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Grayling Brussels' Brexit Bulletin - 25 October 2016

25th October 2016


The Grayling view

Up to now the discussions around Brexit in the UK have been dominated by the Conservatives.

They have been able to set the tone of the debate, largely given free reign to publicly propose (and then retract) measures to control immigration, and are seen to be driving the country into a "hard Brexit".

Now, there are finally signs that the opposition is getting itself organised.

Sir Keir Starmer, the respected former barrister, has been made Shadow Brexit Minister. In our #Brexitpaper we explain how he could be a significant counterweight to "hard Brexit", and could therefore mobilise support from the public and within Westminster.

Secondly, the former Labour Minister and Remain campaigner Hilary Benn has been appointed Chair of the Brexit Select Committee, whose objective is to scrutinise the work of Brexit Minister David Davis and his Ministry.

Both appointments provide some much needed opposition to the Conservative government and could succeed in leveling the playing field in favour of a softer Brexit than might otherwise be the case. 

Nonetheless, both appointees have made it clear that Brexit will happen, so any businesses still hoping to wake up from what they consider a bad dream are likely to be disappointed. 

Other past #Brexitpapers include the 'Great Repeal Bill' Guy Verhofstadt, the European Parliament's lead negotiator on Brexit, Sir Julian King - the UK's last Commissioner. Article 50, the UK's "Minister for Brexit" David Davis, Chief Brexit Negotiator for the Commission, Michel Barnier, his deputy Sabine Weyand, and what Brexit means for Brits working in the EU institutions.

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 and follow us on Twitter @TheEULobby.


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 (robert.francis@grayling.com) in our Brussels team for more information or Jonathan Curtis (Jonathan.Curtis@grayling.com) in London.



The highlights from the UK

Hilary Benn to chair Brexit committee
The Chair of the cross-party Brexit Committee in the UK Parliament will be the Remain supporter Hilary Benn, who beat a challenge from fellow Labour MP and pro-Leave campaigner Kate Hoey. Benn, whose committee will consist of 21 MPs, said that politicians should try to “minimise the risks and uncertainty for business”. The role of the Committee will be to scrutinise the work of the Brexit Minister David Davis and the Department for Exiting the EU. Mr Benn is an experienced and respected MP, having previously been Minister for International Development and the Environment. He is however a realist when it comes to Brexit: "Although some people may argue that in the space of two years we can negotiate both the withdrawal from the European Union, all the mechanics, and reach an agreement on a new deal governing trade and access for our services – I somehow doubt we’ll do that in two years.” A Remain campaigner he may be, but he insists that he will respect the result of the referendum: "Although I campaigned for remain, I accept the decision of the referendum and we are going to be leaving the European Union.”

Davis won't disclose government position before Article 50
Don't expect to know what the government's plans are before negotiations begin. At least that's what UK Brexit Minister David Davis said in Westminster last week whilst being questioned by MPs. This means even MPs in London might not know what the Government is planning before it formally triggers Article 50, likely in March. Davis did however say that he was confident the UK could agree a trade deal with the EU during the two year negotiations, thus avoiding defaulting to WTO conditions. However, he argued that disclosing the UK's position will put it at a disadvantage before the negotiations, despite the fact that Parliament is insisting that it is kept informed and plays a role.

Plan for regions to contribute to discussions in London 
On Monday it was announced that Scotland, Wales and Northern Ireland would be able to feed in their proposals for Brexit via a newly created forum which will be chaired by the Brexit Minister David Davis. The meetings are likely to be fiery affairs given the fact that Scotland voted clearly to "Remain", and Northern Ireland could now be confronted with a "hard border" to the Republic of Ireland, rather than the open border it is today. It is doubtful whether only two meetings in 2016 will satisfy these restless regions, but a lot is at stake, with Scotland threatening to hold another independence referendum if the UK ends up leaving the Single Market. Scotland First Minister Nicola Sturgeon was unimpressed with Monday's meeting with Theresa May. “I don’t know any more now about the UK government’s approach to the EU negotiations than I did before I went in to the meeting,” she said. “At the moment, it doesn’t seem to me like there is a UK negotiating strategy, which is one of the sources of great frustration.” 


