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Grayling's Brexit Bulletin - 19 October 2018

19th October 2018


 

The BREXIT Bulletin: The complications of contingency

 
 

With the chances of a ‘no-deal’ perhaps more than ever at the forefront of business minds, it is increasingly clear that difficulties in preparing contingency measures are not confined to the UK.


On contingency the European Commission has a rather unenviable job. The institution well deserves a reputation for delivering technical competence against a backdrop of the diverse preferences of the Member States and of MEPs.

However, on Brexit outside of the Art. 50 process and the remarkable unity of the EU-27 behind Michel Barnier’s negotiating mandate, the Brexit picture is less harmonious.

It is clear that EU-level contingency measures will be driven by overtly political motivations. Efforts are being taken by the Commission to ensure that wherever possible implementing legislation can be used to establish contingency mechanisms, thereby avoiding the political machinations of the ordinary legislative procedure (OLP - or "co-decision", in other words). However, for some areas the OLP will be unavoidable.

This not only requires that there is sufficient time to complete the OLP, which at its shortest can be completed in eight weeks, but also that the EU-27 and MEPs ascribe politically to the desire to pursue contingency on this issues.

This speaks to another complicating factor for some among the EU-27, namely that there will be commercial advantage to be gained by not providing contingency.

One case in point is the Port of Rotterdam’s willingness to portray itself as particularly prepared, no doubt with half a mind to attracting business from its rivals on the North Sea coast.

Further, much of the contingency that will need to be undertaken remains the competence of the Member States.

Some are more prepared than others, with Germany having some months ago adopted legislation to empower the government to implement Brexit adjustments to legislation. The French, slightly later to this game, have rushed similar legislation through in recent weeks. Where many of the other Member States stand is anyone's guess.

These layers of complication add up to this. Political decisions will be made to prioritise contingency measures by the College of Commissioners and then the EU-27’s leaders. Business can have no guarantee that they will be covered.

Many businesses have of course already begun to make contingency. We visited a client in the UK recently, a family-run SME, which has already spent £1.8 million - which could have otherwise been invested in R&D. The extent to which business’ need to invest in contingency depend on the measures that emerge from the Commission and the EU-27. Advanced warning of these demands political advocacy and engagement with decision-makers.

Brexit underlines the fact that public affairs should not be considered as an accounting luxury, a ‘nice to have’. The danger is that the political decision will be made that your contingency measures might be similarly prioritised as ‘nice to have’.

 



If you have any suggestions about the Brexit Bulletin or want to find out more about a specific aspect of Brexit, please do let us know. Please visit the Grayling Brussels website, follow us on Twitter @TheEULobby, and don't forget to check out our Brexit Papers


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This week's content:

The view from Brussels

The view from the UK

The view from Austria

 

 

Dates for your Diary 

Panel Discussion on the Impact of Brexit on the Agri-Food Sector, Tuesday 6 November 2018 from 12:00 - 14:00, at our offices (Avenue des Arts 46).

Confirmed speakers include FoodDrinkEurope and the UK Perm Rep.

To register please contact emily.ritchey@grayling.com 

We are also holding a webinar on trade, and specifically EU-US trade relations, on 30 October at 3pm Brussels time. If you would like to register please contact robert.francis@grayling.com

 

The view from Brussels

Damp squib of Summit leaves May vulnerable and EU-27 increasingly nervous 
At this week's Summit there was no agreement, nor was there expected to be after a weekend in which agreement was achieved at the Technical Level, but not at the political level. The Summit therefore became something of a damp squib, with UK Prime Minister Theresa May briefing the EU-27 for a mere 15 minutes, before leaving them to assess the situation. The only news of note was a possible extension to the proposed transition period by one year. There will only be a November Summit if President of the Council Donald Tusk thinks that sufficient progress will have been achieved, but otherwise the next major staging post is the December Summit, when agreement will have to be reached if there will be sufficient time for ratification.

The Grayling View
In the end, what was meant to be a defining Summit for Brexit ended up being nothing of the sort. The EU-27 pretended they had expected May to come up with something new, but this was never going to happen after the weekend's shenanigans. Her priority now must be to get domestic politics onside and to support Chequers, or a version thereof, and possibly a longer Transition Period, which most of business would likely welcome, even if it doesn't solve Northern Ireland, or the future relationship. It does however buy time, which at the current impasse is much needed. What chance agreement in December? 50/50, say some of our contacts. But how to solve a problem like the Irish border, with the sword of Damocles being wielded by the DUP over the Prime Minister? She will need to stand firm, or the risk of a no-deal looks even more likely.

