Brexit weekly: 5 things

April 21, 2017 1:35 pm

No election? Oh, yes there is!

Where else to start this week but with Theresa May’s sudden and unexpected announcement of a snap General Election on 8 June. The Prime Minister’s decision was a shock to many, and even members of her Cabinet and Downing Street staff were understood not to have been in the know.

The decision was precipitated by weekend polls that showed the Conservatives enjoying a record 21-point lead over Labour. Faced with such overwhelming odds, Mrs May backtracked on her previous insistence there would be no early election, sending the UK to the polls for the third time in three years in an effort to win a mandate for her Brexit negotiating stance and crush opposition from Remainers and the embattled Labour parliamentary opposition.

The shortened election campaign will be very much focused on Brexit, with the Lib Dems seeking salvation after a 2015 routing and promising to appeal to the 48 percent of voters who wanted to Remain in last year’s referendum. The Scottish Nationalists have similarly promised to make the campaign about Brexit and will push for a deal advantageous to Scots who voted to Remain.

With Parliament voting through the plans for an election, we’re now just 47 days from heading back to the polls. The vote, which will likely cement an increased Conservative majority (which could exceed 100 seats according to pundits) will determine whether we see a hard Brexit or not.

Election limbo

You have to feel a bit sorry for European civil servants tasked with Brexit negotiations. Since the referendum last year they’ve seen elections in the US, Bulgaria and The Netherlands. They still have elections to come in France, Germany and probably Italy. So there was probably a collective sigh when Theresa May announced that the UK would also be heading to the polls.

European officials were, however, in an uncharitable or resolute mood (delete as applicable). Quite simply, the message from Brussels is that the UK may be going back to the polls, but it won’t make one iota of difference to the Brexit timetable. Formal negotiations must be completed, as things stand, by 2019. But EU negotiators will be acutely aware of the significance of the UK vote. If, as expected, Theresa May emerges with an increased majority (and consequently a significantly weakened opposition) she may feel emboldened in pressing British demands. But that isn’t a view shared unanimously within the corridors of Brussels – some officials are of the view that Mrs May could be more amenable in negotiations, given that the early election means she won’t face an immediate domestic challenge in 2020.

It’s a ‘non’ to contracts

EU officials have been told to start shutting British companies out of lucrative multi-million Euro contracts, according to a leaked internal memo.

The document has guided officials to “avoid unnecessary complications” with the UK ahead of the conclusion of the Brexit process in 2019 – but also been instructed officials to encourage businesses to establish a presence in remaining member states. While the leaked memo could be interpreted as a sign of hardened negotiating attitudes within EU circles, the truth is likely to be far less malign. The UK’s leaving the EU will see it reclassified as a ‘third party’ in contract awards, and the EU understandably will look to make contract awards to businesses within the bloc first.

Nevertheless, the document leak will be a sobering reminder to businesses – particularly research and service providers – of the possible cost of Brexit, and may precipitate some consideration over establishing European bases, if not relocating. Expect a continued push from the UK Government, led by the Treasury, to keep major players on these shores.

They think it’s all over – it is now

With a whimper rather than a bang, the age of austerity is over. That’s at least what the International Monetary Fund was stressing this week.

The IMF upgraded its global forecast for growth from 3.4 percent to 3.5 percent. And in very welcome news for the UK, it also upgraded its forecast for the British economy for the second time in three month – anticipating two percent growth this year compared to a prediction of 1.5 percent in January.

Unsurprisingly, the announcement was hailed by the Prime Minister as a sign of the continuing strength of the British economy, eschewing the prophecies of decline that preceded and followed the referendum. While good news for Mrs May in the context of the election campaign, the IMF’s upgraded forecast will also help the Government continue to make the case Britain remains open for business.

How about another U-turn?

According to EU Parliament President Antonio Tajani, there’s room for another major U-turn in British politics (following Theresa May’s announcement of the General Election).

Speaking after meeting Mrs May in Downing Street, Mr Tajani insisted the UK would be welcomed back to the EU ‘with open arms’ if voters rejected Brexit in the 8 June vote. Mrs May has previously insisted “there is no turning back,” following the triggering of Article 50. Mr Tajani’s carrot was, however, accompanied by the stick in the form of a threat to veto any Brexit deal doesn’t guarantee in full the rights of EU citizens in the UK. Mr Tajani also endorsed leaked EU Commission negotiating guidelines that will demand the UK indefinitely submits to the rulings of the European Court of Justice on issues including pensions, employment and welfare relating to EU citizens in the UK.

The visit of EU Parliament’s President underlines British efforts to maintain friendly relations with European partners during and following the Brexit process. The offer of being welcomed back into the EU fold will inevitably be given short shrift by the Prime Minister, but the Government will doubtless heed Mr Tajani’s warning of a veto, which could result in the UK crashing out of the bloc and trading under World Trade Organisation terms – a situation various Remainers, but also the Brexit Select Committee have warned against. However, given removal from the authority of the European Court was a plank of the Leave campaign, submitting to its rulings in any form will likely be a red line for Mrs May, but will add a further layer to complexity to the negotiation process.

 

For more information about the Brexit process, its impact and the individuals involved, please visit Project Brexit.

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