The Cicero Brexit Insights team is producing regular updates, comment and insight on both the broad themes and the technical detail of Brexit. We aim to give readers a clear view of the issues and challenges as they are seen in Brussels, London and Member States. This week our UK team considers developments on transitional arrangements and our EU team analyses whether Brussels may look to speed up negotiations following disappointing progress so far.

 

The last two negotiation rounds in Brussels have led to accusations that the UK team is woefully unprepared, and the feeling was encapsulated no better than the photo of David Davis and the UK team sitting in front of Michel Barnier without any notes or papers before the discussions began last month. The Government though are expected to attempt to diffuse these suggestions by publishing a number of position papers in the coming weeks. These papers would include issues such as Northern Ireland, customs agreements, goods and service arrangements, the digital economy, and data protection. If these papers are not more substantive, those domestically from across the political spectrum, and in Brussels, won’t be impressed. Furthermore, in Brussels the UK’s lack of a current position on the financial settlement continues to be a source of annoyance, and there is a growing feeling the time has come for the UK to show its hand. Reports last weekend that it would offer £36bn if the bloc agreed to start negotiating a post-Brexit trade deal were watched closely in Brussels, and was the first real signs of a number the UK was prepared to pay. However the reaction by Eurosceptic Tory MPs to these suggestions will not fill the government with confidence that a compromise can be amicably reached.

Clearly once Parliament returns, Theresa May will have a number of big decisions to make on transitional arrangements, the financial settlement, and Northern Ireland to name just a few, so as to get things moving in the negotiations. The backdrop of the Conservative Party Conference and Cabinet splits on a number of the above issues is unlikely to help. However, time continues to tick and with little still known on what the UK wants from all of the above Theresa May must now start dragging her Cabinet to some agreed positions.

When it comes to Cabinet splits, Cicero this week received global coverage of the analysis we did of where the Cabinet stands on transition arrangements. Our analysis, appearing in The Financial Times, Bloomberg, and The Daily Express argued Cabinet is now split into at least three groups over how Britain should arrange a transition period. The Chancellor Philip Hammond is leading the call for an “off the shelf” model, backed by the majority of the Cabinet, while the International Trade Secretary Liam Fox has called for a much looser transition deal with Theresa May as well as the likes of Damien Green, and David Davis trying to pull these two positions together.

Chris Hughes
Account Executive

 

Mr Barnier must be a little bit pleased to see that UK cabinet members have heeded his warning, following the second round of Brexit negotiations, that it was beginning to look less likely that come October parties would have reached the ‘sufficient progress’ milestone that will allow talks to move on to the topic of UK-EU trade relations.

With the Prime Minister being out of town on holidays, key figures on the UK scene have upped the intensity of debate and reflected on the workability of the various suggestions for a transitional arrangement for Britain. Looking ahead at the last week of August when a third meeting round of chief negotiators is scheduled to take place, Brexit Minister David Davis will want to avoid a repeat of leaving audiences with the general perception of his team being unprepared.

Citizens’ rights have reportedly now been identified as the first area where negotiations can be successful. The financial settlement and the Irish border are the other two hurdles to overcome in the short term. That is, if EU plans remain unchallenged internally and it remains convinced that its approach as set out is workable. This is something the UK has always contested, pointing at the links between EU external trade borders and the Irish border, as well as a preference on the UK side to let financial settlement depend on the shape of a transitional agreement over trade.

The latter has been a contentious issue all along, firstly because of the EU view that a new relationship can only be contemplated after a clean divorce, and secondly because the financial consequences of Brexit for the remaining EU27 are of key political significance in the Member States and therefore a potential threat to EU unity.

If nothing has changed in the EU’s negotiating philosophy, the lack of movement so far on producing a UK position paper on the financial settlement will be seen by the EU as worrying.

An interesting suggestion however reported by the Telegraph as coming from Brussels sources described the possibility of a 40bn euro Brexit bill that could double as the UK’s ticket for joining the European Economic Area during a transitional phase from March 2019. If this idea were to gain traction, it would be a somewhat significant move from the EU, accommodating the UK’s domestic political need for a deal that can be defended as reasonable, whilst preventing immediate disruption for businesses on both sides of the Channel.

While the UK spends the next two weeks signing off on a suite of position papers it hopes will help in getting Barnier to say ‘yes’ to staying on schedule for entering the next phase of talks, the EU may well be busy testing the ‘exit bill for market entry’ compromise among its 27 members.

Antonet Abbink

Account Manager