UK Transport and Brexit News & Views No. 37

Mark’s Brexit Week for Transport

I’m sure we are all shocked by the collapse – the largest ever to hit a UK airline – of Monarch Airlines, which was about to mark its 50th anniversary. The airline, which employs around 2,100 people across its airline and tour group, had struggled with mounting costs and competitive market conditions which saw it suffer a period of sustained losses.
The Civil Aviation Authority (CAA) has been asked by the Government to charter more than 30 aircraft to bring 110,000 customers home, with Transport Secretary Chris Grayling calling it the “biggest peacetime repatriation” effort. It is a sign of how tough market conditions are and Brexit uncertainty isn’t helping.
That’s why it is vital the Prime Minister’s proposed transition of, in her words, “around” two years, is towards a clear pre-agreed destination for transport, not a two year postponement of the current uncertainty with the risk of a cliff-edge. As UKTiE has been saying for several months, a transitional arrangement is the priority for the industry, and everyone should get behind it because there is no guarantee our EU partners will agree.
Recent comments that we may diverge from EU rules during the transition are not helpful. We either follow the Acquis Communautaire, or there will be no transition deal. And we also need to press for clarity over the final destination (hence our call for a UK Government position paper on transport – here).
We have witnessed decisive steps forward in the past couple of weeks, albeit not ‘sufficient’ to allow the October Council to agree talks on trade and transport to begin. Indeed the European Parliament (which has a veto over the Brexit deal) is likely to be highly critical of the UK’s position this week. But to be honest, until the ‘fog’ that inevitably surrounds the Party conference season clears we are not likely to see much in the way of progress in any case.  But after that fog clears, hopefully at the end of this week, we do need to make rapid and sufficient progress to ensure the December Council meeting agrees to move the negotiations on to our future relationship.

1. Fourth round of Brexit negotiations – reinvigorated by PM May?
The fourth round of negotiations took place here in Brussels last week. In his press statement after the latest round, Michel Barnier said that Prime Minister May’s speech in Florence had indeed created a new dynamic in the negotiations and that some progress has been made. However he warned: “We’ve had a constructive week – yes – but we are not yet there in terms of achieving sufficient progress.” PM May also met with President of the European Council Donald Tusk last week who said that he feels cautiously optimistic about the constructive and more realistic tone of the Prime Minister but reiterated his colleague’s belief that there is no “sufficient progress” yet. It would seem transport is still far away from getting onto the agenda.

2. European Parliament to vote on whether “sufficient progress” has been achieved
A motion on whether “sufficient progress” has been achieved, drawn up by Parliament’s Brexit Steering Group, will be debated and put to a vote by the full house tomorrow. The draft resolution reads that the European Council should determine that “sufficient progress” has not been made on the EU’s three key aims – safeguarding EU and UK citizens’ rights, clarifying the UK’s financial commitments and resolving the Republic of Ireland/Northern Ireland border issue – unless the fifth round of talks delivers a major breakthrough on them. The motion states that it is the responsibility of the UK government to provide a ‘unique, effective and workable’ solution to the border issue and presumes that, based on the Prime Minister’s speech in Florence, the United Kingdom intends to stays in the internal market and customs union, or that Northern Ireland stays in some form in the internal market and customs union. The later would of course mean customs checks taking place at ports on the Irish sea for visitors and goods travelling between Great Britain and Northern Ireland.

3. The view from Germany on ”sufficient progress” – German MEPs holding firm
German politicians in the European Parliament are holding firm that “all questions” must be clarified before any trade agreement can start. This includes those of the exit statement – recognizing, for example, the supreme sovereignty of the European Court of Justice and continuing to grant residential and labour rights to EU citizens. Senior German MEP Elmar Brok said that during the implementation period “At the same time, [the UK will] no longer participate in the EU as a third state and cannot enter into any trade agreements with other countries.”

4. Hard Brexit would cost UK manufacturing £17bn/year
According to a new report from top law firm Baker McKenzie, which examines the implications of Britain defaulting to World Trade Organisation rules, a “hard Brexit” would cost Britain’s Automotive, Technology, Healthcare and Consumer Goods businesses £17bn/year. The report also questions whether, as some have commented, industries such as German car makers will push to give the UK a good Brexit deal. The report tilts towards no, as its assessment is that Britain is a less important market to Europe than Europe is to Britain. It also estimates that UK exports to five key markets, such as the US and China, need to increase by 60% to offset ‘hard Brexit’ EU export loss.

5. Monarch Airlines goes into administration
Just before its 50th anniversary, Monarch Airlines has collapsed, leaving passengers stranded across the world. Monarch chief executive Andrew Swaffield said the “root cause” of the airline’s plunging revenues was terror attacks in Egypt and Tunisia, as well as the “decimation” of the tourist trade in Turkey. The Unite union however draws a link to Brexit. “Uncertainty surrounding Brexit and the ability of UK airlines to fly freely in Europe after the UK has left the EU undoubtedly hindered Monarch getting the investment it needed to restructure and survive” Richard Corbett MEP also sees a link: “the fall in the exchange rate of the pound after Brexit referendum was a factor in its demise”

6. Transport industry welcomes calls for transitional period….
As UKTiE has been calling for a transition period from the start, we were very happy to hear Prime Minister May explicitly ask for one during her Florence Speech. PM May said that the UK will seek a “strictly time-limited” transition period that would last “around two years”. The announcement was also welcome by transport industry, including the Freight Transport Association. Pauline Bastidon, FTA’s head of European Policy said: “Her call for a transitional period, to give enough time for negotiators to conclude a trade agreement, and for authorities and businesses to adapt, is a huge relief for a logistics industry charged with ensuring that trade continues to move smoothly after Brexit”

7. … but UK and EU at odds over what that means
There seems to be some disagreement over what rules would govern during a transitional period. PM May told the Sunday Telegraph that Britain could ignore some new EU rules and regulations during the Brexit transition phase but Michel Barnier warned that there will be no agreement on a transition regime for the UK after Brexit unless it commits itself to fully respect the EU’s legal order and its regulatory and supervisory systems. A warning the European Parliament is likely to repeat this week. Barnier also reiterated that the request to have an EU transition deal will only be discussed once the UK has settled “divorce” matters, including its exit bill.

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