EU Archives - WA Communications

The UK and France – A Family Affair

The UK and France are like siblings. They may love each other deep down but most of the time they seem to be fighting it out. Always trying to outdo the other.

So it has been since 2016 – the year of Brexit – when the UK and France seem to have been at constant loggerheads. Then President François Hollande famously declared after the Brexit vote that “there must be a threat, there must be a risk, there must be a price” to the UK leaving the EU. President Emmanuel Macron continued that hardline stance, constantly criticising the arguments of the Leave campaign, opposing extensions to the UK’s timetable for leaving the EU and holding multiple ‘Choose France’ business summits to secure investment from overseas.

Events reached a nadir when, in this summer’s Conservative Party leadership campaign, Liz Truss was asked whether she considered Macron a friend or foe. Truss hesitated, smiled and looked out to the audience. ‘The jury’s out,’ she declared to cheers from the room.

Macron was asked about Truss’ remarks that same day. He paused, let out a long sigh and stifled a smile. “I don’t question it for a second: the UK is a friend of France,” he said. His face afterwards erupted into a broad grin – recognition that this was but the latest development in a very long-running family saga.

With Prime Minister Rishi Sunak at the helm, the relationship has taken a turn. At their first bilateral meeting at the COP27 summit in Egypt, Sunak and Macron were the vision of brothers reunited. All smiles, handshakes and ritual back slapping. After the event, Sunak tweeted that the UK and France were “friends, partners and allies” – a pointed rejoinder to Truss’ characterisation of the relationship.

So what do the ups and downs of British and French relations mean for business? Should investors take note?

The evidence of the last few years points to a mixed and often counterintuitive picture. The political drama of the Brexit years, for instance, had little effect on trade volumes. In 2015, total trade between the UK and France stood at £65.1 billion. It rose after the Brexit vote to £78 billion in 2017, £82.9 billion in 2018 and £84.4 billion in 2019 but fell again to £67.1 billion in 2020 – the pandemic year.

The same variation exists for Foreign Direct Investment (FDI). UK outward FDI stood at £60.5 billion in 2015, rising consistently every year to reach £85.5 billion in 2020. UK inward FDI stock stood at £69.6 billion in 2015, before rising and falling in successive years to end at £69.1 billion in 2020. The French stock market, however, has overtaken the UK’s as Europe’s most valuable. The CAC-40 has grown by 47% since 2020 while the FTSE 100 has only grown by 16%.

Steady trade volumes between 2016 and 2020 suggest that trade opportunities created by the relative weakness of the pound outweighed any loss of confidence that resulted from political hostility between the UK and France. The rally of exchanges between British and French politicians during the Brexit years were simply par for the course for business – a continuation of the long and complex rivalry between two countries stretching back a thousand years.

The variation in inward FDI since Brexit may be more nuanced, linked to broader investor uncertainty about the UK’s future outside of the EU. The disparity in the value of the French and UK stock market is more structural, linked to the nature of the businesses listed on the CAC-40 and the FTSE100 as well as recent political upheavals in the UK.

The immediate economic future for both countries is difficult but in different ways. Inflation in the UK hit 11.1% in October while inflation in France reached 6.2%. Unemployment in the UK stands at 3.6%, rising to 9.8% among those aged 16 to 24, while unemployment in France stands at 7.3% rising to 18.3% among those aged 15 to 24. Political difficulties are also plaguing the French President, with his party working with a minority government in L’Assemblée Nationale and the IMF stating that the French government should stop its “whatever it takes” attitude to support households and businesses through the energy crisis.

For investors, the key to understanding the effect of British-French political developments on investments means assessing the likelihood that the intense rivalry between the two countries and the relationship between its political leaders translates into policy changes that affect the ease of doing business in either jurisdiction.

In the meantime, the UK and France may soon be fighting it out again, with a quarter-final match between England and France in the football World Cup not beyond the realms of possibility. They could yet have another opportunity to showcase their rivalry to the world.

If you would like to discuss the UK-France relationship in more detail please contact our policy specialist Thomas Sharpe on thomassharpe@wacomms.co.uk.

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What are the chances of a breakthrough on the Northern Ireland Protocol?

In the early hours of 8 December 2017, a bleary-eyed Theresa May shook hands with a sleepy Jean-Claude Juncker on an interim Brexit agreement, supposedly resolving the issues around Northern Ireland. That handshake has plagued the UK’s relationship with the EU ever since.