The highlights from Brussels

May given a rough welcome at her first EU Summit
At last week's EU Summit Theresa May gave a 5 minute presentation on Brexit in which she stated that Britain would continue to be a "dependable partner" and that there would be no second referendum on Brexit. Angela Merkel was rather scathing, saying "(b)asically it was a repetition of what we have heard so far" before adding that "as far as the practical terms are concerned, it is going to be rough going." François Hollande was even tougher, saying that if May wants a hard Brexit, "she will get a hard negotiation" before reaffirming that free movement of people is a condition on being a member of the Single Market and that there would be "no pre-negotiations" before Article 50 is triggered. The rather cold response to May's presentation should have been expected. Indeed, in some ways she is fortunate to be invited to EU Summits these days, for there will be many more meetings at which she will not be invited in the near future, as the other EU countries discuss their own approach to the Brexit negotiations.

Parliament President wants MEPs to get to work
The European Parliament's formal role within Article 50 is to approve or oppose the final agreement - but this is not enough for the President of the Parliament Martin Schulz, who has asked MEPs to start working on "analytical material" and "fact-finding work" in time for early 2017, when the negotiations are expected to begin. Schulz wants the Parliament to be involved in "all stages" of the Brexit negotiations - but what does this mean in practice? Probably adopting a number of resolutions, insisting on being updated regularly on the status of the negotiations, and perhaps even having a seat at the table. Some key questions he wants answered are:“What is the possible impact on legislative files currently under discussion of impending U.K. departure? What is the likely impact on these legislative files if they are not concluded pre-Brexit and therefore only concluded post-Brexit? And are there policies or EU legislation in force likely to feature as part of the EU-U.K. withdrawal agreement, and if so in what way?” To recall that the Parliament's lead negotiator is the federalist firebrand Guy Verhofstadt, who is expected to be very vocal in the press in the coming months. See our #Brexitpaper on Verhofstadt here.

Trade relationship not on Barnier's agenda
The lead negotiator for the European Commission Michel Barnier has specified the points he would like to cover in the negotiations. They are as follows.
1. "The check" i.e. the amount which the UK will have to pay to cover its share of EU programmes and other costs such as pensions for EU staff.
2. The status of EU nationals in the UK and vice versa
3. "Administrative disengagement", and the future of EU agencies in the UK
4. "Special situations", e.g. Northern Ireland and Gibraltar.

Conspicuous by its absence from this list is the future trade relationship between the UK and the EU, including membership of the Single Market. A clear indication that the Commission considers that to be outside the mandate for discussions. Is this the first point of disagreement with the UK?!

MEPs start to discuss Brexit process
The European Parliament's lead committee on Brexit, the Committee on Constitutional Affairs (AFCO) last week discussed how the Parliament would deal with Brexit as part of its work. It has been agreed that it will be handled between the political level (Conference of Presidents) and the committees. The latter will prepare a list of files which they believe will be affected by Brexit, and there will be ongoing dialogue between them and the Parliament's lead negotiator, Guy Verhofstadt. AFCO will hold a number of meetings with expert groups, most of which will be behind closed doors, and the Chair of the Committee, the Polish centre right Danuta Hübner, said she had already met some representatives from Scotland and Northern Ireland. Don't forget that the European Parliament must agree to the EU-UK agreement, once it has been negotiated.


What's happening in Asia

ASEAN prioritising EU deal over UK deal - for now

Representatives in the ASEAN region (Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) are apparently prioritising finalising a deal with the EU-27 before focusing on the UK. This is according to a diplomat who attended the recent EU-ASEAN summit.  “Their [the ASEAN side] priority is to finish with the EU first, bilaterally, and region-to-region, and then later on, when we know more about [the] EU-UK set-up, countries can look at that.” The Singapore Ambassador to the EU repeated this message, saying that regarding Free Trade Agreements, "right now we’re looking at EU, and the individual countries. Until such time as the UK’s not in the EU, I think then we can look forward to a different arrangement.” This comes as something of a reality check to those who say that countries and regions will be flocking to sign a trade deal with the UK post-Brexit. 


