1 September 2016

Theresa May suggests UK will not seek “off-the-shelf” model for new relationship with EU and stresses need for controls on EU immigration

Following the Cabinet meeting at Chequers yesterday, a spokesman for the UK Prime Minister Theresa May said, “There was a strong emphasis on pushing ahead to Article 50 to lead Britain successfully out of the European Union – with no need for a parliamentary vote…Furthermore, several Cabinet members made it clear that we are leaving the EU but not leaving Europe, with a decisive view that the model we are seeking is one unique to the United Kingdom and not an off-the-shelf solution. This must mean controls on the numbers of people who come to Britain from Europe but also a positive outcome for those who wish to trade goods and services.” The spokesman added, “Ministers agreed that we should be seizing the opportunity of Brexit to confirm the UK’s place as one of the great trading nations in the world, fostering entrepreneurialism and setting out a long-term vision for the country.” At the opening of the meeting, May stressed that there will be “no second referendum; no attempts to sort of stay in the EU by the back door.”

May reiterated the point on not choosing an “off-the-shelf solution” in a phone call with Norway’s Prime Minister Erna Solberg, saying the negotiations should consider “what is going to work best for the UK and what is going to work for the European Union, rather than necessarily pursuing an existing model.” May also again confirmed that Article 50, the formal process for leaving the EU, will not be triggered this year.

Separately, writing in the Financial Times, Jean-Claude Piris, former Director-General of the Council of the European Union’s Legal Service, argues that “the interpretation of the [Article 50] process as a one-way path does not appear to be legally correct.” Piris suggests that, since the notification under Article 50 is only an “intention” to leave, legally such an intention can be reversed, if politically desired.

Meanwhile, European Commission Vice-President Frans Timmermans told AFP, “The UK is not going anywhere. It’s going to be geographically where it is now. The Channel is not going to get any broader. So, in that sense, the UK will remain a European country even if it’s not a member of the EU and that should be the basis, I believe, for the negotiations.”

Source: Reuters Bloomberg The Financial Times: Piris EUObserver

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Referendum debate criticised for leaving voters “ill-informed”

A report from the Electoral Reform Society gives a damning verdict on the EU referendum campaign. Unlike the Scottish Independence referendum, the predominance of individual personalities in the EU debate obscured the policy debate and left voters feeling “ill-informed”, The Times reports. The Leave campaign fared better from personal statements, with 29% saying that Boris Johnson helped sway their vote towards Leave, and a further 29% saying David Cameron convinced them to vote Leave. In future, the Society recommends the voting age be reduced to 16, that an unbiased guide be published before a six-month campaign window to allow proper debate, and the establishment of an independent body empowered to correct disingenuous claims.

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Deutsche Bank boss: London will remain top financial hub, but may look “very different” after Brexit

John Cryan, the CEO of Deutsche Bank, told a conference in Frankfurt yesterday that he believes London will remain Europe’s top financial hub over the next decade – although he added that the City may look “very different” as UK-EU relations are re-shaped after the Brexit vote. He argued, “It is important for the bank to respect the fact that we really need to follow our customers. In some areas London is our biggest trading hub”, but noted that “we trade a lot of paper and derivatives which are Eurozone or EU paper, and although we are ‘passported’ into the UK and the UK authorities are very keen for us to continue to passport in, our clients might take us back into the EU because they may demand we transact with them through an EU entity.” Separately, The Times reports that Chesnara, a specialist consolidator of life insurance funds, may relocate its head office from London to Amsterdam if regulations change unfavourably after Brexit.

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UK manufacturing rebounds strongly in August beating expectations

Markit/CIPS Purchasing Managers’ Index, a measure of private sector activity, showed that UK manufacturing rebounded strongly in August hitting 53.3 on the index, compared to expectations of 49.0 and 48.3 in July. The rise was driven by strong new orders, both domestic and foreign, with the latter supported by the depreciated currency. However, the weaker currency also led to 44% of firms reporting rising purchasing costs.

Meanwhile, Ireland’s Investec Manufacturing Purchasing Managers’ Index (PMI) rose in August from its lowest point in three years in July. The Eurozone’s manufacturing PMI hit a three month low in August dragged down by the manufacturing sectors in France and Italy contracting.

