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Grayling's Brexit Bulletin - 4 August 2017

4th August 2017


The BREXIT Bulletin: Brexit's holiday blues

On its first visit to the UK since the Prime Minister triggered Article 50, the Brussels arm of the Brexit Bulletin was struck that outside the Brussels and London bubbles, life as it stands has continued much as before.

There was some griping about the increased cost of the weekly food shop and warnings from those early visitors to continental holiday destinations that ‘holiday money’ doesn’t stretch as far as it did last year.

However, the connection was rarely made between the Brexit-induced depreciation of the pound and these complaints

As Brexiteers have become accustomed to crowing, Brexit has not resulted in the immediate economic ‘catastrophe’ predicted by ‘expert’ economists. Clearly, the predicted economic costs of Brexit have yet to be fully felt in seaside villages, the market towns of the Midlands, and the northern hills and dales. 

There is however palpable tension in London. Recent announcements by major financial services and banking firms that they will be moving portions of their operations to ensure that they remain inside the EU’s Single Market has ratcheted up the pressure. Management consultancies are being asked to hastily draw up impact assessments for business and public affairs agencies are scrambling to get clients in the room with Civil Servants and senior Government figures. Perhaps the ‘hidden agenda’ of business is that a soft Single Market and Custom Union Brexit could still be an option.

It seems that these efforts have to a degree paid off. The Cabinet has ceded that transitional arrangements will be a necessity. With the Government now consulting more widely, businesses' role in prompting this acceptance should not be underestimated. However, even upon transition, a mechanism to provide certainty, the Government lacks a clear direction. Businesses next ‘goal’ should be to obtain clarity quickly on these points.

Yet businesses’ prospects of securing a ‘status quo’ transition, or even a softer Brexit are hampered by the differences in atmosphere between the capital and the rest of England.

Whilst Brexit-related economic pain could eventually lead the public to change their minds and the Government's stance, the risk is that this could come too late.

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 and Timeline. 

This week's contents:

Sectoral Insight -

UK Highlights -

EU Highlights - 

Member State Highlights - 

The highlights from the Australia -

Our Reads of the Week - 


Grayling Brexit Unit Events 

5 September 2017 - Third Installment of the Grayling Brexit Breakfast Club

Venue: Grayling’s Brussels Office, Floor 4, 46 Avenue des Arts, Brussels 1000

28 September 2017 -
Grayling Brexit Workshop - 'The Weakest Link? Brexit and Your Supply Chain'

Join us to discuss Brexit's supply chain challenges for business with leading multi-nationals, supply chain experts, EU and UK decision-makers, and major trade associations. Confirmed speakers include Patrick Keating European Government Affairs Manager at Honda Motor Europe and a Senior Civil Servant from the UK's Department for Business, Energy and Industry Strategy

Venue: Grayling’s Brussels Office, Floor 4, 46 Avenue des Arts, Brussels 1000

Sectoral Insight: Banking and Finance

Banking on Brexit
The depths of the impact of a possible hard Brexit continue to emerge. The respected consultancy Oliver Wyman, who have been analysing the issue over the past year, released their latest report estimating that up to 40,000 UK banking jobs could leave its shores. The fragmentation of the wholesale banking market could increase banks’ costs by up to 4% and require a further $30-50bn in extra capital to build their new business models.

Meanwhile, Bank of America has announced that it will make Dublin an important hub post Brexit, Morgan Stanley has picked Frankfurt and could relocate about 200 staff there, Citi has indicated it will beef up its presence in the city, and  Deutsche Bank has earlier in the year signaled that up to 4,000 roles could move to Germany.

From the regulators, the head of the Financial Conduct Authority Andrew Bailey has also argued for a sensible transition period and warned that the time is fast approaching by when firms will have to have committed to move to guarantee continuity of business post-March 2019. Bailey also made a strong argument for regulatory equivalence between the UK and the EU post-Brexit and for the thorny issue of clearing to be based on ‘joint oversight’ not physical relocation. In Parliament, the new head of the Treasury Select Committee Nicky Morgan has asked the Bank of England for an analysis of the City’s preparedness and for the Bank’s  transition plan.

