UK Transport and Brexit News & Views No. 16

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Mark’s Brexit Week for Transport

The UK’s transport industry needs to launch a charm offensive in Brussels and other national capitals to secure a good deal for the industry during the Brexit negotiations.  We need to embrace the world but we mustn’t miss the opportunity to maintain excellent relationships with what will remain our largest market, right on our doorstep. The British Government and senior politicians are advising us that the UK industry must work with business partners and associations across Europe to persuade them to lobby their governments to ensure that the EU does not put barriers in their way to trade with us.  In addition we must build and strengthen bridges with Commission officials, MEPs and Perm Reps in Brussels and the key decision-makers in national capitals, to make the case that a good deal for transport, as part of the new partnership between the UK and EU, is of importance to both sides and for Europe as a whole.  Over the past few months we’ve built up a formidable team of advisors to help you navigate Brexit in London, Brussels, Berlin, Paris and elsewhere: the Canadian diplomat who negotiated CETA, the former Daniel Hannan MEP advisor, a German delegate to the BDI, a former Royal Navy Commander and maritime expert and a French transport consultant, among others.

1. Transport faces a challenge to get on agenda
Angela Merkel has dealt an instant blow to Theresa May’s plan for Brexit by rejecting the PM’s plan for trade talks to take place at the same time as Article 50 secession negotiations. The Prime Minister in her letter triggering Article 50, said she believed it “is necessary to agree the terms of our future partnership alongside those of our withdrawal from the European Union”. She repeated similar sentiments four times in the documents. The German Chancellor told reporters in Berlin: “The negotiations must first clarify how we will disentangle our interlinked relationship… and only when this question is dealt with, can we, hopefully soon after, begin talking about our future relationship.” Paris has issued a similar reaction.  That means it will be that much harder to get transport on the agenda.

 2. We interview ECR Group leader Syed Kamall MEP – “prepare for WTO”
One of the members of the UKTiE secretariat had the exclusive chance to interview Syed Kamall MEP, leader of the third largest group in the European Parliament. He was asked what he thinks business need to do now Article 50 has been triggered. Kamall recommends lobbying both the UK and the EU, assessing which parts of your business will actually be affected by Brexit, and planning for the worst case scenario, i.e WTO rules – he warns it is a huge risk to assume that and FTA will be achieved on time. He also says it is important to decide what your business wants from a new FTA, and focusing on that rather than the withdrawal and interim agreement.

3. View from Berlin: Germans see Brexit fantasies for little Britain
Der Spiegel has written that the UK Brexit team has unrealistic expectations regarding the negotiations. Theresa May’s position is weak, she is currently dealing with many problems, including dealing with complex negotiations in a short time frame, the threat of terrorism and the growing populist tendencies. They also write that May´s weakness is demonstrated by a passage from the official letter of resignation, where she indirectly threatened that the EU will lose access to information provided by UK´s secret services. The position of the EU is crystal clear: to discourage the anti-European movement, the EU will under no circumstances let the UK have the same advantages under the new deal. The Spiegel thinks it is likely that the negotiations will end being a punishment for the UK for leaving the EU, which is already the impression that the Brexit proponents are trying to spread in order to avoid responsibility. To sums up the view of many German politicians: ‘The British seem to have completely unrealistic expectations.’

4. How will the Port of Dover cope with Brexit?
The BBC interviewed Tim Waggott, Chief Executive for the Port of Dover about how Britain’s busiest port will cope with Brexit. He said that physical checks at the border are simply not possible due to the value and volume of goods that get processed there (17% of trade in goods in value for UK plc). According to him the solution is some type of passport for goods, a technology based solution that will give them advance information of the source and destination of goods. However Mr Waggott thinks transitional agreement is definitely needed as this system would take more than two years to set up. One such system, the Customs Declaration Service (CDS) has been in the works for a while, but on Friday, Andrew Tyrie, chairman of the treasury committee said confidence in the system had collapsed, and there is now serious doubt over whether the project could be completed in time and still meet the required standards.

5. Insurer Lloyds of London confirms new Brussels subsidiary
Lloyd’s has announced it will establish a new European subsidiary in Brussels that should be operational by January 2019. They have done this in order to continue their access to the continental market post-Brexit. They chose Brussels because it has a good reputation for regulation and they also wanted to be near talent and to have good accessibility. Several other investment banks are considering relocating staff to Dublin, and other European cities like Frankfurt and Madrid are also expected to benefit from these relocations.

 
6. Germany also gearing to move business away from the UK
According to a study conducted by the German Chamber of Industry and Commerce (DIHK), German companies with UK involvement are counting on damage for the business, even before the official Brexit negotiations have begun. Nine percent of the companies want to relocate investments – mostly back to Germany. According to the survey, exports to the United Kingdom fell by 3.5 percent in 2016, especially in the second half of the year, following the Brexit vote. 40 percent of companies expect things to get worse in the coming months.

7. The EU institutions set out hard stances for Brexit
This week, we have seen the draft negotiation guidelines from both the European Parliament and the Council. Both set a pretty hard line, for example, both parties seem adamant that the UK will not be allowed to set up trade agreements with third countries before having officially left the union. However, both resolutions seem to be willing to give UK-Ireland agreements a bit of leeway, due to Ireland’s unique and vulnerable position. The Parliament’s stance seems a bit tougher, in particular in regards to the time limit of a transitional agreement and the UK’s wish to develop a new free trade agreement during the withdrawal process. The Parliament has repeatedly said one must be done after the other, whereas the Council seems more flexible.

8. The sensitive issue of Gibraltar brings up words last used in Falklands War
Less than four days after Article 50 and already words of war are being brought up. Last week, conservative Michael Howard suggested that Britain would be willing to go to war to protect Gibraltar’s sovereignty. This came after Donald Tusk, EU president said that Spain would have a determining say on whether any Brexit deal will apply to Gibraltar, a move that caused a lot of consternation in the UK. It’s clear this issue alone could prove sufficient to block a deal on transport, particularly aviation as Gibraltar has already proved problematic for these sectors, for example regulation 265 and SES, which were blocked because of the rock. Further tensions with Spain have also arisen as they announced this week that they would no longer stand in the way of an Independent Scotland joining the EU. An ex-Royal navy commander has felt the need to reassure the UK public that Britain could “cripple” Spain if it came to war, and that the Americans would support this. I’m scratching my head wondering if we are in fact seeing the classic The Day Today “WAR” sketch reenacted?

9. Interim EU trade deal to hit UK services hard
Although publicly, the EU27 are insisting that the withdrawal agreement must be decided before trade talks can begin, behind closed doors, they are discussing between themselves how to proceed. Reportedly, an idea gaining traction is transitional agreement where there will no tariffs on goods, only on services. This means that, post-Brexit, carriers like easy Jet and Ryanair would have to show they are majority owned by EU interests if they want to continue their access to European skies. This tough approach on services seems to be influenced by the opportunities that other European service providers see in the gaps that could be created if UK based providers lose access.

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