UK Transport and Brexit News & Views No. 51

David Davis has today said that the UK has accepted that it will effectively be a rule-taker and not a rule-maker during the transition and that the UK intends to negotiate and sign trade deals with other countries during the transition period while remaining members of the Customs Union. This comes in a week that has seen Davos dominating the headlines, we have also seen a seeming softening in the EU’s stance towards the UK getting a bespoke Brexit deal. While this can only be seen as good news for the UK in the Brexit context, one must wonder what this means for transport.

Removing UK transport from EU transport regulations will feel a lot like ‘taking an egg out of an omelette’, to use Pascal Lamy’s Brexit analogy. Given this softer approach from the EU, the UK has an opportunity to make the case for transport but it is up to us to help inform the UK government what a successful Brexit looks like from a transport sector perspective. I have often heard in meetings that the UK government is open to input from businesses, and this is something we need to really lean on in the coming months to hammer home the following the message: the transport sector needs to be a priority issue and not a second-fiddle issue.

Finally, we will be hosting a roundtable event with Henrik Hololei, the Director-General of the European Commission’s DG MOVE in the European Parliament on February 27th.  We will be focusing on the future of European transport, as we fully expect future EU transport regulations to apply to us, or at least influence our own regulations, whatever the final deal on Brexit looks like. If you would like to attend then please join us. If you would like to attend then please join us.
 
1. Chris Grayling says aviation is a priority for the UK in Brexit talks
In a speech given on January 24^th by Chris Grayling, Secretary of State for Transport, he said “securing a good deal for UK airlines, with the best possible access to European markets, remains one of my biggest Brexit objectives”. He went on to further highlight that aviation will play a more crucial role than any other transport sector as the UK leaves the EU. Grayling stated that he believed the aviation sector would get a good deal as “it’s in the interests of all European countries and everyone who travels between them that we seek an open, liberal arrangement for aviation following Brexit”. Given the forthcoming Heathrow expansion, Grayling believes that the UK will possess extra valuable capacity which airlines from all countries would want to make use of. During his speech, Grayling also confirmed that discussions were already underway on replacing EU-based third country aviation agreements with countries such as the US and Canada. Would you like to help us make the transport sector, as a whole, a priority in the Brexit negotiations? Join us to find out how.

2. Steve Mnuchin says the US ‘very supportive’ of the UK on Brexit
Speaking at Davos, US Treasury secretary Steve Mnuchin re-affirmed the ‘special relationship’ between the US and the UK and expected it to continue, adding that the US has been “very supportive” of the UK over its Brexit negotiations with the EU. Mnuchin also added that “as soon as the UK is ready, we are prepared to negotiate an attractive trade deal . . . the president was very clear early on that . . . they would go to the front of the line”. A trade deal with the US, a long-touted objective of a post-Brexit Britain, would inevitably reassure those concerned about the UK’s place in the global economy after leaving the EU. The positive statements from Mnuchin were echoed by US commerce secretary Wilbur Ross who said that after having a conversation with Liam Fox, Britain’s International Trade Secretary, said he felt “encouraged”. These positive signs regarding the US-UK come in the aftermath of media reports suggesting a strained relationship between Trump and May and will, along with comments made by the pair at Davos, go some way towards appeasing the concerns over the long-term future of the relationship.

3. Varadkar- ‘There will be need to be a specific deal for the UK’ 
Speaking to Bloomberg, Leo Varadkar said that the UK may end up in a “Norway-plus” style relationship with the EU following its departure from the EU. Importantly, Varadkar pointed to “different perspectives” within the EU regarding the future deal and relationship with the UK. The article covers what would be the softest form of Brexit, the so-called ‘Norway model’, whereby by joining the European Economic Area the UK would not be in the Customs Union and could therefore strike its own trade deals while also continuing to benefit from “duty-free trade of services, as well as goods within the single market”. With Ireland considered the most vulnerable EU economy to Brexit, with approximately 15 percent of its exports going to the UK, Varadkar has stated that the closer the UK’s future relationship to the EU, the better it will be for Ireland. Do you know what a Norway model means for your business? Contact us to find out more.