The interim agreement was supposed to allow progress in the exit negotiations to move to other issues such as trade. For a while it seemed to do so, but recriminations soon began. In June 2018, then Secretary of State for Exiting the EU, David Davis, was actively briefing against the so-called Northern Ireland backstop. He resigned the following month. By December 2018, then First Minister of Northern Ireland, Arlene Foster, said removal of the backstop ‘has been our message from the day a backstop was conceived.’

That was then. What about now? Despite agreeing to an amended Protocol and backstop as part of a revised Withdrawal Agreement in December 2019, the British government argues that the Protocol in practice is not working as it should. Rather than maintaining Northern Ireland’s place in the UK and its internal market, the government believes that it is doing the reverse: threatening the province’s economic settlement within the UK.

With images of food shortages in Northern Ireland and complaints of burdensome customs paperwork, the UK government has evidence to back up its assertions. The EU for its part argued that the Protocol is a consequence of Brexit and the only solution to challenges in Northern Ireland.

But the consequences are more than economic. In May, the republican Sinn Fein party became the largest party in Stormont. For the first time since power-sharing in Northern Ireland began in 1998, there would not be a unionist politician as First Minister.

The second largest party in the May elections was the unionist DUP. But its leader, Sir Jeffrey Donaldson, stated that his party would refuse to nominate a deputy first minister, unless the Northern Ireland Protocol were replaced. The DUP blames the Protocol for endangering Northern Ireland’s economic and constitutional settlement with the UK and since the Executive requires cross-community consent, there can be no government unless the DUP changes its mind.

The deadline for forming an Executive is not infinite. Unless an Executive can be formed by 28 October, further elections will be held. Political instability in a constitutionally fragile province during a cost of living crisis is not an ideal situation.

But there might be light at the end of the tunnel. Vice-President of the European Commission, Maros Sefcovic, has said in recent days that the pressure of the Protocol and the restrictions placed on trade could be reduced. Checks on only a few lorries a day would be required if the UK were to agree to the EU’s new plan.

It sounds almost too good to true.

The EU’s new plan would require the UK to provide the bloc with real-time data on trade movements. According to Sefcovic, checks would only take place ‘when there is reasonable suspicion of…illegal trade smuggling, illegal drugs or dangerous toys or poisoned food’.

Will the UK agree to it? Not publicly at the moment. As well as unilaterally extending grace periods, initially intended to ease the transition for Northern Ireland and Great Britain into the Protocol arrangements, the Government has a further proposal of its own. The new Prime Minister, Liz Truss, introduced the Northern Ireland Protocol Bill in Parliament in June while she was then Foreign Secretary. This Bill would seek to unilaterally disapply those parts of the Protocol that the government believes are hampering the constitutional and trade relationships between Great Britain and Northern Ireland: customs processes, regulations, tax issues and governance.

Speaking in Parliament in her first Prime Minister’s Questions, Liz Truss re-stated her preference for a negotiated settlement but that this had to ‘to deliver all the things that we set out in the Northern Ireland Protocol Bill.’

The EU cannot countenance the UK taking unilateral action to extend grace periods and disapply parts of the Protocol and is taking legal action against the British government. Both the UK and EU have solutions they claim to be practical and logical. But neither, it seems, wants to accept the other’s solution.

Which means that uncertainty – the great enemy of investment – remains a real and present danger in Northern Ireland. The next early morning handshake to try to resolve issues in Northern Ireland is a long way off.

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WA Explainer: What is the Northern Ireland Protocol and why is the government trying to change it?

Many people thought (or hoped) that the need to keep up with Brexit stopped in 2019. As the WA Investor Services team and other seasoned Westminster watchers will tell you, Brexit has been bubbling under the surface since the initial deal was signed, with the UK and EU locked in ongoing, and not entirely productive, negotiations ever since.

Now, after months of hinting at the need for more dramatic action to break the negotiating deadlock, the government has published the highly controversial Protocol Bill, which it argues will solve some of the issues that the current Brexit deal has created in Northern Ireland.

The Bill has huge consequences for UK-EU relations, the stability of power sharing in Northern Ireland and Prime Minister Boris Johnson’s own political fortunes. With all that in mind, we’ve put together an explainer of the position of the UK and EU on the Northern Ireland protocol, what the Bill seeks to change, and what it will mean for both sides in the future.

