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Grayling Brussels' Brexit Bulletin - 8 November 2016

9th November 2016


The Grayling view: Court decision threatens timing of - but does not actually endanger - Article 50

The fallout continues following last week's High Court ruling that Parliament must scrutinise and approve the triggering of Article 50. Theresa May is appealing, with the judgement due early in December from the Supreme Court.

Meanwhile some of the British right-wing press has been criticised for their response to the judgement, referring to the judges as "enemies of the people", and the actual decision is being seized on by some (but not all) Brexiteers as an establishment-plot to ensure Brexit never goes ahead. Conversely, a pro-Leave Conservative MP Stephen Phillips resigned in anger last week at the Government trying to ride roughshod over the rule of law. 

Out of the mess, what conclusions can we draw? 

In reality, the timing now becomes very tight if Theresa May is going to stick to her March 2017 deadline. That said, it still looks like MPs will allow it to be triggered, possibly in return for some assurances of Single Market membership or at least some form of privileged access. There has even been talk of May calling a General Election, but this now seems unlikely unless Parliament was to unexpectedly block the triggering of Article 50.

Whilst the Government grapples with the "big picture" issues, there is still little clarity on how sectoral policies will be impacted by the negotiations. Indeed, this may only become clearer once the negotiations begin.

In conclusion, the path towards Brexit may have taken a slight deviation in the last week, but the destination remains very much the same - Brexit - even if some of the finer details still need to be hammered out.

Don't forget to check out our #Brexitpapers including the 'Great Repeal Bill'Guy Verhofstadt, the European Parliament's lead negotiator on Brexit, Sir Julian King - the UK's last Commissioner. Shadow Brexit Minister Sir Keir StarmerArticle 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, and check out our brochure.



The highlights from the UK

Corbyn sets out his conditions for Brexit 
The Leader of the opposition Labour Party Jeremy Corbyn has set Theresa May 4 conditions in view of the Brexit negotiations:

  • A guarantee of UK access to the single market;
  • No watering down of EU workplace rights;
  • Guarantees on safeguarding consumers and the environment; and
  • Pledges on Britain picking up the tab for any EU capital investment lost by Brexit.

Corbyn added that if the above are not guaranteed before the negotiations begin, he will not agree to the triggering of Article 50. Yet he later appeared to contradict himself, saying that he "would not block Brexit." These mixed messages symbolise Labour's response to the referendum vote since June. They seem torn between challenging the Prime Minister, as is their role, and not wishing to go against the referendum result. 

Richmond by-election between Leave and Remain 
Set your diaries for 1 December, when there will be a by-election in the Southwest London constituency of Richmond Park. Why should you care? Because the two main candidates standing are former Conservative MP and Leave supporter Zac Goldsmith, and the Liberal Democrat Remain campaigner Sarah Olney. The by-election in this prosperous area is being portrayed as a mini-vote on Brexit. 70% of the constituency voted Remain, but Mr Goldsmith has been a popular MP for the area since 2010. Even if Ms Olney wins, Richmond Park is hardly reflective of the country at large, and the broader impact of such a vote must be limited, even if it could still give Ms May a bloody nose.

The City sticks by the Status Quo
The City of London wants the final outcome of EU-UK negotiations to be as close to the current state-of-play as possible. Paul Manduca, co-head of CityUK’s lobby group, said “we want a deal post-Brexit as close [as possible] to what we have today for financial services — open and free markets where we can trade without barriers — and we want a partnership with government as we work through that process”.  Manduca concluded that keeping EU Single Market access will depend on how much Britain will contribute to the EU budget.  
 
The question is, therefore, whether such pressure will influence the executive’s stance given that, so far, the UK Government is intent on waving goodbye to the EU Single Market and removing the ‘passporting’ right on which banks, insurers and financial groups depend to sell their services throughout the EU. Despite the executive’s rhetoric, figures generated by the CityUK, such as £67bn (€75bn) in UK tax revenue which is generated by the financial services industry, may very well trigger a change of heart.


The highlights from Brussels

Commission enquires about UK’s assurances to Nissan
On  4 November the Commission confirmed that it had asked the UK for details on the assurances it gave to Nissan and other car manufacturers to allay concerns about Brexit. The Commission wants to know whether the currently undisclosed guarantees, which led to Nissan re-investing in its Sunderland based production plant, breach EU rules preventing governments from subsidising particular companies. 
 