4. Goldman Sachs boss warns on irreversible Brexit plans
Speaking to the BBC, Goldman Sachs chief executive, Lloyd Blankfein, said some steps already taken to deal with Brexit were now very unlikely to be reversed. Blankfein further added that “every month incremental steps are being taken and at some point we are doing things that are not going to be undone”. Blankfein also added that “we may have to rely on the promise of a transition, suspend our march [out of the UK] and yet not be entirely sure it gets accomplished. So we may have to make a leap of faith – which is a little dangerous for us”. The article concludes by highlighting that Goldman Sachs “does not expose itself to risk like that – particularly when dealing with a government which Mr Blankfein describes as “feeling its way” through these negotiations”. What is your business doing to prepare itself for Brexit? Contact us if you would like to know more about the exposure you may face from a ‘No-Deal Brexit’.

5. 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. You will find more information on IDA Group and what services they can provide you with here.

6. Italy PM- ‘Brexit deal must include Financial Services’
Speaking to Bloomberg in Davos, Italian Prime Minister Paolo Gentiloni said that any accord reached between the UK and the EU must include financial services as it is “totally unrealistic” to have them excluded from any future agreement. This softer stance than that expressed by Michel Barnier, the EU’s chief Brexit negotiator, echoes one raised by Macron on the Andrew Marr show last weekend when he said that a deal could cover aspects of financial services but that this depended “on what you’re ready to put on the table in terms of precondition”. Statements like those from Gentiloni and Macron suggest a desire for flexibility within the Brexit negotiations and that no option should be dismissed out of hand nor taken off the table permanently before there is ample opportunity to discuss it. While it is common knowledge that the EU27 unity will be tested during Phase 2, considering the varying degrees of vulnerability and interest in post-Brexit trade with the UK, we have yet to see any serious departure from the agreed EU stances on Brexit matters.

7. UK political turbulence proving problematic in Brexit negotiations according to the Institute for Government
The Institute for Government has said, according to its Whitehall Monitor 2018, that the turbulence and ministerial turnover in Theresa May’s government has made the UK too distracted to prepare the UK for Brexit. In covering the report, Bloomberg highlights the statistic that “85 of her 122 ministers are in new posts since the general election in June. At the Department for Exiting the European Union, just the Secretary of State David Davis and one other minister have remained in place since the department’s creation 18 months ago”. The problems in this turnover were also highlighted in a separate briefing on the Department for International Trade by the National Audit Office which said that the “model of moving staff every few years” could be problematic, since trade and negotiating skills require time to master” and that “considerable work will need to be done to build skills that have not existed in government for a generation”. The Institute for Government report also commented on the concerning lack of transparency from the Department for Exiting the European Union, with the department being “the least likely of all to release information in response to requests, and has a lower response rate for parliamentary questions and ministerial correspondence”. The report adds that ministers “have been opaque about their negotiating objectives even as the EU has used transparency as a tool to set the agenda and get what it wants”.

8. The view from Paris: Macron receives 140 CEO’s in a session called “Choose France” as Paris prepares to receive more businesses from London
According to a report in 20 minutes, Paris has already welcomed several international and British businesses since the Brexit referendum and expected some sixty or so other additional businesses to already be engaged in discussing such a move. The explanation behind this, put forth by Marie-Célie Guillaume, Director General of Paris La Défense, that a feeling of uncertainty was dominant in the UK and that businesses don’t like uncertainty. The article highlights France’s activity to promote its own attractiveness to these businesses feeling concerned with this uncertainty, pointing to a meeting Macron held with 140 international and French business leaders in a session labelled as “Choose France”.

9. Looking Ahead to Next Week
Monday will see the General Affairs Council where EU27 ministers will adopt a new set of negotiating directives which will, in particular, give details on the EU27 position regarding a transition period.

The Press Briefing of January 25^th says that “according to the EU position, the transition period will cover the whole of the EU acquis, which will continue to apply to the UK. Changes to the acquis adopted by EU institutions, bodies, offices and agencies during that period will also apply in the UK. The UK, as already a third country, will no longer participate in the institutions and the decision-making of the EU. All existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply, including the competence of the Court of Justice of the European Union. The transitional arrangements must be clearly defined and precisely limited in time. The proposed end date for the transition period is 31 December 2020.As the UK will continue to participate in the customs union and the single market (with all four freedoms) during the transition, it will have to continue to comply with EU trade policy, to apply EU customs tariff and collect EU customs duties, and to ensure all EU checks are being performed on the border. This also implies that during that period the UK will not become bound by international agreements in its own capacity in fields of competence of EU law, unless  authorised to do so by the EU.” It is not yet clear what this means for the UK’s participation in EU agencies during the transition period.

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