What is the Northern Ireland Protocol?

The Northern Ireland Protocol is the part of the Brexit deal that sets out special customs and regulatory arrangements for Northern Ireland in light of its land border with the Republic of Ireland, an EU country. Both sides agreed that avoiding a ‘hard border’ between the Republic and Northern Ireland was a key priority. The eventual compromise was to create a customs border in the Irish Sea, rather than on the island of Ireland. Goods crossing into Northern Ireland are checked as though they are entering the European Union. Northern Ireland must, in certain areas, follow the jurisdiction of the European Court of Justice (ECJ).

In return, both sides agreed that Northern Ireland businesses would have access to both UK and EU markets without the need for further checks. This arrangement appears to have resulted in economic benefits for Northern Ireland. Data from the Office for National Statistics shows that the only regions in the UK to have seen GDP recover to pre-pandemic levels are Northern Ireland and London, though Northern Ireland recorded the largest drop in GVA of any region in Q1 2022.

The current terms of the Protocol are strongly opposed by Unionist parties in Northern Ireland, who argue that the presence of a customs border between Northern Ireland and the rest of the UK undermines the union. The Democratic Unionist Party (DUP) is now refusing to form a new power-sharing government in Northern Ireland until a solution to its concerns is found. Despite this, the Protocol is not universally opposed in Northern Ireland. On 13 June, 52 out of 90 members of the Northern Ireland Assembly wrote to Boris Johnson to “reject in the strongest possible terms your government’s reckless new protocol legislation”. The letter is an indication that the government’s proposals do not guarantee an end to Brexit-related tensions in Northern Ireland.

What is the government trying to change?

The government is arguing that the current agreement undermines the Belfast/Good Friday Agreement in Northern Ireland and creates additional, unnecessary bureaucracy for businesses trading between Northern Ireland and the rest of the UK. Protecting the Agreement is key to the government’s reasoning for introducing the Bill. In a summary of its legal position on the protocol, the government said it is relying on the “doctrine of necessity,” which it argues would “lawfully justify non-performance of international obligations” because of Northern Ireland’s “genuinely exceptional situation.”

The Bill proposes to override some parts of the protocol unilaterally. Under its proposals:

Goods staying in Northern Ireland would travel through a new ‘green channel’ with no customs checks, while those intended for the EU would go through a ‘red channel’ that would be subject to EU border checks.
The jurisdiction of the ECJ in Northern Ireland would end, as well as end the EU’s control over VAT and state aid laws, all of which are strongly opposed by pro-Brexit MPs.
A new dual regulatory regime would be established giving businesses a choice on whether to place goods on the market in Northern Ireland under either UK or EU rules.

Can the government secure the changes it wants?

Johnson has been criticised by opposition parties and some Conservative MPs for seeking to override a deal he only agreed to in 2019. The UK government has argued that the deal has had “unforeseen consequences”, particularly for the stability of the Good Friday Agreement. Some MPs are also concerned about the legality of the Bill. Others are concerned that the UK’s actions will undermine its international standing, particularly as it still seeks to negotiate trade deals with major developed and emerging economies.

As a result of these concerns, the Bill will face a challenging journey through Parliament before it can become law. This process is likely to take months. It is extremely likely that members of the House of Lords and MPs will seek at least to amend the Bill to water down some of the proposals.

The key political test for Johnson, however, will be whether he faces a significant rebellion from his own backbenchers. The European Research Group (ERG) of pro-Brexit MPs have also yet to give the Bill their backing and plan to scrutinise the Bill line by line before announcing how they will vote. It is likely that at least some of the One Nation group of Conservatives will vote against the Bill over concerns that it breaks international law, but they will not have enough votes to defeat the Bill alone. If a broader coalition within the party chooses to rebel on the issue, and Labour chooses to vote against the Bill, there is a risk it could be defeated. However, the size of Johnson’s majority and the lack of organised opposition to Johnson or the Bill itself within the Conservative Party make a rebellion of the necessary size difficult to achieve.

What is the likely response of the EU?

The EU is strongly opposed to the UK’s current action and has stated that there will be serious consequences if the UK moves to change the Protocol unilaterally. In the short term, expect the EU to put forward revised proposals of its own to try to continue dialogue between the two sides. Continuing negotiations are supported by the UK and EU, and therefore we are likely to see ongoing talks take place even while the UK government seeks to pass the Protocol Bill.

