Brexit Bulletin: ‘Bloody Difficult’

  • Theresa May fights back against leaked reports of Juncker dinner
  • EU government officials distance themselves from Juncker’s skepticism

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The cross-channel war of words on Brexit is escalating.

British Prime Minister Theresa May on Tuesday declared that European Commission President Jean-Claude Juncker is learning she can be “bloody difficult,” after leaked details of the pair’s dinner last week alleged he was shocked by her strategy.

U.K. Prime Minister Theresa May Welcomes Ukraine President Petro Poroshenko

Theresa May

Luke MacGregor/Bloomberg

May, however, won a measure of support from several European government officials, who distanced themselves from Juncker’s apparent skepticism about the chances of a Brexit deal.

The reports of the dinner are “not helpful,” Irish government chief whip Regina Doherty said. A German official expressed unease over the leak and called it unusual.

The clash may help May’s re-election campaign by convincing voters they need her as leader rather than Labour party leader Jeremy Corbyn — that seems to be the strategy she’s pursuing to salvage something from the debacle. At the same time, it highlights the scope for misinformation and political damage during the two-year process and also shows why May will prefer to engage with capitals rather than the bloc’s more technocratic executive body.

Brexit Secretary David Davis conceded that there had been some disagreements during the dinner with Juncker, but said it hadn’t been hostile. He told ITV on Wednesday the leaked report of the dinner was “gossip and spin.”

Potentially adding fuel to the fire, the Financial Times today estimates the EU will ask the U.K. to pay a bill of €100 billion (£84 billion, $109 billion) on leaving and The Times suggests May will be barred from discussing Brexit at future meetings of EU heads of state. Davis said he hadn’t seen a number for the Brexit bill, but that the U.K. wouldn’t pay €100 billion.

Back to Business

Brussels will seek to restore an air of business to the debate on Wednesday.

The European Commission will at 11 a.m. local time formally present a recommendation to open withdrawal negotiations with the U.K on the basis of the guidelines adopted by EU’s leaders last week.

The draft directives will be more technical and detailed than the guidelines and can be revised by member-states before being signed-off by governments on May 22.

Then, negotiator Michel Barnier, who will talk to reporters, will be mandated to begin the talks, which are now set to begin after the June 8 election.

“I don’t see the position of the 27 changing very much, there is very little room for maneuver,” said Fabian Zuleeg, chief executive at the Brussels-based European Policy Centre, adding a breakdown in the talks is the likeliest outcome. 

JPMorgan Eyes Three Cities

JPMorgan Chase became the latest bank to flesh out its plans for Brexit.

In an interview in Riyadh, executive Daniel Pinto said the firm will use the “three banks we already have in Europe as anchors for our operations” as it tries to protect its business in the region once Britain leaves. That means Dublin, Frankfurt and Luxembourg.

“We will have to move hundreds of people in the short term to be ready for day one, when negotiations finish, and then we will look at the longer-term numbers,” said Pinto. “We have to plan for a scenario where there is no U.K.-EU passporting deal, and we have to move a substantial portion of our business to continue serving our European clients.”

For banks looking to flee London, the European Central Bank warned that those applying to locate in the EU not only must be well capitalized, but also have enough local staff.

Separately, London Stock Exchange Group warned against a move by the EU to limit euro clearing in its home city, saying the attempt would put investors and financial firms at risk.

Postcard from Walsall

Bloomberg’s Thomas Penny travelled to the urban sprawl of the English Midlands to report on the places where Britain’s desire to leave the EU is strongest and where May’s decision to send her country back to the ballot box less than a year later will turn out to be a master stroke — or reckless.

More than 70 percent of voters in Walsall North backed Brexit and May’s Conservative Party lost it to the opposition Labour Party by fewer than 2,000 votes in 2015.

Before Walsall North votes, there will be regional elections on Thursday that may provide pointers to what will happen in June. Eddie Buckle has compiled a series of charts to explain what’s at stake.

Brexit Bullets

  • Most people surveyed by Ipsos MORI don’t expect May to achieve her aim of cutting migration to the “tens of thousands.” Some 52 percent are against offering visas for hospitality workers such as baristas, while at least 60 percent reckon doctors, nurses, academics and computer specialists should be considered for special visas
  • Lawmakers said there needs to be a transition deal after Brexit to prevent farmers being hurt by “potentially disastrous” tariffs
  • Ireland says in preparation document that parallel Brexit talks are possible if progress is made
  • QBE Insurance Group is “well advanced” in its plans to establish a new location for its European business, chairman says
  • Spain wants to end Gibraltar’s special status on tax and customs when U.K. leaves EU, El Pais reports.

On the Markets

The pound steadied on Tuesday after its previous decline allowed U.K. manufacturing to unexpectedly grow at the fastest pace in three years.

Nomura strategists noted in a report on Tuesday that the noise surrounding the Brexit talks already seems to be priced into the pound’s value, which means it should continue to rise against the dollar, perhaps to as much as $1.37 or higher. ING said the diminishing risks of a “cliff edge” Brexit mean sterling will soon stop falling against the euro.

By contrast, Simon Derrick of Bank of New York Mellon Corp wrote that sterling “is not bulletproof” and “may now find upward progress rather harder” as attention turns to the negotiations.

Meantime, a French asset-management firm has been investing in European exporters that sell most of their products outside the bloc, thereby offering its clients an opportunity to hedge against the euro zone’s break-up.

And Finally...

Mark Twain advised never to pick a fight with people  “who buy ink by the barrel.”

Now almost a year since he was fired by May, former Chancellor of the Exchequer George Osborne is sitting in the editor’s chair at the London Evening Standard.

In Osborne’s first day in the job, the Standard’s front page declared “Brussels twists knife on Brexit” and an editorial inside described the decision to leave the EU as an “historical mistake.”

Meanwhile, the internal workings of another influential daily were laid bare as the New York Times secured access to The Sun’s offices in a bid to better understand its role in the referendum.

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