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Friday, 8 December 2017

Time To End This False Brexit Farce?

As the EU/UK joint report on "progress" makes clear, the parties have done nothing more than agree "in principle” on only three of many, many issues to be resolved if the UK is to leave the EU (and that remains a big “if”). Aside from the ongoing price tag, there are the three aspects worth noting below. But my overriding concern is that the very reasonable steps which people and businesses are already taking to minimise their exposure to the downside (and maximise exposure to the upside) of the Brexit “Black Swan” are probably the main source of lasting damage for the UK, and unless the Brexit process is soon halted that lasting damage will be done. 

The first area of common ground is that if citizens wish to retain their EU rights (with some family members being able to join them), then UK citizens need to be ‘legally resident’ in (another) EU member state, and EU citizens legally resident in the UK, on the date of the UK’s withdrawal. But they may well need to apply for that status, and this opens a chasm of uncertainty. 

After some scary moments early this week, the UK now seems clear that the Good Friday Agreement must remain paramount. That deal was predicated on EU membership, so it's a Trojan Horse for what the “Leave” camp are now calling “Leave in name only” (or “LINO”). There is no clarity at all, for example, on how the absence of a ‘hard border’ between Northern Ireland and the Republic of Ireland can be accommodated in light of typical import/export checks and other constraints between the EU and ‘third countries’ (as the UK will be). My sense is that there could never be agreement on that, the result of which is stated (in para 49) to be that: 
“the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North - South cooperation, the all-island economy and the protection of the 1998 Agreement.” 
The demands from Scotland, Wales and London to receive equal treatment with North Ireland in this respect also seem to be honoured in paragraph 50 of the report. Other provisions suggest free movement of labour will continue, as will free movement of goods ‘placed on the market’ prior to UK withdrawal. There are references to transitional arrangements but no cap on their duration...  Uncertainty abounds.

There is no mention of free movement in relation to any services, let alone financial services - which are a bellwether for the UK economy. Financial passporting was ruled out by Mr Barnier on 20 November, but perhaps it might yet leap out of the Good Friday Trojan Horse. Be that as it may, there is nothing sufficiently certain on this front that should tempt firms which are currently passporting from the UK to delay the process of establishing new EEA passport ‘hubs’ within one of the EU27 countries by March 2019 (or, indeed, EEA firms from establishing a UK presence). Management and staff will also be considering their own personal risks and opportunities related to this, particularly where they might benefit from rights that flow from becoming legally resident in an EU27 member state before the UK’s withdrawal. 

No doubt there are also people and firms in other sectors who will be similarly disinclined to halt or pause their own efforts to minimise their exposure to the downside of Brexit, and maximise their exposure to the upside. It is this risk management activity in the face of continuing uncertainty that seems likely to cause lasting damage to the UK...

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