UK Transport and Brexit News & Views No. 41

Whilst on the surface the politics in London and Brussels appears to be getting in the way of progress in the Brexit negotiations, there is now in fact a lot going on behind the scenes to prepare for a trade deal.   Whilst there was very much a case of wait and see until a few weeks ago, this has now all changed as a result of the preparatory discussions being authorised at the recent European Council meeting. People here in Brussels are now openly discussing what a deal with the UK should look like.   For example, last week we attended a briefing where German officials outlined what sort of trade deal they would like, which was along the lines of a robust FTA, with sector by sector agreements.  We also  met with senior elected representatives from Flanders for whom getting a good deal is a high priority.

That doesn’t mean a deal is now certain, after all the negotiations are still a long way from being authorised, but I detect a change in the mind-set here in Brussels.  This represents a huge opportunity for us to get across the attention that must be given to transport and what sort of trade deal we, as a sector, would like to see. However, a comprehensive trade deal is very different to the current Single Market arrangements for transport, and does not fully resolve the impending customs challenge. UKTiE will be working with our members to develop proposals for a sectoral trade deal for transport and customs in the coming weeks, in order to create a more concrete proposal of what we would like to see implemented.  

The other issue on which we still all need to reach a consensus is how we manage if the negotiations on a trade deal go beyond March 2019.  That’s where the transitional arrangement comes in to play, to provide the stability and continuity to allow those talks to reach a satisfactory conclusion beyond the legal date of Brexit.  But in order for that arrangement to work, we need to maintain the status quo in terms of the primacy of EU law during the transition.  Moving forward, UKTiE will be stepping up our initiative launched recently with the AmCham EU, BritishAmerican Business, the Trans-Atlantic Business Council, and the British Chamber of Commerce|EU&Belgium. We need to keep up the pressure for a comprehensive and timely transitional arrangement, which sticks as closely to existing arrangements as possible, avoiding not just a cliff-edge but also the disruption caused if we have two separate changes to the regulatory regime in as many years.

Now, as we enter a critical period ahead of the December European Council Summit in Brussels, is the time for the transport sector to speak up and get its collective voice heard in these Brexit negotiations.

Finally, do register for UKTiE’s Annual Forum to learn more about planned EU transport regulations, and receive an all-important Brexit update from key decision-makers. 

1. Session themes confirmed for UKTiE’s 7^th Annual Forum
UKTiE’s Annual Forum will take place on November 28th in the European Parliament. The theme for the Forum is “Clean, connected and competitive – how to modernise Europe’s transport system”. The three sessions will discuss 1) Decarbonising road, rail, maritime and air transport, 2) Digitalisation of road, rail, maritime and air transport, and 3) Reforms to keep road, rail, maritime and air transport competitive. Spaces are limited – register here.

2. Brexit transition likely to be limited to 20 months
According to an interview given by Michel Barnier to the French financial paper Les Echos, the UK is likely to be offered a 20 month transition period post-March 2019. Although, importantly, nothing has been officially agreed yet among the EU27 but the suggested December 2020 date also coincides with the end of the EU’s seven-year budget. Barnier said that this was the transition time frame that made the most sense to him and would include maintaining the status-quo of the UK’s relationship with the European Union.

3. ETS made “Brexit-proof”- What impact on aviation?
As we covered last week, there was an agreement among EU lawmakers on a “Brexit amendment” to the Emission Trading System. The agreement, to to void all permits to pollute that are issued by a country leaving the European bloc from January 2018 onwards was seen as Brexit proofing the Emission Trading System as it would prevent a massive sell-off of the permits to pollute, given to the UK. This heavily affects entities such as the UK Treasury, that had been stockpiling permits to then sell on to companies, but also has a huge effect on UK airlines. Should the UK leave the EU without a deal for remaining in the Emission Trading System, then there would be both a shortage of demand for allowances in the UK and an abundance of spare allowances (now worthless) that cannot be dumped on a massive sell-off onto the Emission Trading System Market due to the “Brexit amendment”.

