Summer’s Over

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Posted on August 28, 2017

The UK and EU are heading back to the negotiating table. Whilst the UK has already published some of its ‘position papers’ on a range of issues, including looking at a transition arrangement over a two to three year period following March 2019 when the UK formally leaves the EU, the summer months have yet to provide much desired clarity or certainty on when there will be a breakthrough and the talks will move to detail and substantive agreement. This may well be a few months away.

The three major issues between both sides remain to be agreed. Firstly, there has been little progress on the Irish border. The Irish Government have made it clear that there cannot be a hard border between the Irish Republic and Northern Ireland and that people should be able to move freely between the two. The UK Government knows that this is a major sticking point, and is looking at the Irish common travel area which allows Irish citizens the ability to freely move into/out of the UK. On the second issue of the rights of UK and EU nationals post-Brexit, there appears to have been some progress with both sides now closer to an agreement. The role of the European Court of Justice in ensuring EU citizens rights are protected, has been a major sticking point, with Brexit purists clear that the ECJ should have no influence in the UK. Thirdly, the ‘divorce bill’ for legal UK financial commitments remains contentious. The UK accepts it has legal commitments, but the actual amount the UK will pay is to be decided. The EU has put pressure on the UK for all three issues to be decided as part of unstitching the UK’s membership before a future relationship, including the trading arrangement, can be discussed.

Having your cake and eating it too.

Whilst the UK Government grapples with the complexity of untying 40 years of membership, there is evidence that the economic price is now starting to be paid. The UK economy is slowing and the trade deficit is climbing as exports fall. The expectation was that UK exports would be more competitive, but the increase in UK imports has easily countered this. The UK is a net importing country and Sterling has continued to slump with more expected losses on the horizon. Pressure is now being put on the UK Government by UK business to achieve a transition period rather than a cliff edge of the March 2019 departure from the customs union. The UK Government has moved from ’no deal is better than a bad deal’ to the wish for a transition period that will allow the UK to freely start formal trade negotiations with other markets including the US, India, Canada etc.

Labour party move?

The Opposition Labour Party, whose Brexit strategy lacked clarity have now come out and stated that they want to see the UK remain in the ’single market’ as the ‘least worse option’ for both jobs and the economy. This would of course include free movement of people, goods, services and capital. This is a risky position for them to take, but they believe the mood has changed from one of support for a hard Brexit to a more pragmatic strategy following the disastrous June general election. They also know that they have support from some Tory voters and MPs for this position.

Immigration and emigration

Immigration and free movement was one of the central reasons why the UK voted to leave the EU. Since the Referendum vote in June 2016, net immigration is down and a reported 122,000 EU citizens have left the UK over the last year to March 2017. Why? It’s a combination of a number of factors. Firstly, some EU nationals no longer feel as welcome in what was a tolerant welcoming country. Secondly, there remains uncertainty around EU nationals rights and thirdly there has been a marked pick up in the Eurozone’e economy. Companies too, including financial and other services have started moving parts of their operations into the Eurozone, particularly from London. The Institute of Directors has raised concerns about the possibility of ’acute labour shortage’ in vital sectors. There is now also evidence of Brits leaving the UK, with a reported 100,000 having left for a variety of reasons since the Referendum.

So where now?

The expectation is that during the autumn, the UK will be able to progress with the three EU demands, before the future relationship is discussed. But no one underestimates the complexity of this as well as the understanding that all EU member states will have to sign off on the whole agreement. All in just over 18 months when the UK will leave the EU.

Photo by Thomas Kelley on Unsplash

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