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Grayling's Brexit Bulletin - 30 January 2019

30th January 2019


The BREXIT Bulletin: Carry on Regardless


The Prime Minister has been sent back to Brussels by MPs to seek ‘alternative arrangements’ to avoid a ‘hard’ border on the island of Ireland.

The Government’s renewed mandate to renegotiate the ‘backstop’ is being spun in the UK as a clear signal to the EU that a Withdrawal Agreement on the basis of the current provisions cannot carry a majority in the UK Parliament.

According to this narrative the EU must now respect this mandate, re-open the Withdrawal Agreement, and replace the ‘backstop’ with unspecified ‘alternative arrangements’.

What is not understood in London is that the Parliament’s position on the ‘backstop’ has been clear since the negotiators agreed to the Joint Report way back in December 2017, which first proposed the ‘backstop’.

In the year since, successive moments advertised as "the" moment for securing a Withdrawal Agreement have turned out to be relative anti-climaxes precisely because of the ‘backstop’.

Acrimony in Salzburg in September, the former Brexit Secretary Dominic Raab’s night-time flight to Brussels to pull the plug on the draft in October, to the crushing ‘Meaningful Vote’ defeat in the House of Commons on 15 January 2019, it’s long been about the ‘backstop’.

Brussels has well understood this message. Indeed, between the October 2018 European Council summit and the November publication of the draft Withdrawal Agreement, the EU explored the full flexibility provided by its own political mandate and the boundaries of its constitutional treaties.

The Deputy Chief Negotiator Sabine Weyand stated this week: "There are now ideas floating around again — and it does feel like Groundhog Day — about a time limit to the backstop, or a unilateral exit clause from the backstop. Let me just reassure you, none of this is new. All of this has been extensively discussed at the negotiating table ... all 27 heads of state and government [of the EU] and the leaders of the EU institutions were unanimous that a time limit to the backstop defeats the purpose of the backstop."

In short the refrain from Brussels, and from Dublin, remains that the Withdrawal Agreement including the ‘backstop’ is not up for renegotiation.

With MPs voting only that ‘no-deal’ is undesirable, not to take it off the table, the UK remains on course to crash over the precipice.


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This week's content:

The view from Westminster

The view from Germany

The view from the US


The view from Westminster

UK Parliament votes - EU refuses to renegotiate
Last night a number of votes were held in the UK Parliament on amendments to Theresa May’s Brexit plan which set out the next procedural steps which the UK Parliament and the Government should follow during the Brexit process.
Only two out of the seven proposed amendments succeeded.
The first saw MPs voting against a no deal outcome. It was the worst kept secret in Parliament that the majority of MPs don’t want a no-deal Brexit. However, the amendment wasn’t binding on the Government, and in any case MPs cannot alone prevent a no-deal outcome.  MPs also voted against a number of amendments which would have enabled them to take control of parliamentary processes – effectively voting against doing anything to stop no deal.
The second successful vote saw MPs supporting the “Brady amendment” to reopen negotiations with the EU and which “requires the Northern Ireland backstop to be replaced with alternative arrangements to avoid a hard border; supports leaving the European Union with a deal and would therefore support the Withdrawal Agreement subject to this change.” The Government had tacitly backed this amendment, and its passage was seen as a success for May. A constant critique by the EU of both the UK Government and Parliament has been that the UK hasn’t said what deal could pass in a vote. Parliament have now said what could.
The EU reaction
Immediately after the vote the EU reiterated its refusal to reopen negotiations. “This is our position, as coordinated with EU27 capitals,” a spokesman for European Council President Donald Tusk said, adding that they “welcome and share the UK Parliament’s ambition to avoid a no-deal scenario.”
The European Parliament’s Brexit coordinator Guy Verhofstadt said he doesn’t think there’s room to reopen the pact (i.e. the backstop), but “there is a possibility to discuss the future relationship.”
Member State Ambassadors meet today, but the main question remains – can they stay united? Poland last week suggested time-limiting the backstop, which drew short shrift from other Member States, particularly Ireland. Yet some Member States could wobble, particularly when confronted with the choice between time-limiting the backstop, as the UK seems to want, or face a no-deal situation and a hard border.
Next steps
May has committed to a further vote on the Withdrawal Agreement as soon as possible and has stated that if a revised deal isn’t ready by 13 February, then another series of votes on what should happen next will be held on 14 February. She also offered to hold further talks with MPs and opposition parties. Notably, Labour Leader Jeremy Corbyn changed his position and agreed to talks. These internal UK talks and possible negotiations with the EU are likely to dominate the next two weeks.
These developments mean a general election looks less likely. With Corbyn agreeing to talks with May and Parliament having given her a mandate to renegotiate, it seems unlikely a further no-confidence vote will be launched in the coming days. If the next votes in Parliament on the Brexit process take place on 14 February there will be no time for the opposition to force an election before Brexit day on 29 March.
Many challenges lie ahead. Furthermore, the Brady amendment does not specify what the “alternative arrangements” for the backstop would be. It would therefore be very easy for MPs who backed the amendment to say any alternative arrangements were not satisfactory. Finally, even were a deal agreed in the coming weeks, the UK may already be out of time to implement the necessary domestic legislation to enable a smooth exit.
All this means there are still only three Brexit outcomes. May’s (possibly altered) deal, no deal, or remain.
The UK can only remain in the EU if it withdraws Article 50. There is no indication that the Government will do this, and MPs showed last night that they are reticent to start processes which could force the Government to do so (either via a second referendum, general election, or a simple Act of Parliament).
With time running out, no deal or some version of May’s deal therefore remain the most likely options if the UK does not request an extension of Article 50. 


