UK Transport and Brexit News & Views No. 48

After a very busy week, progress onto Phase 2 has finally been agreed by the European Council following recommendations of progress by the European Commission and the European Parliament. As we reported last week, we are looking at a Phase 2 that consists primarily of talks on legalizing the divorce issues and setting the foundations for a transition. This will be followed by a subsequent phase once the European Council releases its future relationship guidelines in March. However, with Donald Tusk admitting that exploratory contacts with the UK will be started now to scope out a future relationship, this has to be seen as trade negotiations in all but name.

We had a chance to exchange views regarding the progress that had been made in the Brexit negotiations with the European Commission’s TF50. We heard about how there would be three overlapping processes starting in January, further discussion of the withdrawal agreement, discussion about the transition and exploratory discussion about the future relationship. This leads us to firmly believe that UK transport needs to hit the ground running in the New Year to get their thoughts heard during what will now be an inevitably fast-moving process to get a future relationship framework in place before the UK leaves the EU.

After a busy 2017, we look forward to seeing what 2018 has in store for Brexit and transport, and as the New Year rolls in we will need to be ready to fight for the clarity the sector needs.

If you would like our analysis on what the progress to Phase 2 of the Brexit negotiations means then please let us know.
 

1. U.K. Think Tank Claims to Have Solved the Brexit Conundrum
A U.K. think tank, the Institute for Public Policy Research, has proposed a Brexit model that it says could satisfy both the desire to regain sovereignty from the European Union and the need to keep access to its markets. The solution, is to set up a new customs union with the EU, within which the U.K. could choose to diverge from European rules in specific areas. It would also take Britain out of the jurisdiction of the European Court of Justice, replacing it with a joint U.K.-EU court. But it would allow borderless trade to continue between the U.K. and the EU. This solution claims to allow for the benefits of the Single Market to be enjoyed whilst also allowing for divergence from EU rules over time. The BBC also covered this solution as something that would create a shared market which would fall under the jurisdiction of a new UK surveillance authority and UK Court of Justice, which would include representatives from both the UK and the EU. Billed as a “sensible” deal, the solution will be presented to David Davis on Tuesday. This seems to fall in line with the UK Government’s stated desire in their paper on future customs arrangements to seek new customs arrangements with the EU which “facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows the UK to forge new trade relationships with its partners in Europe and around the world”.

2. The Price is Right?
Research from the Financial Times, conducted 18 months on from the Brexit referendum and with 15 months of UK data at its disposal, has shown that the value of the UK’s output is now around 0.9% lower than if the the country had decided to stay in the EU. This equates to almost £350m a week lost to the British economy. The research shows that UK economic growth has slowed to 1.5% at a time when the global economy is strengthening. The article states that “in October, the International Monetary Fund highlighted Britain as a ‘notable exception’ to an improving global economic outlook”. This is adding onto what the OECD, the Paris-based club of mostly rich nations, has said about “the ongoing slowdown in the economy induced by Brexit”. Although it is important to note that the full economic impact of Brexit will not be known until we know more about the future relationship between the UK and the EU.

3. Theresa May to pitch status quo Brexit transition to parliament
Prime Minister Theresa May will pitch her plan for a Brexit transition period with unchanged access to European Union markets when she briefs MPs on Monday about her latest negotiating trip to Brussels. Theresa May will set out the framework of a time-limited implementation period designed to smooth Britain’s EU exit and provide clarity for businesses and citizens. However, despite the fact that this has been designed to provide clarity to businesses, the article highlights that there may be clarity within the Conservative Party over whether a status-quo transition, something hinted at by Philip Hammond over the weekend, will be accepted. Theresa May will also be insisting that the UK will try to sign new trade deals during the implementation period.

4. Theresa May to meet with Brexit “war cabinet” ahead of full cabinet meeting on Tuesday to discuss the Brexit ‘end state’
Today’s meeting of the Brexit “war cabinet” is the is the first time top ministers will discuss the final relationship the UK will have with the EU after the Brexit transition period, and will be followed by a series of further meetings and a hoped-for agreed position early in the new year. One government source told the Independent that “process needs to bottom out, in the end what we want to keep the same as the EU, where we want to diverge and what we’re willing to give up. There will be a broad consensus arching over that, which people can stick to publicly, but the things that need ironing out are the details of where we eventually diverge with Europe and to what extent.” The cabinet remains divided on the Brexit issue, however, with Philip Hammond, backed by Home Secretary Amber Rudd and Business Secretary Greg Clark, are advocating a position close to existing EU systems in order to maximise the economic benefits of the single market. On the other side, Boris Johnson, Environment Secretary Michael Gove, International Trade Secretary Liam Fox and Brexit Secretary David Davis are pushing for a tilt towards global markets. Are you worried about the various Brexit possibilities? Contact us to find out more.

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. The view from Paris: Paris trying to attract banks from London
An article from Le Figaro describes how Paris is trying to improve its business outlook for international banks looking to leave the City of London due to Brexit. One of the things being changed, as per the article, is the lowering of social charges on the high salaries of inpatriates. The entourage of Bruno Le Maire, France’s Minister of the Economy, has said that the objective is to be competitive with Germany. This points to the continued reports of Germany and France fighting to be seen as the next base for banks following Brexit.

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

  • 29 March 2017 – A50 triggered.
  • 5 April 2017 – European Parliament adopted Brexit guidelines.
  • 22 May 2017 – Brexit negotiating directives approved by Council.
  • 19 June 2017 –  Negotiations formally began.
  • TBC 2018 – UKTiE  & Norton Rose Fulbright Summit: Customs arrangements after Brexit.
  • 30 September 2018 – Date by which EU’s chief Brexit negotiator, Michel Barnier, wants to conclude the terms of Britain’s exit from the Union.
  • 30 March 2019 – Britain formally exits the EU, following ratification of Brexit by all other member states and the European Parliament.
  • June 2019 – European Parliament election.
Mark Watts
Co-ordinator
UK transport in Europe (UKTiE)
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