The Grayling View

Firms are voting with their feet. The lack of any transition deal or even outline deal means that the financial sector has had to react fast. Who knows if their hard cash will have been well spent? They cannot afford to risk a hard Brexit and the loss of passporting rights in two years’ time. What is less clear is the impact on the European financial system as a whole. The UK’s loss is not necessarily the Continent’s gain. Brexit is forcing banking chiefs to reassess their global business models. Just as in the auto sector, Brexit may see production moving outside the EU completely.  


The highlights from the UK:

Lords on tour get a taste of transition
Avid Brexit Bulletin readers will remember that when the Labour Leader Jeremy Corbyn infamously visited Brussels on 12 July and presented a rather nonplussed Michel Barnier with an Arsenal football shirt, the EU’s Chief Negotiator also met with Members of the House of Lords EU Select Committee. The Select Committee has kindly published verbatim transcripts of this hearing, as well as another with the European Parliament’s lead Brexit representative, Guy Verhofstadt.

In his evidence to the Peers, Barnier made sure to focus on the importance of ensuring that ‘trust’ remains at the heart of the relationship between the UK and the EU-27. For Barnier ‘trust’ implies that the UK fulfills its financial obligations and desists from the temptation of lowering regulatory, tax and environmental standards post-Brexit. Barnier also informed the Lords that the EU’s transparency policy and his consultation strategy across the EU-27 are aimed at fostering public support for the ratification of the eventual trade agreement, which will be a mixed agreement (i.e. one requiring the consent of national parliaments as well as the European one, which could make it a tricky affair).

For his part, Verhofstadt provided the Select Committee Members with a clarification on how the European Parliament will handle Brexit. The Constitutional Affairs Committee (AFCO) will be asked to prepare the Opinion that will form the basis for the MEPs' consent motion. Hence AFCO Chair Danuta Hubner’s membership of the Brexit Steering Group. Verhofstadt also revealed that the European Conservative and Reformists (ECR) political group are clamouring to be given a seat in the Group, the membership of which is currently restricted to the Presidents of the political groups that backed the Brexit resolution passed by MEPs in early April. Tantalisingly, Verhofstadt would only say that the ECR’s candidate is Italian – the ECR’s President Syed Kamall, as a British citizen, is deemed unsuitable.

The Grayling View

These transcripts are in themselves well worth a read with some amusing banter between the Lords and their ‘witnesses’. I
t is heartening to see that the Lords are providing effective Brexit scrutiny on behalf of Parliament. The Verhofstadt transcript reveals that the ECR are preparing for life without the Conservative Party – its largest source of MEPs.
However, in terms of content it is the Barnier transcript that offers the most insight. To our knowledge it provides the first indication of the EU Chief Negotiator's thinking on transition, which is now firmly on the agenda in London and Brussels. Whilst reiterating that any transition period must be clearly time-limited, Barnier also stated that it should be “short”. More interestingly, Barnier revealed that transition would involve two distinct elements. “Phasing-Out” elements – membership of Europol and Euratom for instance – and “Phasing-In” arrangements on the future relationship. What precisely this differentiation implies and how it could be made to work legally is still unclear. Any evidence that Barnier is thinking about the shape of transition will in any case be music to the ears of businesses.



The highlights from Brussels:

And they’re off! EBA and EMA candidates announced
The nominations have been put forward – now the political jockeying begins. On 1 August it was revealed that 19 countries are bidding to host the European Medicines Agency (EMA) after Brexit, and eight are hoping to host the European Banking Authority (EBA). Six countries have applied for both categories, though no country is allowed to get both agencies.
The nominations in full are:

EMA: Amsterdam, Athens, Barcelona, Bonn, Bratislava, Brussels, Bucharest, Copenhagen, Dublin, Helsinki, Lille, Milan, Porto, Sofia, Stockholm, Malta, Vienna , Warsaw, Zagreb.

EBA: Brussels, Dublin, Frankfurt, Paris, Prague, Luxembourg-City, Vienna, Warsaw.
The European Commission will now assess these applications and present its findings on 30 September. The EU-27 will then choose a winner during up to three rounds of secret voting in November.
The Grayling view

The contest is very competitive, with a large number of bids, which reflects the gains to be made in terms of influence within the Council and inward investment which awaits the winners. So who will win? As with most issues of this nature, expect the decision to be the result of significant and complex horse-trading between Member States. The EU does messy compromises very well, and this will be no different.



