Brexit Bulletin: Fight for the Future

  • Theresa May's Cabinet will start setting out its vision for Brexit
  • Trade deal and transition period still divide U.K. and EU
Businesses Risk Double Brexit Transition, Says French

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This is the week when the hard decisions begin. Eighteen months after the referendum, Theresa May’s Cabinet will start hashing out what it really wants Brexit to look like, and what it’s prepared to sacrifice to get it.

The infighting, once again, has gone public. Foreign Secretary Boris Johnson has promised to set out his vision for a “liberal” Brexit this week, one that breaks free from European Union laws and avoids Britain being what he calls a “vassal state” of Brussels. EU chief negotiator Michel Barnier reminded Britons over the weekend what the cost of such freedom could be: losing access to the market of its biggest trading partner.

Michel Barnier, chief negotiator for the European Union.
Photographer: Dario Pignatelli/Bloomberg

The Cabinet – still bitterly divided – meets on Tuesday. On Monday, a smaller panel of key ministers will discuss the kind of trade deal Britain will seek from the EU when talks on the outline begin next year. The EU suggests that a deal like the one it offered Canada would be suitable because it would allow the U.K. to stick to its red lines of controlling migration and keeping EU judges out of decisions that affect the U.K.

That could harm trade in goods and would be particularly damaging for the services that make up most of the British economy. May herself has said it wouldn’t be good enough. But if the U.K. tries to keep close to EU rules in order to keep access to the European market of 446 million people, it will be following rules it has no say in making. That would limit its ability to do free-trade accords with other countries, which has been a key part of the pro-Brexit campaign’s narrative. 

As for the transition period, which businesses want to nail down as soon as possible, May will make it clear on Monday that she’s not ready to accept the off-the-shelf solution proposed by the EU. She wants to register migrants from the EU coming in, which could be seen as a breach of the EU principle of free movement of people. And she wants to start trade talks with other countries during the transition.

Still, both sides are eager to get the transition period sorted out, and the needs of businesses are likely to weigh on policy makers. As much time as possible will be needed for the trickier matter of trade talks: The parties need to get the outline deal sketched out before the deadline of October next year. While the U.K. decides what it wants, the EU is clear what its opening position will be.

“They have to realize there won’t be any cherry picking,” Barnier said. “We won’t mix up the various scenarios to create a specific one and accommodate their wishes, mixing, for instance, the advantages of the Norwegian model, member of the single market, with the simple requirements of the Canadian one. No way. They have to face the consequences of their own decision.”

ICYMI: EU Leaders and May Are Now Best Friends and That Is a Problem

Brexit Latest

Squaring the Circle | A U.K. think tank has proposed a model that it says could satisfy both the desire to regain sovereignty and the need to keep access to EU markets. The Institute for Public Policy Research proposes setting up a new customs union with the EU, within which the U.K. could choose to diverge from European rules in specific areas. It would also take Britain out of the jurisdiction of the European Court of Justice, replacing it with a joint U.K.-EU court. The IPPR, which identifies itself as a “progressive” think tank, could end up shaping opposition thinking – which is still unclear on Brexit – more than the government’s.  Peter Mandelson, one of the architects of Tony Blair’s New Labour project, also weighed in over the weekend, writing in the Financial Times that Labour must embrace a policy of remaining in the single market and customs union to ensure a “jobs-first” Brexit.

Remain Ahead? | A poll shows that Britons now want to stay in the EU by a margin of 10 percentage points, according to the Independent. The  survey by BMG Research showed 51 percent now back remaining in the union, while 41 percent want Brexit, the biggest lead since 2016.

Averting Defeat | May has been thrown a lifeline that could see her avoid another defeat in Parliament this week. After losing a vote last week over her Brexit bill, Tory lawmakers have proposed a new amendment that could avoid a repeat. The issue is the controversial one of setting the date of Brexit in law. The proposed fudge is that, while the departure date would still be written into the bill, ministers would also get the power to change it, with Parliamentary approval.

Rebel Alliance | Tory rebels are urging May to reach out to Labour lawmakers and form an alliance to push through a soft Brexit, the Guardian reports.

May, Please Stay | After months of reports that she could be “gone by Christmas,” May is now being urged to hang around until 2021 to avoid a bloody internal battle before trade talks with the EU are complete, the Times reports.

On the Markets | The pound will be vulnerable this week to the noises coming from May’s Cabinet, writes John Ainger. “These are going to be the things that are very dominant for sterling –  whether or not there’s going to be more tension in May’s government, whether or not there’ll be tensions with the EU,” said Jane Foley, head of foreign-exchange strategy at Rabobank International in London. The pound, which fell on Friday, edged higher on Monday to $1.3342 in early trading.

And Finally...

Goldman Sachs CEO Lloyd Blankfein weighed into the Brexit debate again, this time not with enigmatic praise for rival European cities but to retweet the Independent poll showing Remain was back in the lead.

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