Brexit Update – A collection of recent news (11 – 17 November 2017)

November 17, 2017

Theresa May’s hopes of negotiating a “deep and special” trading relationship with the EU have been dealt a fresh blow by leaked documents which emphasise that only a basic free trade deal similar to that struck with Canada will be offered. The ‘precise translation’ of the commitments made by Theresa May in her Florence speech on the financial settlement is ‘essential’ to reach sufficient progress in December, the EU’s chief Brexit negotiator Michel Barnier has said. This is despite the UK’s Brexit Secretary David Davis, in a more optimistic tone, saying ‘substantial technical progress’ had been made across all the issues that need to be addressed. The Irish government has said Brexit trade deal talks should not proceed until there is a firm commitment to preventing a “hard” Irish border. The Netherlands could be one of the hardest-hit EU countries if the UK leaves the bloc without an agreement. Britain’s banking industry has called for a post-Brexit trade deal to allow financial services professionals to continue travelling freely across Europe on assignments of up to three years. Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said in a post on Twitter that many corporate executives want to see a second vote on the U.K.’s decision to exit the European Union.

Slow progress in the talks with the European Union has unsettled businesses and drawn warnings that unless a transition is agreed soon, some may begin activating Brexit contingency plans – which may include moving out of Britain. The European Central Bank demanded changes in banks’ plans for relocating from the UK, saying some are still seeking to set up “letter box” companies in the euro area with no real independence. EU countries will decide on Nov. 20 where the London-based European Medicines Agency and European Banking Authority will move after Brexit, slated for March 2019. US investment bank JP Morgan has started informing its staff whether or not they will be relocating to the EU ahead of Brexit. The firm—which employs 16,000 people in the UK—has previously warned that between 1,000 and 4,000 roles could go, and said it is planning to grow its operations in Ireland, Germany and Luxembourg.

British leaders agreed to allow Parliament to debate, amend and vote on the terms of its exit from the EU, in a concession to rebellious lawmakers who have demanded more power over the process. David Davis is said to be furious at moves by Boris Johnson and Michael Gove to team up on Brexit and will resist their attempts to interfere in discussions with the EU. The UK Labour Party accused Theresa May of lacking the support within her Conservative Party to deliver a Brexit that will protect jobs, offering her a cross-party deal that will only add to pressure on the embattled prime minister. May is unlikely to welcome Labour’s offer, which highlights the fragility of her position.

Halving the number of European Union immigrants to the UK would cost every Briton only £60 in lost GDP by 2030, according to analysis by PWC. Industries such as construction, food processing and hospitality would be hit hard, as would London, but the aggregate impact for most Britons over more than a decade would be small. A report from the Royal Institution of Chartered Surveyors shows that workloads in UK construction and infrastructure continued to rise in Q3 2017, with 22% more respondents seeing a rise in workloads of the quarter, with a steady pace of growth. While activity remains steady, however, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decision. The U.K.’s $50 billion chemicals industry is at risk of withering away if Brexit isn’t handled properly, according to an industry expert.

Inflation in the UK remained at a five-year high in October, with consumer prices rising by 3% compared with the same month last year. The reading slightly undershot the 3.1% forecast by analysts. The pound fell after the release of the data. British workers are set to receive one of the lowest wage rises in Europe next year, as rising inflation continues to bite into spending power.

Important Dates Ahead

  • October-December 2017: divorce principles should be agreed
  • 14/15 November 2017: Brexit legislation to be debated in Parliament
  • 20 November 2017: EU Member States decide where EMA and EBA will move after Brexit
  • 22 November 2017: Autumn Budget
  • December 2017: EU Council meeting to re-assess the progress of the Brexit negotiations and whether second stage of negotiations can commence
  • October 2018: Bernier’s deadline to agree exit deal and ratification process should begin
  • 29 March 2019: Brexit negotiations end and UK formally exits the EU
  • 30 March 2019 – December 2020: Transitional Period (TBC)