4. Barnier says that the UK is likely to end up with a CETA-like deal
Michel Barnier has warned the UK that it cannot expect a better trade deal than the one agreed between the EU and Canada in CETA. He further added that such a deal would need to be negotiated over several years. Barnier believes that due to the UK’s insistence on leaving the Single Market and the Customs Union, that the negotiations would need to work towards a CETA-like trade deal. Barnier further discussed the negative implications of a no-deal scenario, saying that this, among other consequences, would mean “leaving the single European sky agreement, and no longer being able to mutually recognise pilot qualifications or get take off or landing clearance.”

5. Mixed Messages from the Gov’t? Davis and May differ on whether UK Parliament will have a vote before or after March 2019.
As we highlighted the differences in opinion between Chris Grayling and Lord Callanan, this week we saw divergences in the stances of David David and Theresa May over whether the UK Parliament will have a vote before or after March 2019. Appearing before the House of Commons’ Brexit committee, Mr Davis was asked by Labour MP Seema Malhotra to comment on suggestions that any final deal on the UK’s exit terms could come so late that MPs would have no chance to vote before it was implemented. He said that “it could be after March 2019”. However, when asked the same question, Theresa May appeared to contradict David Davis by saying that she was confident MPs would be given a vote before the UK leave the EU on March 2019.

6. UKTiE Supported by IDA Group
UKTiE’s work is supported by IDA Group. IDA Group is a highly specialized consultancy for governmental affairs, reputation management, trade and funding. They share the belief in effective dialogue built upon trust and mutual understanding. Their diverse team of experts includes seasoned diplomats, politicians, journalists, lawyers and designers, supported by a global network of trusted partners, can help create measurable impact for your business.

7. Technology-related delays at Dover after Brexit could create more than 180km of queues
HMRC Chief Executive Jon Thompson was questioned by the Public Accounts Select Committee regarding the potential impact of the new border-checking system, due to be introduced in January 2019, failing. During the session, Meg Hillier MP claimed that queues could be 180 km at the Port of Dover should there be any faults with the new upgraded border checks system. Such queues would potentially stretch back from Dover beyond London, creating gridlock. In order to prevent such delays from 2019, HMRC has said it needs an extra £7.3m investment to upgrade the system. Jon Thompson further added that in a no-deal scenario, that HMRC would need up to £450m in extra funding and 3,000-5,000 extra staff.

8. Five biggest UK business lobbies call for early agreement on transition deal-the obstacles in the way of such a deal
This week the UK’s five biggest business lobbies demanded that the government should reach an early agreement with the EU on a transition deal. However, the Economist explored the many obstacles that will make achieving such a deal difficult. Chief among these obstacles are the legal questions surrounding it, Will Britain be subjected to laws that it no longer has a say in making? What happens to annual EU budget decisions (including on Britain’s budget rebate) without any British vote on the matter?  In addition to those questions, there are also legal questions on the UK side- Will the supremacy of EU law, created under section two of the 1972 European Communities Act, remain after this act has been repealed?

9. Push by UK government to shape EU negotiating mandate for phase 2 of Brexit talks
The UK government plans to undertake a 2-month push, ahead of December’s European Council meeting, through a variety of diplomatic activities in a bid to influence the negotiating mandate that will eventually be handed to Michel Barnier by the European Council regarding phase 2 of the Brexit talks, the trade talks. Many believe that the upcoming December European Council meeting could be make-or-break with regards to the Brexit negotiations. This explains the commitment by the UK to convince sceptical EU leaders that “sufficient progress” has, in fact, been made and therefore would allow negotiations to progress onto the next phase.

10. Transport Select Committee will hear today from leading UK airlines and airports on impact of Brexit on aviation sector
In a one-off evidence session, the Transport Select Committee of the House of Commons will take evidence on the impact of Brexit on the aviation sector, particular focusing on the implications resulting from delays in securing a transitional deal. The Committee will hear from John Holland-Kaye (Chief Executive, Heathrow Airport); Sophie Dekkers (UK Director, EasyJet); Tim Hawkins (Corporate Affairs Director, Manchester Airports Group); and Willie Walsh (Chief Executive, International Airlines Group). The Committee considers this important as airlines, airports and passengers plan travel many months in advance, and failing to secure a timely transition deal could result in potentially significant costs for the aviation sector and the wider UK economy.

11. UKTiE has also put together the latest timetable for Brexit. We will keep this up to date as the process develops: