Brexit Update – A collection of recent news (16 – 22 September 2017)
September 22, 2017
Sterling fell as May delivered her Florence Brexit speech, before paring those losses as the Prime Minister unveiled limited details of a possible implementation phase after March 2019. May called for a transitional period of around two years after Brexit. The Prime Minister offered no precise details, and certainly didn’t suggest an “exit bill” figure. The status quo in respect of ECJ, the 4 freedoms and budgetary contributions will be preserved during this period. And she said that where there’s uncertainty about EU law, UK courts should be able to take into account judgements of the ECJ. May asked for a different agreement than what EU negotiated with Canada and EEA – former because of restrictions on market access and latter because of lack of control on the EU’s decision making process. According to reports May’s speech is unlikely to get EU to move on to talks on the future relationship. Final deal looks more like a CETA plus, according to reports. Also May stated that the rights of EU citizens will be guaranteed post Brexit.
Michael Bernier reiterated that the EU’s priority is to protect the rights of citizens and that May’s statements on this issue are a step forward but they must now be translated into precise negotiating position of the UK gov. Philip Hammond’s reluctance to “mention the positives” of Brexit risks Britain getting a bad deal, Theresa May’s former chief of staff Nick Timothy has said.
David Mundell, the Secretary of State for Scotland, has spoken of the need to avoid ‘internal trade barriers’ within the UK following Brexit. Speaking during a trade visit to Paraguay, Mundell emphasised the need for common UK-wide frameworks. He said he was not prepared to see barriers to trade emerge within the UK, as it would be ‘extremely damaging’ for Scottish firms and for businesses across the UK. The UK government has warned Scotland’s First Minister that she will not get all of the devolved EU powers she has called for in return for backing the Brexit Bill. Damian Green, the First Secretary of State, said some powers reclaimed from Brussels would be devolved but the government would ‘do nothing that risks undermining the benefits’ of the UK’s internal market.
British business leaders urged Prime Minister Theresa May to seek a three-year transitional period after Brexit, warning failure to secure more time would jeopardize “our collective prosperity.” According to reports the CBI holds that the top priority is to open talks on a “status quo” transition for business, lasting two to three years. That will clear a path to discussing trade between the UK and the rest of the EU, worth well over €600bn (£528bn) a year.
Britain is set to be the slowest growing member of the Group of Seven industrialised countries next year, according to new forecasts by the OECD, which raised its targets for Italy, France, Germany and Japan both this year and next. Optimism among small UK businesses has fallen to the lowest level since the aftermath of the Brexit vote and a record number of entrepreneurs now expect to downsize or sell their company amid ‘unprecedented political and economic uncertainty,’ according to a survey by the Federation of Small Businesses.
The Association for Financial Markets in Europe, a bank lobby group, has appointed a regulatory specialist to lead its new Frankfurt office, as its members prepare to relocate to the German city ahead of the UK’s exit from the EU. Mark Carney reiterated the Bank of England’s message that rates will need to rise within months to keep a lid on price growth. The BOE Governor also warned that Brexit means the UK can expect faster inflation in the years ahead as Britain reorients itself towards new markets and away from the EU. The UK government proposed that London and Brussels sign a new treaty to ensure cooperation on security and law enforcement after Britain leaves the European Union.
According to reports, the majority of asset managers expect allocations to their UK products to hold up over the next year despite Brexit challenges, according to reports. The most senior civil servant at the department responsible for coordinating the UK’s departure from the European Union, Oliver Robbins, has become the latest figure to leave the department. Applications for British citizenship from the EU’s ‘original’ 14 member countries has tripled since the year before the Brexit referendum, according to Home Office data.
On another note, European Union finance ministers expressed cautious support to pursue new and tougher tax rules for technology giants like Facebook and Alphabet’s Google (i.e. taxation of digital services). Though they stressed it would be necessary to find a permanent, global solution that includes the U.S. Also, the Financial Conduct Authority said the debt accumulated by Britain’s most vulnerable is unsustainable, and called for greater oversight, particularly as interest rates are expected to rise. The UK has threatened to withhold tens of millions of pounds to the UN after characterising the body as bloated and disorganised. UK banks and building societies will be able to carry out immigration checks on 70 million accounts from January 2018 as part of Theresa May’s plan to create a ‘hostile environment’ for illegal immigrants.
Important Dates Ahead
- Week of 25 September 2017: commencement of round 4 UK-EU negotiations
- October 1-4 2017: Conservative party conference
- week of 9 October 2017: EU-UK round 5 of negotiations
- 19-20 October: EU decides if sufficient progress has been made to move to next phase
- October-December 2017: divorce principles agreed
- October 2018: Bernier’s deadline to agree exit deal and ratification process begins
- 29 March 2019: Brexit negotiations end and UK formally exits the EU