Brexit 5: The UK is doubling down but the EU shows no sign of folding

By Dominic Aeissame September 4, 2020 5:28 pm

Thirty to forty per cent chance of a Brexit deal – I do not like those odds

With a fixed date for the end of the transition period and all summer to negotiate, Boris Johnson and his team led by David Frost were optimistic about the chances of having completed a free trade deal before the end of the transition period. But a summer of trade talks causing regression rather than progression means those odds are quickly declining. Sources inside No 10 indicate they now believe there is only a 30 to 40 per cent chance that there will be an agreement. The main area of contention isn’t fish – although there is more to come on that – but state aid; the question of how much freedom Britain should have to subsidise UK companies and industries.

Interestingly, the UK has never been forthcoming about the idea of picking winners and rarely uses state aid. It only made up 0.34 per cent of GPD, less than half the EU average of 0.7 per cent. The EU’s concern is that Boris Johnson’s levelling up agenda is a plan for pumping huge amounts of money into the north of England in industrial subsidies. As such, the EU demanded that Britain carry on following EU state aid rules after Brexit. The demand was too much and Barnier was willing to compromise on the issue by asking to see what kind of subsidy regime the UK was proposing and assess whether this was compliant with the so-called “level playing field”.

But despite publicly complaining, Britain has not done this, and it has left many on the EU side feeling that they compromised but Britain has not reciprocated.  The UK is holding the line on state aid, in part to future-proof itself in case it needs to shore up traditional industries in its new red wall seats, but also so that it can potentially invest in highly skilled green jobs in the industries of tomorrow.

Boris Johnson’s wish for more UK fish

Boris Johnson has demanded that British fishermen double the size of their catch from Britain’s coastal waters, a move that has exacerbated tensions and thrown a spanner in the works in post-Brexit trade and fisheries talks. Immediately, European negotiators rejected the proposal, stating that the position would lead to the loss of one in three fishing boats in Europe. More specifically, the UK wants the percentage of fish quotas reserved for UK vessels in British waters to increase from 25 per cent now to more than 50 per cent. Barnier said this would lead to a 31 per cent contraction in Europe’s fishing fleet and devastate coastal communities. The impasse has added to the increasing pessimism on both sides ahead of the critical negotiating round due to take place in London next week.

Industry warns of chaos at the Brexit borders…

The UK’s leading customs and logistics associations have requested an urgent meeting with Chancellor Rishi Sunak and Cabinet Officer minister Michael Gove after warning that Brexit border preparations are inadequate and risk causing severe disruptions to supply chains next year. Among the 11 signatories are trade lobbying groups the Road Haulage Association and Logistics UK, as well as multiple leading freight companies. The industry leaders requested the meeting due to their concerns about the end of the Brexit transition period in December. In the group’s letter, it said the current state of preparedness had “significant gaps” that risked leaving the supply chain “severely disrupted” if not addressed. The letter was written to address the gaps that still exist in no-deal preparations for the customs and logistics industry. These gaps remain despite meetings with the government’s Border Delivery Group. The Cabinet is also aware of the challenges facing the sector after a memo warned that the logistics industry was having to adapt to 10 new systems from January 1 and that “critical gaps” still needed to be filled.

And the government’s solution: bypass local council planning and build 29 lorry parks

In light of the looming crisis at the borders alluded to above, Boris Johnson’s government has given itself the authority to grant emergency planning permissions for “temporary” lorry parks across the country, according to a statutory instrument laid before Parliament on Thursday. Currently, the UK is preparing to build lorry parks in up to 29 parts of the UK to deal with the extra checks necessary after Brexit. To avoid chaos at the border and long queues on motorways, the government is already building lorry parks on sites nationwide where vehicles without the correct paperwork will be held. Construction has already begun on a lorry park in Ashford, Kent, twenty-five miles from Dover.

The EU refuses to fold

With pessimism rife ahead of next week’s round of trade talks that could determine whether or not the UK crashes out without a deal, this is not a happy Brexit 5 round-up. To stay consistent with the tone we will also be finishing on a low, covering Barnier’s combative speech before the negotiations next week. Barnier has stated that Brussels will reject a free trade agreement with Britain and trigger a no-deal end to the transition period unless Boris Johnson gives “credible guarantees” on subsidies and standards. And the blame game has already begun with Barnier blaming Boris Johnson for the lack of progress at the last round of post-Brexit trade talks. Barnier has now stated that the EU cannot accept a deal in which the UK government refuses to set out the future of British policy on competition. “The UK government would be free to hand out subsidies at will,” he said. And to end this week’s round up with the cold and stark warning from Barnier that “without a long-term and fair solution on fisheries there will simply be no new economic partnership with the UK”.

The Whitehouse team are experts in the potential impact of Brexit, providing political consultancy and public affairs advice to a wide range of clients, not only in the United Kingdom but also across the member states of the European Union. More information about our Brexit experience can be found here, or, if you have any questions, please contact our Chair, Chris Whitehouse, at chris.whitehouse@whitehouseconsulting.co.uk

By Dominic Aeissame September 4, 2020 5:28 pm

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