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Brexit means outside the Single Market, Customs Union, Agencies and everything else…

Prime Minister Theresa May is to make her big speech on Brexit tomorrow. But it’s been leaked all over the media this weekend. The indications are that she will set out a tough position for the next two years of negotiations with the EU. It will be more hard than soft, with not much in the way of a transition. While Downing Street described this as “speculation” Chancellor of the Exchequer Philip Hammond backed up the tough message in an interview in Germany’s Welt am Sonntag. All this echoes the recent May interview with Sky News, where she underlined that it is not her intention to maintain ‘bits of [EU] membership’ as she wants the UK to regain full control of their borders and laws. As the EU27 have been clear on their reluctance to compromise on the 4 freedoms, the UK appears to be indeed heading towards a hard Brexit . That of course would have significant impact for the transport sector. Not just out of the Single Market and Customs Union, but also out of the Agencies, and the various arrangements for road, rail, sea and air. In a recent blog entry- somewhat resembling an ‘ode to the leader’, Syed Kamall MEP – the head of the ECR Group in the European Parliament who is very close to May, praised her attitude and asked critics not to ‘cramp her style’ He believes that the negotiations will be done sector by sector. Kamall underlined that Britain should enter negotiations with an open mind whilst being prepared to walk away should the deal not be satisfactory for Britain. Meanwhile, the Germans are seeing Theresa May in a totally different light than Syed Kamall. In a recent article published in Handelsblatt, Theresa May is portrayed as disorganised and thin-skinned, failing to manage the Brexit process. For those outside the political sphere that will be directly affected by Brexit –UK companies and businesses operating in Europe – tomorrow’s speech is long overdue.

Last week the EU’s chief negotiator met the European Parliament to discuss how they will work together to negotiate Brexit
Barnier reminded everyone that the EP must give consent, ‘thus we must work together throughout the process, not just at its end. His priorities include Northern Ireland , climate change, trade agreements, issues like state aid, EU Agencies, financial services, and regional policy. No specific mention of transport. On a transitional deal he reminded everyone it would be subject to the EP approval and will require ratification by all national parliaments. But it cannot be negotiated until Article 50 is agreed. For the European Parliament, Guy Verhofstadt MEP said that the work they are preparing in the EP is twofold:

1. The Committees are finalising fact-finding reports (working documents), at the latest by end of February;
2. There will be an EP resolution after triggering of the Article 50 which should feed into the Council guidelines; the resolution should be ready by end of March / beginning of April; the committee Chairs have been invited to participate in this exercise.

EU Brexit Team
Although the months following the UK referendum have had all eyes focused on Britain’s Brexit team, the EU’s Michel Barnier Brexit team has recently taken centre stage. The current team consists of experts and advisers covering all the key areas of negotiations – from budgets and the UK’s future EU budget contributions, to financial services, competition, trade as well as a delegate charged with overseeing discussions vis a vis Northern Ireland, its economics links with the Republic of Ireland and its reliance on EU funding. Barnier also prepared for the ‘Swiss option’ scenario, bringing in a EU-Swiss negotiations expert should discussions follow that path.

Key Issues for British Policy Makers – who to blame from now on
Media sources from the UK have shed light on some of the most pressing concerns of British policy makers – how best to communicate critical developments and plans on the regulatory side in the UK in the future, once the EU scapegoat can no longer be blamed? Although the tactic of blaming the EU is well known for many in the political sphere, until negotiations are finalised and a final deal reached, the Brexit outcome and resulting regulatory consequences could still be blamed on the EU.

Unity of the EU trumps potential Brexit economic impacts
Germany’s approach to Brexit is becoming more as more visible as elections are approaching: no concessions will be given to the UK during Brexit negotiations. Germany’s Social Democratic Party (SPD), the largest centre left party and junior partners to Merkel’s CDU Party, claim they are willing to let the country’s short term economic interests take a hit if this would ensure the unity of the European Union. A draft resolution of the SPD outlines their main points during negotiations – access to the Single Market will be tied to free movement and recognising the rulings of the European Court of Justice. In the eyes of the SPD the loss of foreign direct investment of supply chair disruptions are seen as a one-off event and can in no way compare to the risk posed to the European project by accepting a win-win from EU-UK negotiations as this may launch other similar movements across the EU. As expected, the SPD is also pushing for a German parliament vote on the terms of Britain’s exit from the EU – as will most likely be the case for other Member States’ Parliaments – which will without doubt cause massive delays to May’s timetable following the triggering of Article 50. Seeing past the lines of political rhetoric and election fever, there remains no doubt of the red lines on both sides of the negotiating table. Given the importance of these negotiations in the greater scheme of things ( for the EU in particular), companies and businesses should be prepared to draw up a plan for a hard Brexit.

Brexit to be heard in Irish Court in January
Dublin’s High Court will this month see a legal challenge to assess whether Brexit can be reversed once Article 50 is triggered. The case aims to assess whether the process, once started, can be stopped by the UK alone or whether it needs the consent of all other 27 Member States. According to the lawyer behind the case, this is by no means an attempt to stop Brexit – but rather to give the opportunity to reverse the process should Brexiteers have a change of heart.

Mark’s week:
‘This will be a dramatic week for Brexit. We should learn what the UK’s Article 50 objectives are. The leaks over the weekend suggest the UK are playing more of a tactical rather a strategic game, and managing expectations by suggesting we will be ‘closed off’ from the Single Market and the Customs Union because the EU won’t accept our demands on ending free movement. It seems we will seek to fall back on a ‘trade deal plus’ type relationship. That may go down well at home but will play very badly here in Brussels and national capitals. If anything it will strengthen the resolve of the 27 and the European Parliament not to compromise, and it may even harden attitudes against the much needed transitional deal. It’s still early days but a trade deal plus type could in my view be very bad for transport, particularly if transport is not a priority and there is not much in the way of a transitional deal. And so far in the discussions being held in Brussels last week, ahead of the negotiations, transport is not yet on the priority list vis-à-vis other sectors. That has to change. Barnier’s and the European Parliament’s large team of negotiators are taking shape. It’s time to plan to engage with them’.

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