Brexit Bulletin: Final Offer?

  • The clock is ticking toward the December summit
  • Will the Irish border issue derail talks before the deadline?

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Theresa May has a week to make Europe an offer it can’t refuse.

Just as she was getting closer on the payment front, the all-but-impossible question of the Irish border has reemerged as the main obstacle. Adding to the risk of failure, the Irish prime minister, fighting to save his premiership, has become increasingly vocal in his opposition to the U.K.’s stance that a solution can be postponed.

European Council President Donald Tusk set May a deadline on Friday of Dec. 4 to put more money on the table for the divorce settlement and also come up with an answer that satisfies the Irish on how tightly their future border with the U.K.’s Northern Ireland should be controlled after the split. While neither side wants a policed border, the U.K.’s Brexit policy will make some kind of oversight inevitable. 

Part of the problem is that the EU’s vision for that future trade deal is far less ambitious than what the U.K. wants. While the U.K. seeks to keep current rules as much as possible, Europe is talking about an accord like the one Canada struck with the EU, which maintains trade barriers on products such as beef and dairy.

The worse the trade terms, the more border enforcement is needed. While Ireland wants to preserve the status quo and have an unhindered border on the island, the Northern Irish party that props up May is more worried about avoiding any barrier between Northern Ireland and mainland Britain. They reject anything that would make the enclave different from the rest of the U.K.

The EU has shown little sympathy for that view. U.K. Trade Secretary Liam Fox reiterated on Sunday the stance that the border issue can’t be settled until a trade deal is clinched.

Irish Prime Minister Leo Varadkar, who essentially wields a veto on whether Brexit talks can move on from the divorce to trade at a crunch summit next month, has also stepped up the rhetoric in recent weeks. On Friday he raised the prospect that the deadlock in separation talks will continue into 2018. He’s fighting for his own political survival, after a scandal in his government risks prompting an early election. Ireland’s Brexit stance is a sensitive matter for voters and Varadkar doesn’t want to risk being accused of allowing the two-country island to be divided.

This time next week May is due to have dinner with European Commission President Jean-Claude Juncker in what is expected to be the key event in unlocking talks after another possible round of formal negotiations this week. The pressure is on.

Scottish Conservative Party leader Ruth Davidson – a hugely popular figure in May’s party – said on Sunday that failing to break the deadlock next month would be a “setback.” The opposition Labour Party is taking a tougher line, with Brexit spokesman Keir Starmer indicating that failure could bring about a no-confidence motion in May: “If there isn’t sufficient progress this time, I think that scrutiny will become really intense and it will be about her authority.”

Brexit Latest

Downing Aerospace | Brexit risks severing the links that make the U.K. an aerospace industry hub. Few aircraft are actually built in the country, but 120,000 British aerospace jobs are fueled by supplying components and systems for planes assembled elsewhere. From tiny companies such as Boxarr Ltd. to continental corporate giants like Airbus SE, executives are worried, Bloomberg’s Matthew Campbell reports. “There are a huge number of planes flying around all over the world with lots of British kit in them, and that’s the product of these very integrated networks,” Boxarr Chairman Colin Terry says at the RAF Club in London. “We need to not take our eye off the ball.”

In Search of Productivity | Business Secretary Greg Clark says reviving Britain’s flagging productivity lies at the heart of the industrial strategy he’ll unveil on Monday. While Britain would pursue the strategy “regardless” of Brexit, the plan will take the sting out of the uncertainty sparked by the departure, Clark said in an interview with Alex Morales. The publication of the flagship policy on Monday comes as healthcare company Merck & Co. and diagnostics provider Qiagen NV say they’ll set up new research facilities in Britain. 

Office for National Statistics

Dumping U.K. Assets | European banks cut their exposure to Britain in the aftermath of the referendum, slashing their U.K. assets by $425 billion in just a year. The decline was driven by a 35 percent drop in derivatives exposures, showing European banks are preparing for the risk that the U.K. fails to reach an agreement on its future relationship with the bloc before its departure, data from the European Banking Authority shows.

Selling Out | Entrepreneurs sold their businesses in record numbers last year because of political uncertainty, the Financial Times reports. The Brexit vote and the risk of government led by Labour’s Jeremy Corbyn were among the reasons for the sales, according to a report by Barclays.

PM for Brexit? Health Secretary Jeremy Hunt is sounding out colleagues and donors about a possible leadership bid, the Sunday Times reports. Hunt has publicly switched sides on Brexit after campaigning to remain last year and is lining himself up as an alternative to Foreign Secretary Boris Johnson should Theresa May stand down, the Times says.

On the Markets | The endurance of the pound’s three-week rally against the dollar depends on whether ongoing Brexit negotiations can clear the way to discuss trade. Without much in the way of key economic data, discussions between British and EU officials could dictate sterling’s moves, Bloomberg’s Charlotte Ryan and Anooja Debnath report.

And Finally...

Maybe it won’t happen at all. Liberal Democrat Leader Vince Cable reckons the chances of Brexit being ditched are as high as 20 percent, the veteran europhile said over the weekend, prompting fury among Brexit backers.

“We may get to the middle of next year and find this is just a horrible mess and there will be a growing political mood in the country and in Parliament to find a way out,” he told Sky News. “But if it is a terrible mess and very divisive and very costly then I think people will want to reopen the question.”

Former U.K. business secretary Vince Cable.
Photographer: Chris Ratcliffe

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