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Brexit Bulletin: Open Warfare

  • Euroskeptics want Philip Hammond fired for his Brexit stance
  • Brexit legislation faces new battle in the House of Lords
TheCityUK CEO Says Need Brexit Transition as Soon as Possible

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The pressure is growing to tell Europe what the U.K. wants from Brexit, and it’s revealing just how unreconcilable the differences are within the governing party. Prime Minister Theresa May’s job is on the line, as is that of her chancellor, Philip Hammond.

By March, May needs to tell the European Union how her government sees a future relationship with its largest trading partner. And this week or next talks will start on the transition, the period of two years after Brexit. That’s why the Conservative Party is now in open warfare; the window to influence what Brexit will mean is closing. Euroskeptics fear a sellout amid signs the “soft” Brexit camp led by Hammond is winning the arguments, and the government has made a series of gestures that suggest it’s trying to show hardliners it’s at least listening.

Pro-Brexit Tories led by potential leadership candidate Jacob Rees-Mogg have made plain that they want Hammond to be fired. It’s worth remembering what Rees-Mogg stands for: He wants a clean break with the EU and its rules and indicated last week that he’d rather walk away from the bloc than abide by the transition period that businesses are crying out for. 

May, who will be in China for part of this week, is fighting to keep her job amid reports that lawmakers are frustrated by a lack of leadership. But the rebels are still too few in number to trigger a vote of no confidence, and she could well survive such a ballot. It’s not clear that the dynamics that have kept her in an impossible job since the botched election have changed significantly enough for her to be ousted.

Her woes will get worse this week with or without a leadership challenge. Her key Brexit legislation heads to the House of Lords, where peers are preparing to re-write it. Those changes seem likely to enrage the euroskeptics and make the gap between the warring factions deeper still.

Brexit Latest

French Poaching | French Foreign Minister Jean-Yves Le Drian told Japanese business leaders France would welcome companies that need to relocate from the U.K. because of Brexit. “First of all, the presence of the U.K. in the EU is finished,” he said in Tokyo. “Japanese companies must become aware of the consequences.”

Bankers Grim | Sentiment among London’s Brexit-hit bankers sank to its gloomiest depths since the 2008 financial crisis, a survey showed – a stark contrast to the bullish tone of finance executives gathered last week in Davos, Switzerland. Almost a third of firms think financial-market conditions will worsen in the next six months, according to the Confederation of British Industry poll.

Speech ‘Canceled’ | May has scrapped plans to give a third landmark Brexit speech because of the risk of cabinet infighting spilling out in to the open, The Times reported. However, May’s office said no such speech had ever been planned. 

Swivel-Eyed Old Men | In a sign of the depth of division within the government, the Telegraph reports that energy minister Claire Perry described euroskeptic Tories as “mostly elderly retired men” who represent the “swivel-eyed few.” She made the comments in a WhatsApp message to colleagues in the aftermath of the December Brexit deal, which some euroskeptics criticized as a sellout. Perry said there are “no excuses” for her comments, but that they were aimed only at those who were calling her government colleagues “traitors.”

Secret Impact Papers | Cabinet members will be shown government impact assessments of the various Brexit options in one-to-one meetings with officials this week, The Times reports. At the end of the meetings, the papers will be collected to avoid leaks of the sensitive analyses. 

Transition Threat | Officials fear a battle over accepting rules could delay a transition deal, the Financial Times reports. That comes after Brexit Secretary David Davis said on Friday the U.K. would have to find a way to avoid laws being brought in during the transition that would “run contrary to our interests and in which we have not had our say.”

Blackouts Coming? | Britain probably will risk more energy supply shortages after leaving the EU, a panel of lawmakers from the House of Lords said, as the exit will likely lead to a less efficient energy trade and higher prices.

And the Winners Are… | Lawyers and accountants are enjoying a Brexit boon, according to the Office of National Statistics. The business services sector, which includes lawyers and recruiters, as well as architects and travel agents, helped services expand 0.6 percent between October and December – the strongest performance in a year. 

On the Markets | The pound’s winning streak means it could be vulnerable this week, Charlotte Ryan reports. Sterling has gained more than 5 percent this month, hitting a post-Brexit vote high above $1.43 last Thursday, and the test now is whether it can stay at these levels. Industrial data, political news and testimony from Bank of England Governor Mark Carney all have the potential to hurt confidence in the pound, according to strategists.

Coming Up | Davis will take questions from the House of Lords EU committee at 2:35 p.m. on Monday. EU chief negotiator Michel Barnier gives a news conference at 3:30 p.m. London time after the General Affairs Council, where the bloc will formally agree its approach to the transition.

And Finally...

What would Donald do? The U.S. president had some words of advice for May this weekend on how he would be negotiating Brexit.

“Would it be the way I’d negotiate? No,” he said in an interview with ITV, referring to May’s approach to the talks. “I would have said that the European Union is not cracked up to what it’s supposed to be, and I would have taken a tougher stand in getting out.”

May and Trump in Davos on Jan. 25.
Photographer: Simon Dawson/Bloomberg

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