Brexit Bulletin: Getting to Yes

  • Both sides start getting serious ahead of the December deadline
  • The border between Ireland and Northern Ireland could scupper the deal

Blackford Says Brexit Transition Deal Offers Opportunity

Sign up to receive the Brexit Bulletin in your inbox, and follow @Brexit on Twitter.

Germany wants a breakthrough, Theresa May is at least ready to improve her offer on the divorce bill and a senior European official puts the chances of success as high as 75 percent. 

As a crunch December deadline approaches, Brexit negotiating teams are in constant contact and May is planning more diplomacy. She wants to make sure she gets something in return when she lays out a better offer on what the U.K. will pay in order to leave the bloc. The U.K. prime minister meets European Union President Donald Tusk on Friday and will push the case that both sides need to “step forward together.” She may also see German Chancellor Angela Merkel, who, according to a government official, is keen for a deal even as she’s busy at home fighting for her  political survival.

The U.K. is cutting it close, however: EU officials have said the new offer on the bill, for costs including pension and EU budget obligations, must be made in good time rather than just before the summit. The FT reports that negotiators are aiming to complete a “stock-taking” process by Dec. 1, and will draft a joint EU-U.K. text. May is having dinner with EU President Jean-Claude Juncker on Dec. 4 and could present the offer then, the paper says.

Theresa May at Downing Street.
Photographer: Chris J. Ratcliffe/Bloomberg

The EU is also concerned about May’s future, according to a person familiar with the discussions. The bloc doesn’t want to approve an offer on the divorce bill only to find the embattled May replaced by someone with different ideas. Member countries may get some comfort from the fact that May’s Cabinet colleagues have remained largely silent on the prospect of increasing the settlement; the voices of opposition are coming from backbenchers rather than key ministers.

If the EU fails to give May something in return for a better offer, it could spark exactly the kind of crisis that could destabilize her. EU leaders  don't want to damage May domestically, which might encourage them to help with the choreography once they are satisfied with the bill. EU ambassadors meet today in Brussels to discuss the chances of progress in December.  

Just as the U.K. is moving forward on the bill, the future of the border between Northern Ireland and Ireland – an EU member state – has emerged as a greater threat to the talks. The EU has adopted Ireland’s position favoring an open border, and chief EU negotiator Michel Barnier had some stern words for the U.K. on Monday. His U.K. counterpart, David Davis, hit back on Tuesday, saying the issue can’t be solved until talks move on to trade.

Ireland wants an open border on the island, for political and economic reasons. The U.K., and the Northern Irish party that props up May’s government, don’t want a border cutting the north off from mainland Britain. But if the U.K. leaves the customs union and single market there's got to be a policed border somewhere – and the 310-mile line that bisects the island will become the U.K.’s only international land border with the EU.

Charles Grant, director of the U.K.-based Center for European Reform, says “the issue of the Irish border is much more likely to scupper a deal on Brexit in December than money or citizens’ rights.” In a Twitter post, he quoted an unnamed EU ambassador as saying there was no solution that could satisfy both the U.K. and Ireland. A U.K. spokesman told reporters on Tuesday the government is working on a “unique solution” to the Irish border issue.

Still, the Irish have a dilemma: while they want to avoid a border, and have the EU’s full backing to push for that, they also want talks to move on to trade. They have the most to lose, after the U.K., from a no-deal scenario.

Brexit Latest

Scraping Through |  May’s flagship piece of Brexit legislation continued its journey through Parliament unamended after the government offered concessions to Conservative rebels over human rights. Tuesday saw the third of eight days of line-by-line scrutiny in the House of Commons, with the most contentious issues left for the (as yet unscheduled) final days. Much debate focused around a clause that repealed the EU’s Charter of Fundamental Rights, something opposed by the Labour Party and some Tories. Former Chancellor of the Exchequer Ken Clarke ridiculed the idea. “Why is the government going to such lengths to get rid of it as the one specific change in this bill?” he asked. “Presumably it’s because it’s got the words ‘European’ and ‘rights’ in it.”

Crown Jewels to China | The design and manufacture of Airbus wings – the “crown jewels” of U.K. aerospace – is at risk because of Brexit. Airbus’s Chinese arm is clamoring to take the work from the U.K. as Brexit threatens to blunt the country’s competitive edge, Airbus U.K. Senior Vice President Katherine Bennett told British lawmakers Tuesday. Wings are exported to the rest of the EU (using unusual-looking ‘Beluga’ transport planes, below) so would be affected by any new customs costs. “We do build wings in China now, and believe you me they’re knocking at the door as a result of the situation that we’re in in this country,” Bennett said.

An Airbus Beluga transporter takes off from the Airbus factory in Broughton, U.K.
Photographer: Paul Thomas/Bloomberg

Justice for All | The role of the European Court of Justice after Brexit came back on the agenda as Immigration Minister Brandon Lewis said it was still to be negotiated. He had been asked whether the rights of EU residents in the U.K. would be overseen by the court. May’s spokesman soon set him straight, telling reporters that the role of the court – which is taboo for Brexit backers – would end after the transition period.

Snowball Effect | Half of companies are making contingency plans, and about 1 in 10 businesses have implemented them, Institute of Directors chief Stephen Martin said on Tuesday. That number will “snowball” without knowledge of what is going to happen in March 2019, he said, calling for a transitional deal to be put in place before the start of the next financial year in April.

On the Markets | The pound strengthened to $1.3257 in early trading. All eyes are on Chancellor of the Exchequer Philip Hammond, who presents the budget shortly after noon on Wednesday.

And Finally...

British readers, brace yourselves: Passports made in the year Britain leaves the bloc may be printed in the EU, the Telegraph reports.

The Home Office’s contract for passport printing and design comes up for renewal in 2019, and the new contract will last for 10 years. Under current rules, it was tendered across the EU, the paper says. Martin Sutherland, chief executive of money and security printing company De La Rue, said his business was on a shortlist of three bidders for the contract. Two other unnamed European companies are also on the list, he said.

“It would be a shame if in the year of Brexit the contract was lost and the British passport was not printed by a British company,” Sutherland said.

A current British passport.
Photographer: Matt Cardy/Getty Images Europe

For more on Brexit follow Bloomberg on Twitter, Facebook and Instagram

Before it’s here, the Brexit Bulletin is on the Bloomberg Terminal.

    Quotes from this Article
    Before it's here, it's on the Bloomberg Terminal.