The highlights from the Member States:

Davis visits Germany’s Brexit Achilles Heel - Bavaria
David Davis, the UK’s Brexit Secretary, was in Munich on 26 July for talks with Bavarian Premier Horst Seehofer, leader of the Christian Social Union (CSU) the regional sister party to Chancellor Merkel’s Christian Democratic Union (CDU), about a post-Brexit relationship.
Bavaria, Germany’s second-most populous state, has particularly close economic ties with the United Kingdom. The informal meeting between Davis and Seehofer appears as an opportunity to assess what can be done in particular sectors and how the CSU could influence the overall German position on Brexit.
The CSU appears to be more divided on Brexit than the big two nationwide parties because so much more is at stake with Brexit for Bavaria. After the US and China, Britain is the most important market for Bavaria's economy. The export volume, according to the state government, amounted to about €15 billion in 2016, half of which stems from automotive manufacturing. On the other hand, the UK is ranked 10th in the Bavarian import balance with imports of €5.6 billion.
It should therefore come as no surprise that Seehofer has repeatedly stressed the importance of a quick conclusion to a comprehensive trade deal between the EU-27 and the UK.
The Grayling View

David Davis will be well aware that Bavaria and the CSU represent the closest thing that Germany has to a Brexit achilles' heel. With one of the Brexiteers' favourite tropes being that the German automotive industry will force Merkel to be ‘pragmatic’ and though she put pressure on Barnier to give the UK a ‘good’ deal, it is unlikely that Davis will have overlooked this potential ally. The Chancellor must accommodate the CSU’s interests, although Barnier will certainly sleep more easily should the German election result in the status quo or an increased majority for the CDU.


The highlights from Australia:

Australia keen on a deal – but wants something in return
Discussions have begun between Australia and the UK with the aim of better facilitating travel to the UK for Australian citizens. Australian High Commissioner (Ambassador) to the UK Alexander Downer said this week that the country is developing a “scoping paper” on a possible trade agreement with the UK and that visa liberalisation would be “on the table”.
Downer stated that Australia “wouldn’t be looking at completely free movement like the UK currently has with the EU. But we would be looking at making it easier for business and professional people, academics and the like to move more easily between Australia and the UK in both directions”.
Immigration however remains a sensitive topic for the UK. As a UK Ministry source said: “The sensitivities around migration are very significant. I don’t think anyone would expect we are going to recognise concern about migration of free movement from Europe and not pretend it isn’t an issue with the rest of the world. What we are not going to do is start replacing one free movement deal with a free movement deal with India, for example. It is not on the cards.”
The Grayling view

The Commonwealth countries – including Australia and India – will hope to be first in the queue for a trade deal, but they will expect something back in return, most likely in the form of free movement – and here lies the rub. There appears to be an inherent contradiction between being a champion of global trade and closing borders to immigrants, and it is not yet clear how this can be reconciled. Failure to give something back to the Commonwealth may jeopardise a future deal with these countries and do longer term damage to the UK’s reputation within the Commonwealth.


Dates for your diary

w/c 28 August 2017 - Third Negotiating Round
5 September 2017 -
GBU Brexit Breakfast Club
7 September 2017 - European Union Withdrawal Bill Second Reading
11 September 2017 -
European Union Withdrawal Bill Second Reading - Vote
w/c 18 September 2017
- Fourth Negotiating Round
24 September 2017 - German Federal elections
28 September 2017 - GBU Workshop - 'The Weakest Link? Brexit and your Supply Chain'
w/c 9 October 2017 - Fifth Negotiating Round
19-20 October
- European Council Summit
1 January 2018
 - Bulgarian Presidency of the Council
1 July 2018 - Austrian Presidency of the Council
End of October 2018 - Negotiations expected to end
Autumn 2018 - Spring 2019 - Possible Scottish independence referendum
1 January 2019 - Romanian Presidency of the Council
March 2019 - UK expected to leave EU



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.

No task is too big, too complex, or too ambitious - please contact Robert Francis Tel +32 2739 47 34 ( in our Brussels team or Jonathan Curtis ( 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

Updated Timeline


Robert Francis

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