending pressures, after the Office for Budget Responsibility previously warned that further cuts in public spending were needed to meet the existing target of reducing the deficit to 0.7% of GDP by 2021-22. The Treasury have said that the suggestion the deadline to ensure a budget surplus is being pushed back is speculation.
Former Liberal Democrat leader Nick Clegg has suggested that Brexit could be “paused” to allow the EU to develop into a union of “concentric circles” with a more integrated Eurozone, but less integrated outer states. He said, “This would allow the space for wise heads to sketch out a new settlement in which the UK re-enters the EU orbit but in an outer circle. Britain could remain in the single market and the customs union, maintain its participation in the EU’s internal and defence security, while accepting a formal status outside the EU’s inner core with looser obligations governing freedom of movement. While difficult, I believe this is nonetheless achievable. So another future is possible. But it requires the very ingredients that are presently missing: imagination, courage and leadership from our politicians.”
The Financial Times
The Irish government has submitted formal bids to host the European Banking Authority (EBA) and the European Medicines Agency (EMA) after Brexit, when they are expected to relocate from their current locations in the UK. Irish minister of state for financial services and insurance Michael D’Arcy said, “The fact that the United Kingdom has decided to leave the European Union has resulted in significant disruption and uncertainty. For the EBA, its staff and their families, a move to Dublin is the least disruptive option.” He added, “Our transport links to Europe, our culture, language and skilled multilingual education workforce make Dublin an attractive destination ahead of other potential locations. Given the economic and strategic benefits for Ireland, we are making a strong proposal which includes incentives to support the relocation of the EBA and the establishment of a Relocation Group to aid the relocation of the Authority.” A decision from the European Commission is expected in November. The Times however reports that Bratislava and Frankfurt are favoured as host cities for the agencies, with Amsterdam, Barcelona and Milan also in the running.
The Press Association
The Times reports that changes to tighten controls around the Schengen area, the border-free travel zone that incorporates the majority of EU member states, is resulting in major delays at airports. The rules, introduced following the terrorist attacks in Paris and Brussels, require passport control to carry out entry and exit checks on travellers from non-Schengen countries, including the UK, against a series of databases to flag up security concerns. Airlines for Europe, which represents carriers such as British Airways, Easyjet and Ryanair, said that many countries had failed to staff passport control checks properly, leading to lengthy delays.