Brexit Bulletin: How to Treat Citizens

  • May faces first test in Brussels over rights of U.K. and EU citizens
  • Banks firm up contingency plans for moving staff away from London

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Prime Minister Theresa May travels to Brussels on Thursday for potentially the first row of the Brexit negotiations.

May is planning to talk her — for now — fellow European Union leaders through her approach to treating their citizens living in the U.K. after Britain leaves the bloc.

Theresa May leaves 10 Downing Street on June 21.
Photographer: Simon Dawson/Bloomberg

“It’s an early test,” said Jonathan Portes, professor of economics and public policy at King’s College London. “If we can’t get a sellable deal on this issue, which is less problematic than others, then we might be in trouble.”

The U.K.’s stance on the rights of an estimated 4.5 million European and British nationals living in each others’ countries is expected to fall short of the EU’s expectations, officials in Brussels said.

Obstacles to an agreement include differences over what the rights are, which citizens get to enjoy them and whether Europe’s top court will have the power to enforce them. May must find a middle way between satisfying EU governments without running into opposition from euroskeptics at home.

While officials welcomed the calm start to negotiations on Monday, EU diplomats are expressing pessimism that the U.K. will agree a deal before it leaves the bloc. One senior official close to the talks predicted the collapse of negotiations at some point because of what he described as the U.K.’s incapacity to be realistic.

Meantime, French President Emmanuel Macron told newspapers that “pragmatism will determine our new relationship” with Britain although it’s hard to reverse Brexit.

Scottish Conundrum

A new layer of complexity was potentially applied to the Brexit process on Wednesday as May suggested lawmakers in Scotland could be given a separate vote on her Brexit legislation.

May’s team are in talks with their counterparts in Scotland over whether the Edinburgh parliament will be legally required to give its consent to the so-called Repeal Bill, which paves the way for Brexit. The bill will overturn and then replicate more than 80,000 pieces of EU law that apply across Scotland as well as England, Wales and Northern Ireland.

Scotland has its own powers of self-government through the Scottish Parliament in Edinburgh. This means the local Edinburgh parliament could be required to pass a motion giving its formal consent to the U.K.-wide parliament in London to take the final decision on the bill.

The Scottish National Party and Scottish Greens, which oppose Brexit, have a majority in the semi-autonomous assembly in Edinburgh.

The announcement came hours after May’s government listed its Brexit-heavy legislative program for the next two years. Labour and Liberal Democrat lawmakers have already said they will seek to amend the legislation and peers in the House of Lords could also try to block it.

For more on the no longer “great” repeal bill, see our QuickTake Q&A.

Banks Execute Plans

Banks continue to firm up their contingency plans for shifting staff from London.

JPMorgan Chase is scouting for additional office space in Dublin and is also weighing occupying property in Amsterdam after the Brexit vote, said people with knowledge of the matter. The U.S.’s largest bank may lease or acquire about 100,000 square feet (9,300 square meters) of extra office space in the Irish capital.

Nomura has picked Frankfurt as the headquarters for its European Union operations after the U.K. leaves the bloc, people with knowledge of the matter said. Japan’s biggest brokerage will start preparations this month to form a base in the German financial center, one of the people said. It will seek regulatory approval and find office space before transferring fewer than 100 employees from London to the city, according to the person.

Deutsche Bank Chief Executive Officer John Cryan complained Brexit is causing tremendous uncertainty, while Citigroup strategist Tina Fordham said for “the first time” that there may be a second referendum on the final Brexit package. “Public opinion is turning and it’s increasingly difficult for Whitehall to know what people want,” she said.

The Economy One Year On

When Britons voted to leave the EU a year ago, the managing director of PP Control & Automation, which makes electrical-control systems, was devastated.

The feeling didn’t last long, Bloomberg’s Jill Ward and Lucy Meakin report. The company broke ground mere weeks after the vote on a project to increase its production space in the West Midlands. It’s part of a plan to double sales over the next four years and push into more markets.

“When our back’s against the wall, it’s like the British bulldog spirit suddenly appears,” says Tony Hague, PP’s managing director. “And long may it continue, because I think we’re going to need it over the next few years.”

That determination is helping support the U.K. economy as Brexit proves to be a drawn-out affair. Many firms are continuing with expansion plans, cutting costs and managing a weakening currency. Their actions, along with rampant consumer spending in late 2016, helped the economy to confound forecasts of a sharp slowdown following the referendum.

Brexit in Brief

  • The U.K. looks like a “poor value” and Coutts has sold gilts at the longer end of the curve, according to chief investment officer Alan Higgins
  • Bank of England Chief Economist Andy Haldane acknowledged that the central bank’s expectation for a smooth Brexit is a “strong assumption” although he also signaled he might soon vote to raise interest rates
  • The EU envisages returning only the U.K.’s paid-in capital in the European Investment Bank as part of Brexit, excluding any share of the bank’s profits, Der Spiegel magazine says
  • Tesco Chairman John Allan will say an immigrant cap is “bad for everyone,” according to The Times
  • EU negotiators must seek an agreement with the U.K. that prevents “regulatory dumping” in financial services once the U.K. regains power to change regulation standards, says German finance ministry
  • Politico updates its Brexit power matrix
  • The U.K. in a Changing Europe think tank reviews how Brexit looks one year on
  • Britain’s advertising market is slowing down, according to a forecast from media buyer GroupM
  • Deloitte study to be published today says 18,000 German auto industry jobs are threatened in hard Brexit, reports Sueddeutsche Zeitung.

And Finally…

The Wimbledon tennis tournament is just around the corner and fans in future years may find themselves choking on their strawberries and cream, the event’s traditional fare.

That’s because a potential seasonal labor shortage resulting from Brexit could cut supply of strawberries in the U.K. and raise prices by up to 50 percent, according to a report commissioned by a trade body representing the U.K.’s berry industry.

Soft fruit growers employ 29,000 seasonal workers, or about one-third of the U.K.’s total horticulture industry workers.

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