What a difference a day makes for the Pound. The dark clouds of Brexit uncertainty hanging over the UK seemed to part when the Bank of England governor, Mark Carney lifted the banks’ economic growth expectations, yesterday. Like a knight on a white horse, riding in on the BoE’s super-Thursday press conference, he suggested the central bank might raise interest rates sooner than expected, which resulted in Sterling rising sharply against the US Dollar and the Euro.
And then, like the villain in a panto, Michel Barnier, the EU’s chief negotiator, suggested that a transition deal was not a given, and the spectre of not having a Brexit deal pulled the Pound back down again. Countless UK businesses are counting on a transition deal that extends the UK’s membership in the single market and customs union.
EU Transition Draft Leak
This week, the EU’s paper entitled: Transitional Arrangements in the Withdrawal Agreement was leaked, as has been the customary means of discovering Brussel’s intentions. The primary revelation was, that the EU could punish the UK during the transition period, by closing off parts of the single market to British companies. This would allow Brussels to “suspend certain benefits,” rather than take up a dispute member states might raise with the UK that would go to the European court of justice, where it would take time to be settled.
In response, the government said the document was “a draft document produced by the EU that simply reflects their shared directives.” This draft, together with the speech the Brexit secretary David Davis made in Teeside last month, were said to be “a solid foundation for the negotiations on the implementation period.”
At the Teeside speech, Davis said the UK would be able to sign trade deals with other countries during the transition period, after leaving the EU in March 2019. He dispelled with tedious legal policy details, but, rather painted broad-brush strokes of lofty ambitions, saying “For the first time in more than 40 years, we will be able to step out and sign new trade deal with old friends, and new allies, around the globe.”
The fact is, the UK’s major trading partner is the EU, which is why so many are opposed to the UK leaving the customs union and the single market. It’s likely to be a very costly and disruptive sort of independence. Now there’s the added risk of crashing out without a transition deal.
The latest leak
Today, the news broke that the EU will stipulate that Northern Ireland will, in effect stay in the single market and the customs union after Brexit. This followed the cabinet meetings failing to come to an agreement on the issue of the Northern Ireland border. It would appear that EU is constantly several steps ahead of prime minister Theresa May’s government.
And little wonder why, given that EU27 is the epitome of united, while the Tory party is the very example of a house divided against itself.
John McGrane, the director general of the British Irish Chamber of Commerce, said there was an “underlying sense of entitlement,” that the British government seemed to think that it would be able to carry on just as it wished because it was so important.
UK’s Presentation Cancelled
Speaking in Brussels, following the latest round of discussions, Barnier admitted he could not understand the positions Downing Street has taken this week. “To be quite frank, if these disagreements persist the transition is not a given,” Barnier said. He said that Brexit secretary Davis, insisted that the UK and EU must reach an agreement in March on the transition period, but he also found there are still substantial disagreements.
Among these possibly insurmountable deal breakers, is the UK’s wish to treat EU citizens who arrive during the transition differently than those who came earlier. The other, is the UK having the right to object to the application of new EU laws, and keep the right to new security policies on justice and home affairs.
Barnier not only was baffled by these, saying, “The positions of the EU are very logical,” he also mentioned that the UK’s presentation of its vision for the future trading relationship with the EU, scheduled for Friday, 9 February had been cancelled. Government sources denied there was a scheduled presentation, and said that a discussion would happen.
It rather sounds as if we are all still waiting for Theresa May’s cabinet to come to a series of decisions as the countdown clock to transition ticks ever louder