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 assesses the implications of Theresa May’s Florence speech and the EU team analyses how the speech was received in Europe. 

After her speech in Florence last Friday, Theresa May might have just managed to keep her cabinet together but she knows there will be bigger tests to come at the Conservative Party Conference this weekend. Many Brexiteers on her backbenches, and in the grassroots, will be uneasy about elements of the position the Prime Minister laid out in her speech, and while she has managed to keep the likes of Boris Johnson and Liam Fox temporarily on side, for others more convincing and reassuring will be necessary.

The speech set out proposals for a ‘status quo’ transition period of around two years, in which time the UK will continue to pay into the EU budget and in return still have ‘full market access’, providing some much-needed certainty for business. However, May’s careful balancing act of needing to reassure ardent Leavers that Brexit will happen was constant throughout her speech. Her confirmation the UK will (eventually) leave the single market and customs union, and that the UK will not seek an EEA arrangement means much of the speech remained consistent with the direction of travel laid out in the Lancaster House speech in January. Therefore, the Prime Minister’s problems now lie in two areas. Firstly, how patient and accommodating Brexiteers will be to her transition proposals. An implementation period that the Prime Minister has suggested would likely mean keeping freedom of movement, and remaining under the jurisdiction of the ECJ, until 2021, issues that will be hard to swallow for some Brexiteers. Secondly, although the Chancellor and business might have won the argument on calling for a standstill transition, many in the business community will argue that with little changing in the overall picture of a future partnership agreement, the transition is simply a ‘postponed cliff-edge’ scenario. May will have to continue managing this balancing act extremely carefully.

While not giving much away regarding the UK’s future relationship with the EU, the Prime Minister’s speech did provide much needed clarity on the type of transition the Government will seek. May attempted, in part, to also try and break the current deadlock on the first phase of the negotiations. Proposals such as those indicating that UK courts will continue to acknowledge European Court of Justice (ECJ) precedent in relation to EU nationals, as well as a confirmation that the UK will continue paying into the EU Budget during any implementation period, is evidence of this. However, while the speech was an important one, there is still much more clarity needed if the UK is to make significant headway in the negotiations, and quickly, if it wants to move to the second phase of negotiations before the new year.

Chris Huges

Account Executive

 

Theresa May’s speech in Florence received a mixed response from politicians and officials in Europe. What may be considered as a substantial offer in the UK is seen as a more modest set of proposals on the continent. A “status quo” transition limited to two years was always the standard implementation model under consideration in Brussels, while compromises on the financial settlement and ECJ jurisdiction fall short of the solutions hoped for by the EU. What remains unchanged in European leaders is their belief that there is little need for them to soften their position as long as the economic impact of Brexit is mostly felt in the UK.

The real impact of the speech on negotiations will depend on whether the UK is willing and able to transpose the Florence speech into concrete and detailed policy positions at this stage. There is considerable scepticism about whether the UK’s position has really changed as much as suggested by Theresa May and this will be closely scrutinised when Article 50 negotiations resume this afternoon. Even if that is the case, it is doubtful that the change in direction delivered by the Florence speech will be sufficient to persuade Barnier to recommend moving to phase two of the negotiations and whether the EU27 will be ready to approve it without further guarantees. On the financial settlement in particular, a gulf remains. Barnier’s statement following May’s speech, recalls “there is still today major uncertainty on each of the key issues of the first phase.”

Theresa May will also have to contend with a sceptical European Parliament which has so far been unimpressed by the UK’s position on citizens’ rights. While the Parliament’s Brexit coordinator, Guy Verhofstadt, noted that the UK position was “becoming more realistic”, he rejected May’s offer to set up an independent dispute settlement system for citizens’ rights. The European Parliament Brexit Steering Group is expected to circulate a draft version of its motion on the negotiations later this week. MEPs intend to pre-empt Barnier’s appraisal of progress during the negotiations in plenary next week. It will be much more difficult for him to recommend that talks move on to discussing the future relationship between the EU and the UK once the European Parliament has made up its mind. The fourth round of Article 50 talks will therefore be crucial for the UK to persuade the EU that “substantial progress” has been achieved, and maintain the possibility of beginning discussions on a transition phase before the end of the year.

George Winkler

Senior Account Executive

 

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