What's happening in North America

Mixed views of Brexit from the US
In a report released last week, the US Chamber of Commerce warned the British government that re-establishing barriers to the free movement of workers, goods, and services means that US companies would drastically cut – or even withdraw - their investments in the UK. The American business community has a significant stake in the outcome of the Brexit deal, with almost $600 billion worth of investments and more than 1.2 million jobs provided to Britons. We can therefore expect US companies to step-up their engagement efforts to ensure that the Brexit deal avoids any major business disruption for US companies.
 
The business community in the US is however not speaking as a united voice. Contrary to the US Chamber of Commerce’s fears, Liberty Media Chairman and billionaire John Malone predicts that sterling’s plunge could prompt a wave of takeovers by US companies of their UK counterparts. In addition, the CEO of the US tech company Circle, the bitcoin-payments app, claims that despite the Brexit vote, London remains an attractive place for start-ups to recruit talent and build global activities. Jeremy Allaire explains that the UK Government still remains the European country which most embraces financial technology innovation. As pointed out by the two CEOs, there may be a short-term silver lining to the Brexit vote, but in essence, Brexit has not happened yet, and long term consequences will probably be closer to the ones described by the US Chamber of Commerce.


News from our European Network

Ryanair blames profit downgrade to fall in the pound
Ryanair has reduced its expected profit growth to 7% from 12% for the full year following the sharp fall in the pound, adding that a further downgrade in profits could be possible later in the year. The airline said on 18 October that it expected to make between €1.3bn to €1.35bn from a previous range of €1.375bn to €1.425bn. The UK market being one of the most important for Ryanair (it makes up a quarter of its revenue ) the situation could worsen if the pound continues to fall in the coming months. Ryanair campaigned for Remain and has already said that, following the referendum, it would look to reduce its presence in the UK and move to other bases in the EU. 

France trying to make the most of Brexit in financial and border control policy
As reported previously in the Bulletin, France wants to put itself forward as Europe's new financial capital, replacing London. To do so, La Défense, Paris’ business district, launched an advertising campaign to convince banks to move their offices from London to Paris. For French officials, the UK’s refusal to accept freedom of movement after Brexit means that it will also lose passporting rights, which allows banks to carry out financial activities in the rest of the EU. Nonetheless, despite being home to 500 companies, 40% of which are foreign, La Défense will have to compete with Frankfurt, Dublin and Luxembourg, who are all vying to become Europe’s new financial capital.

Also in France, the Le Touquet agreement, which ensures that British immigration controls are in Calais and not in Kent, could also be challenged with Brexit. Alain Juppé, the leading candidate for the French Presidency from the centre-right party Les Républicains, said that the border should be moved back to the English coast. He added “Don’t tell me that it’s difficult because the British don’t want it.” Another unintended consequence of the Leave vote for the British to deal with!

Hungary and UK establish British-Hungarian Business Council
On Wednesday in London the Hungarian Minister of Foreign Affairs and Trade met UK Finance Minister Philip Hammond, foreign Minister Boris Johnson, and Brexit Minister David Davis to discuss Hungary’s interests post-Brexit, including employment rights, border protection, and economic questions. The Hungarian Minister also signed a contract with British companies operating in Hungary creating the British-Hungarian Business Council. The Council will be a one-stop shop for dialogue between British corporate executives and the top political leaders responsible for the UK-Hungary bilateral relationship. The Minister also mentioned that the UK needs a fundamentally new agreement with the EU - one which is different to the Swiss and Norwegian models.

 


Dates for your diary 
End March 2017 - UK expected to trigger Article 50
April/May 2017 - French Presidential elections
September 2017 - German Federal elections


Grayling Team

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