Recruitment firm Hays Plc has said, “Following the EU referendum, there is increased uncertainty in the UK market, but we have seen no evidence of any impact elsewhere…It is too early to tell what the longer term impact may be and as ever, we will monitor activity levels closely.”

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Davis: There will be no return to the past in Ireland

David Davis, Secretary of State for Exiting the European Union, has vowed there will be no “hard border – no return to the past – and no unnecessary barriers to trade [in Ireland]…We had a common travel area between the UK and the Republic of Ireland many years before either country was a member of the EU.” Davis is due to meet Northern Irish First Minister Arlene Foster and Finance Minister Máirtín Ó Muilleoir today.

Meanwhile, Bert Koenders, Minister of Foreign Affairs for the Netherlands, has said the Netherland’s “fully recognised” the specific fears of the Irish government and assured Ireland that they will “move in the direction of supporting these kinds of concerns in negotiations over the coming weeks and months.”

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Irish government remains split on Apple ruling

Ireland’s government remains split on whether to appeal the European Commission ruling on Apple’s tax activities. Michael Noonan, Ireland’s Finance Minister, has vowed Dublin would appeal the ruling. The Irish Cabinet will meet on Friday when the government said a decision would be made, following an emergency Cabinet meeting yesterday that ended in deadlock.

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Right-wing populist AfD overtakes Merkel’s CDU ahead of upcoming regional election

Ahead of Sunday’s regional election in the home state of German Chancellor Angela Merkel, Mecklenburg-Vorpommern, a new Insa poll for the magazine Cicero shows the anti-immigration AfD party on 23% ahead of the CDU on 20%. The SPD, who is heading the state’s current governing coalition, retains its first place with 28%. Die Linke polls on 15% and the Greens on 6%. The polling results would allow the current SPD-CDU coalition to continue, but alternatively enable a governing coalition between the SPD, Die Linke, and the Green party.

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Rajoy fails in first bid to win second term as Spanish PM

Spanish MPs yesterday rejected centre-right leader Mariano Rajoy’s first bid to be voted in for a second term as Prime Minister by 180 to 170, as widely expected. The unsuccessful vote triggered a two-month constitutional deadline, meaning that Spanish MPs now have until October 31 to vote in a new Prime Minister – or a third election will have to be called. Rajoy will face a second confidence vote tomorrow evening, which he currently also looks likely to lose. If the second attempt fails, King Felipe VI will need to begin another round of consultations with party leaders in a bid to find a way out of the impasse and avoid a third election.

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Austria suggests stopping TTIP negotiations and starting afresh after US Presidential elections

Austria’s Economy Minister and Vice-Chancellor Reinhold Mitterlehner told ORF radio yesterday, “One should stop the negotiations [over the EU-US free trade deal] now and start the entire process afresh [after the US Presidential elections],” adding that the negotiations are “so strained that a positive implementation is de facto impossible under the current preconditions.” Meanwhile, Austrian Chancellor Christian Kern calls for improvements on the EU-Canada trade deal (CETA). Kern told ORF, “We will have to see where the weaknesses [of CETA] are. Many are the same as with the US-EU trade deal,” adding that “this will be the next conflict in the EU that Austria will trigger…We must focus on making sure…we don’t shift the power balance in favour of global enterprises.”

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Home Office tests online system to speed up permanent residence applications from EU nationals

The Financial Times reports that the UK Home Office is currently testing a new online system to speed up permanent residence applications from nationals of EU member states who are trying to secure their status in the UK following the vote to leave the EU. The article notes that the pilot programme will run for the next two weeks, with a public launch expected later this year.

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Brexit vote hits Ryanair profits

Ryanair will fly five million fewer passengers to and from Britain in 2017, after the vote for Brexit reduced demand for air travel. Michael O’Leary, Ryanair’s Chief Executive, said “There’s an awful lot of rubbish being talked over here about ‘oh, there’s no effect’ [of Brexit]. As fares get cheaper, more aircraft will be moved away from the UK over the next few years.”

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