The highlights from the UK
Competing Tory factions gearing up for Autumn battle
Theresa May has been able to hold off her restive backbenchers, largely due to the European Research Group’s reluctance to put forward a workable alternative of its own to the Chequers proposal. That could be about to change, as it emerged this week that Jacob Rees-Mogg and the 60-strong group of Eurosceptics are preparing to launch their own “positive” policy paper on their preferred model for the UK’s future relationship with the EU. This will come as an annoyance to the Prime Minister, who will want to use this year’s Conservative Party Conference to project confidence in the UK’s negotiating position in the approach to October’s European Council Summit.
The document is understood to be the handiwork of veteran Eurosceptics, Peter Lilley and John Redwood, who are exploring the various options for tariff and trade that they believe would constitute proper divergence from the Single Market and Customs Union, or, in the words of Rees-Mogg, “what is acceptable in line with the referendum result.” This would mean that, for the first time, Brexiteers on the Tory benches will have an agreed position, set in clear opposition to Chequers, and No. 10 will no longer be able to dismiss the ERG out of hand as all talk and no substance.
Meanwhile, around 50 Tory MPs are believed to have formed yet another caucus in Parliament, reportedly titled the “Brexit Delivery Group”, under the stewardship of Simon Hart and Andrew Percy. Rivaling the ERG, the group has formed in anticipation of Brexit clashes when Parliament returns from summer recess and will reportedly seek a “pragmatic middle ground” solution to the Tory Party impasse, while opposing leaving “at all costs.”
Jeremy Hunt continues his tour of European capitals in an effort to sell the UK position to EU-27 leaders, this week taking his case to Latvia and Denmark. Hunt may have had something of a spring in his step following comments from the German Chancellor that she wants a “reasonable, negotiated agreement” rather than a “disorderly” divorce, though there remains precious little chance of a major divergence between Merkel and the EU position. Commentators have noted the uptick in Foreign Office involvement with Brexit since Boris Johnson’s departure, as the Government continues to press bilateral engagement as a parallel to the direct negotiations.
The Grayling View
As September nears, the temperature is beginning to rise in Westminster. Reports of an ERG Brexit paper and the establishment of the Brexit Delivery Group demonstrate that Tory MPs are feeling increasingly restless, recognising that the success or failure of the whole Brexit process will likely rest on a series of crunch votes in the autumn. The Prime Minister will welcome the efforts of Simon Hart and Andrew Percy to actively seek compromise, but it remains unclear how Chequers in any variation can satisfy the ERG.
Particularly troubling for the Government is the apparent decision of Jacob Rees-Mogg and his followers to present their position on the eve of the Tory Party Conference. The Prime Minister will fear a frosty reception from grassroots members and Association Chairs when she takes to the stage in Birmingham. This would place the Government in arguably the weakest possible position for the October Council and raises the already uncomfortable odds of no deal.
The highlights from Brussels
A trial separation?
Whilst this week has been a quiet one for many in Brussels, Brexit negotiations have continued to push ahead. However, the agenda for the EU-UK Article 50 negotiations, taking place in Brussels on 16-17 August, were anything but detailed. On the agenda for the two days of talks; Ireland/Northern Ireland and the future relationship. Interestingly, the remaining issues of the withdrawal agreement, namely data protection and GIs, were not included.
Getting to the heart of the technical details, the negotiations were attended only by EU and UK officials, with Barnier and recently appointed UK Brexit Secretary Dominic Raab keeping at bay. With no solution to the question of how to avoid a hard border in Ireland in sight, yesterday’s talks were set to be as challenging as ever with little hope of any concrete solutions arising.
The Grayling view
While all attention is focused on the Irish border, we have to wonder why the remaining issues of the Withdrawal Agreement were not due to be discussed this week. Both data protection and GIs remain key priorities for a number of Member States. Having had no confirmation that these issues were settled during the last round of negotiations, it is unlikely that they have already been resolved. It is possible that the EU just did not want to discuss these issues at this moment in time, turning their attention solely to the Irish border and the future relationship.
Nevertheless, such important issues cannot always be pushed back. Brushing a problem under the carpet does not mean it will go away. It may be that negotiators feel the transition period would give enough time to work out these remaining issues. For example, at the beginning of transition, a data adequacy decision could be applied for, with enough time for this to come into force by the end of the implementation period. Or perhaps negotiators were taking a break from discussing these remaining issues, and they will appear again in the next round of negotiations?
The highlights from Spain
Brexit brings opportunities and threats
Spain and the United Kingdom have a long history of cooperation and good commercial and economic relations. Bilateral trade between the two countries accounted for £40 billion in 2015, and more than 400 Spanish companies are registered in the UK, according to the British government. The UK is also the first destination of direct investment from Spain in Europe.
The decision of leaving the EU has and will have important consequences not only for the UK, but also for the remaining 27 Member States and very particularly for Spain. The effects of Brexit will depend on how the exit occurs and on how the new relationship between countries is articulated.
For Spain, there are several key issues that must be addressed. The free movement of people is important to negotiate, since nowadays there are almost 300,000 UK citizens living in Spain and near 150,000 Spanish citizens living in the UK. Tourism is also one of the vital issues, as it is crucial for the national economy. In 2017, British visitors represented 23% of the total of tourists and 21% of the total revenue in the sector.
Another important issue is Gibraltar and the application of the Brexit agreement to this area. The UK has considered that any of the treaties on Brexit should be applied automatically to Gibraltar, but Spain requests this to be negotiated in a separate agreement between the Spanish and British government.
Both countries are aware that they have a lot to lose with Brexit and, therefore, will try to reach agreements. However, there will probably be new customs requirements as well as regulatory changes. In all likelihood, there will also be a strong impact on investments and on flows in the production chain in many sectors. Thus, it is advisable for companies to create a Contingency Plan that gathers the different possible scenarios.
The Grayling View
Like any change, Brexit has risks and opportunities. Spain can become an attractive country for investors because of the legal security it offers, the improvement of the economic situation, and its presence in the single market. Therefore, it is important that there is a political stability that encourages investors to bet on Spain. Brexit can also help Spain increase its political importance and become a strategic partner for decision-making at European level.
However, it seems that for the moment the Spanish authorities have been more aware of the risks of Brexit than the opportunities it may entail. Spain is in favour of reaching an agreement with reasonable conditions, as well as to establish a period of transition that allows Brexit to be the least traumatic possible. In any case, and for the good of both countries, the goal should be to continue collaborative relations.
Dates for your diary
18-19 October 2018 - EU Summit and deadline for negotiations on Withdrawal Agreement
1 January 2019 - Romanian Presidency of the Council
29 March 2019 - UK expected to leave EU
31 December 2020 - Expected end of transition
Grayling Brexit Unit
Our Grayling Brexit Unit brings together the very best consultants from across the Grayling network and includes those who have direct experience of working alongside the leading political figures charged with negotiating Brexit in London and Brussels.
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