The Commission’s move surely ratchets up the tension between the EU and the UK ahead of the negotiations. The inquiry also sends a message to the UK and other Member States - on the Commission’s watch, there is no easy route out of the EU. The UK is now finding this out the hard way, and even if the Commission’s inquiry falls flat, there will be more pressure on the UK to offer greater transparency regarding its attempts to manage the impact of Brexit.

UK’s involvement in EU decision-making in the midst of Brexit
The question of the UK’s involvement in EU decision-making has been an issue even since the referendum, but now MEPs are beginning to call into question their involvement. Renaud Muselier, a centre-right MEP from France, has asked the European Commission whether it thinks it "right and proper for the United Kingdom and its representatives in the European Parliament to continue to be involved in decision-making on legislation that will not apply in the UK when the country leaves the European Union?"

There are no provisions in the EU treaties indicating how the issue should be treated within the European Parliament and with regard to British MEPs. In the absence of rules, it is highly unlikely that the Parliament will censure some of its members on the basis of nationality. Nevertheless, British MEPs will likely suffer from a loss of influence, notably when the reshuffle of Committee Chairs and Vice-Chairs in the EP takes place early next year.


What's happening in Asia

May’s visit to India overshadowed by visa dispute
On 11 November Theresa May met with Indian Prime Minister Narendra Modi. Despite pledging to make it easier for Indian business travelers to enter the UK, May was unable to persuade India to drop trade barriers to UK goods and services. The main sticking point is India’s insistence on visa liberalisation for Indian workers and students migrating to the UK.
 
Thus far, concessions from the UK side are procedural and include lower prices for visas and quicker application processes. In return, May made it clear that India would have to step up its efforts to quickly repatriate Indians when their visas expire.
 
However, given the importance of liberal trade agreements between the UK and large Asian economies, we can expect India to drive a hard bargain and demand more, in the hope that the UK Government will concede  ground under the time constraints and significant political/stakeholder pressure. Indeed, states like India now find themselves in the driving seat in negotiations with the UK. The UK has its work cut out.


What's happening in North America

US not taking sides - for now 
The US may be about to elect a new President, but even they felt compelled to respond to the court case in the UK last week. The White House urged both the UK and the EU to “continue to be flexible and work this out in a process that is smooth, pragmatic, transparent and productive.” For now, the US is not taking sides, but we know that a President Trump is likely to back the UK in any acrimonious divorce proceedings - admittedly, if he decides to act at all. A President Clinton is harder to read, but is likely to hedge her bets. 


News from our European Network 

New report underlines that Hard Brexit might impact harder
According to an analysis by the Economic and Social Research Institute, Brexit would have a significant impact on the Irish economy if the UK left the EU without a trade deal and would lose up to 4% in GDP. The Irish Government would then have to rely on World Trade Organization membership, and this would come at a cost.

There would be a decline in British export demand, unemployment could rise by 1.9%, and salaries could decrease by 3.6% over the next ten years. If Britain were to remain a member of the European Economic Area, the report estimated Irish GDP would be around 2% lower ten years after Brexit, compared with if the UK stayed in the EU.
 
In parallel, Irish airline Ryanair confirmed that it is scaling back plans to increase its presence in Britain due to Brexit. The airline is now planning to build bases in Belgium, Germany and Italy. Michael O’Leary, Ryanair’s CEO said that until the final outcome of Brexit has been determined, the company will continue to adapt to changing circumstances.

Milan’s dreams about EMA but might miss out on EBA.
For the second time since the referendum, Milan’s Mayor Giuseppe Sala travelled to London to lobby for Milan to host the European Banking Authority and the European Medicines Agency. He underlined that Milanese authorities are currently finalising their dossiers to officially enter the race and added that he is working together with the Italian Finance Ministry on the tax package they could offer to companies that opt to leave London.
 
The Mayor made it clear that he is more interested in getting the EMA, and there are fewer competitors. He added that the buildings used for the Universal Exposition held in Milan would be the site to host the EU agency or agencies and would become a tax free zone.



Dates for your diary 

December - Judgement on the appeal launched by the Government regarding Article 50 due
End March 2017 - UK expected to trigger Article 50
April/May 2017 - French Presidential elections
September 2017 - German Federal elections


Robert Francis

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