The view from our affiliate in Germany

Is it time to panic yet?
Tom Enders, CEO of the German-French Airbus SE, threatened to close factories in the UK if a deal for a soft Brexit isn’t reached. Enders addressed decision-makers directly in a video posted on “Please don’t listen to the Brexiteers’ madness, which asserts that because we have huge plants here we will not move and we will always be here. They are wrong.” Airbus has 14,000 employees in the UK and another 110,000 jobs supported by their UK programs. “It is a disgrace that more than two years after the result of the 2016 referendum businesses are still unable to plan properly for the future,” Enders said.

Enders isn’t the only German CEO to speak up: BMW boss Harald Krüger announced his company will need to shift production to the continent, and Adidas' Kasper Rorsted described Brexit as “the dumbest economic decision in a very long time”. Businesses are worried about their supply chains and are scrambling to get at least a stop-gap in place.

Frankfurt, the de facto financial capital of continental Europe and home of the European Central Bank, looks to turn out as a Brexit winner, regardless of how the next few weeks play out. The German financial hub has been successfully wooing US banks such as JP Morgan Chase, Morgan Stanley, Goldman Sachs and Citigroup, who have announced their intention to shift something to the tune of $400 billion of assets to Germany. Deutsche Bank is planning to repatriate  €400 billion (all estimates from Bloomberg). Not too shabby.

The view:
London seems to think it still has time, but does it really? Even if an agreement is eventually reached, industry is making decisions right now, with many having already set their relocation gears in motion. Enders’ public appeal is nonetheless a sight for sore eyes in Berlin. German politicians had been hoping industry would have been positioning itself more loudly and clearly in the Brexit debate. And so it remains to be seen if late really is better than never.


The view from the United States

The US watches from the sidelines
Although the foreign-policy establishment in Washington is watching Brexit closely, rank-and-file lawmakers are generally much less focused on it than their European counterparts, particularly given ongoing internal crises like the partial government shutdown. One notable exception to this is in the area of trade, where the Trump Administration has notified Congress of its intent to begin negotiations with the United Kingdom once Brexit is concluded. There is longstanding bipartisan interest on Capitol Hill -- in particular among the committees overseeing foreign trade (House Ways and Means Committee, Senate Finance Committee) -- in helping to shape a future U.S.-U.K. trade agreement.  

That said, Trump and his inner circle are notably pro-Brexit and are cheering the process on, both publicly and behind the scenes. In Davos last week, U.S. Secretary of State Mike Pompeo mentioned Brexit as an example of a series of global disruptions that are overall a “positive development.” Washington media company Axios reported that National Security Advisor John Bolton regularly talks to UK International Trade Minister Liam Fox and Transport Minister Chris Grayling, conveying support for Brexit and encouraging them to “keep it up.”

A handful of U.S. lawmakers with large numbers of Irish-Americans in their constituencies are watching the Brexit process as it pertains to the Irish border.  Rep. Richard Neal (D-Massachusetts) for example, stated, upon the failure of Theresa May’s plan in Parliament: “I urge all sides to redouble their efforts to find a path forward that can, at the same time, respect the achievements of the European experiment, the will of the people of the United Kingdom, and the legacy of the Good Friday Agreement. I look forward to continuing to engage with my counterparts in both the UK and the EU as they navigate the challenges before them.”  

Andrew Adair is a former Capitol Hill staffer and lobbyist in DC and founder of DC/Berlin, a consultancy helping German business navigate opportunities in Washington. He has partnered with our German affiliate as a transatlantic consultant.


Dates for your diary

13 February 2019 - Deadline for possible renegotiation of Withdrawal Agreement 
29 March 2019 - UK expected to leave EU
31 December 2020 - Expected end of transition



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 #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

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