 



The view from the UK

Extended transition period creates more problems than it solves politically
As the Brexit talks near their eleventh hour, it has emerged this week that Theresa May is preparing to consider an extension of the transition (or implementation) period to provide as much time as possible to nail down the details of the UK’s future relationship with the EU. As the New Statesman’s Stephen Bush pointed out, the average free trade deal takes 28 months to conclude, while the transition period currently stands at 21. For a future UK-EU FTA to match up to the promise of the “most comprehensive” deal yet struck with a trading partner, few realistically expect this to be achievable within the two year time-frame.
 
The insistence upon 21 months in the first instance was a bone to Conservative Brexiteers who are acutely fearful of any attempts to delay the UK’s exit or drag it out such that a possible change in Government could see the Lancaster House mandate of exiting the Single Market and Customs Union watered down or scrapped altogether. Little surprise then that the ERG group of committed Brexiteers registered loud protests at the Prime Minister’s suggestion that implementation could be extended by “a matter of months”.
 
The Government is keen to present this as a solution to the Northern Irish question, namely that by extending implementation, the likelihood of the Northern Irish backstop ever having to be used diminishes. But as James Forsyth has written this week in The Spectator, this fails to understand that the DUP’s objection to the Northern Irish backstop is “philosophical as much as practical” – it is the principle of separate treatment for Northern Ireland they will not countenance, irrespective of whether it is ever expected to come into effect.
 
Second to this, the whole concept of the transition period is entirely contingent on reaching a Withdrawal Agreement with the EU, which itself depends on finding an acceptable deal on the Irish border. For all that Downing Street wants to present an extension as a way through the gridlock, it is clearly no such thing in that it fails to address the fundamental contradictions that have so paralysed the final stages of negotiations in recent weeks.
 
Recognition of that paralysis seems to be behind EU leaders’ claim that there is no need for a snap November Council Summit on the basis that signing off on a deal at that stage looks premature. On the home front, impatience with the Prime Minister has long been evident among backbenchers, but is now building among Cabinet ministers too. There is a growing caucus of restive ministers including Andrea Leadsom and Penny Mordaunt, both of whom are understood to be considering their positions if the Prime Minister continues to insist on the binary choice between some form of Chequers and no deal. The group met this week and are understood to be more sympathetic to the ERG view that a Canada-style trade deal represents the only consistent way of achieving the goal of leaving both the Single Market and the Customs Union.

 



The view from Austria 

Optimism, and a surprising pro-EU sentiment 
After weekend talks aiming to secure a Brexit deal, yesterday's summit in Brussels failed to clear the main sticking point — how to keep goods and people flowing freely across the Irish border. Although Austria currently holds the rotating EU presidency and is still optimistic that a deal could be struck, preparations for a no-deal are already taking place.

Prior to the Brussels Summit, Chancellor Sebastian Kurz and EU-Minister Gernot Blümel also emphasised their concerns over a no-deal-scenario, which they consider could be “catastrophic” for the EU economy. Despite Kurz's efforts to channel the Austrian governmental message vis-à-vis the media, political parties are expressing different views. Whereas, the Social Democrats are proposing that Austria should take its role as mediator more seriously, the Freedom Party has stated that Austria should not further comment on UK politics, including on the prospect of a second referendum. All eyes are now on the next summit on 13-14 December, which is widely considered as last chance to secure a deal on Brexit.
 
The Grayling View:
As this week's Summit showed, the EU-27 are sticking together as never before - but time is running out. Yet, the “pro-European spirit” seems to be growing stronger every day. According to the Eurobarometer of the European Parliament, even in traditionally eurosceptic Austria, 56% of the population favour staying within the European Union.
 
Thanks to our colleagues at Grayling Austria - https://www.grayling.com/at/de 

 



Dates for your diary

17-18 November 2018 - Possible EU Summit to finalise the Withdrawal Agreement (TBC) 
13-14 December 2018 - EU Summit (confirmed!)
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.

The Grayling Brexit Unit is here to support, guide and inform the success of your business and identify how the political dynamics will change as a result of Brexit in both London and Brussels. We are your Brexit experts.

Please contact Robert Francis Tel +32 2739 47 34 (robert.francis@grayling.com) in our Brussels team or Jonathan Curtis (Jonathan.Curtis@grayling.com) in London for more information, and check out our brochure.

 


 

 

 #Brexit Papers 


Brexit Negotiating Documents
The 'Great Repeal Bill'
Brits working in the EU institutions
Article 50

Sir Julian King - The Last UK Commissioner
David Davis – UK Brexit Secretary.
Sir Keir Starmer – Shadow Brexit Secretary.
Sir Tim Barrow – UK Permanent Representative.
Michel Barnier – EU Chief Negotiator.
Sabine Weyand – Barnier’s Deputy.
Guy Verhofstadt – EP Brexit Lead
No-deal – Concrete impact

 

 


Grayling Team

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