The European Commission is also expected to relaunch legal action against the UK, which was previously paused to allow for negotiations between the UK and EU over the Protocol to continue. The EU argues that the UK has already failed to implement large parts of the existing Brexit deal, breaching the terms of the agreement. This process is unlikely to move quickly, but provides the EU with an option of escalating its response.

The EU’s response is likely to be limited to continuing negotiations and its legal proceedings for now, but a significant escalation can be expected in the event the Bill passes in its current form. The EU has been clear that it will trigger a full-blown trade war with the UK — something neither Johnson nor his chancellor Rishi Sunak wants in the middle of the cost-of-living crisis. Compromise remains in the interests of both parties, so the government will hope that the Bill will push the EU into changing its position, rather than expecting the Bill to pass in its current form.

Where do we go from here?

The government has sought to play down the scope of the Bill, with Boris Johnson labelling its proposals as “a trivial set of adjustments”. In reality, Johnson sought a more moderate version of the Bill after Chancellor Rishi Sunak and Health Secretary Sajid Javid raised concerns about the consequences of the original, more hardline version of the Bill proposed by Foreign Secretary Liz Truss. However, fresh from a bruising vote of confidence in which 41% of his party unsuccessfully tried to unseat him, Johnson has been forced to move back closer to the original proposals tabled by Truss. Johnson’s changing position is indicative of the political position he finds himself in. Weakened by the vote, Johnson will now be more vulnerable to the views of his own backbench MPs, making government U-turns – and inconsistent policymaking driven by their views – more likely.

The proposals are also extremely likely to have diplomatic consequences. The EU has warned that the Bill undermines trust between the two sides and makes finding a compromise harder. US President Biden has also warned that the UK’s actions make it less likely that a UK-US trade deal can be agreed. Although the UK’s actions are likely to cool UK-US relations, a trade deal was already unlikely, with lead UK negotiator Crawford Falconer admitting in May 2022 that negotiations had “stalled”.

Johnson is likely to find it extremely difficult to compromise on the Bill to break the impasse with the EU while retaining the support of pro-Brexit backbenchers. This, rather than legal challenges at home or in the EU, is likely to be the real flashpoint of the legislation. Johnson risks finding himself in the same position as former Prime Minister Theresa May, caught between the demands of the party and the need for a workable solution with the EU. The Bill begins the process of establishing whether he can find the solution Mrs May could not to the question of the Northern Ireland Border, but is unlikely to settle it.

To discuss the government’s approach to the Northern Ireland Protocol, please email Lizzy Cryar on lizzycryar@wacomms.co.uk.

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Solvency II reforms: a key Brexit win for the government?

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What is the government’s plan for state aid?

Two of the Margaret Thatcher’s most steadfast beliefs were the benefits of European economic integration and the folly of governments providing financial aid to support particular businesses and industries, both of which she said contributed to the UK being labelled the ‘sick man of Europe.’ Ahead of the UK joining the European single market in 1992, Margaret Thatcher addressed businesses and encouraged them to think about the opportunities access to the single market would create. She said: “Just think for a moment what a prospect that is. A single market without barriers – visible and invisible – giving you direct and unhindered access to the purchasing power of over 300 million of the world’s wealthiest and most prosperous people.”

How times change. The current Conservative government, in its negotiations with the EU, is willing to sacrifice access to the single market so that it can offer state aid to British businesses. This about-turn raises a fundamental question: why is this government so keen to be able to financially support businesses, and what does it hope to achieve?

What are the rules on state aid?

State aid, broadly speaking, is any advantage granted by the government on a selective basis to businesses, and it can come in many forms: direct cash transfers, preferential tax treatment and financial guarantees offered by the state. Under EU rules, there is not a blanket ban on state aid. State aid can be provided if it is approved by the European Commission, it is of a small sum or if it is covered by the General Block Exemption Rule. The General Block Exemption Rule allows state aid to promote new activities that would not otherwise have taken place and promotes economic development without distorting competition. State aid that falls outside of these parameters and is viewed to distort competition by offering an advantage to a particular business or industry is illegal under EU law.

The UK and the EU are currently at loggerheads over state aid and a future free trade deal. The EU is demanding that in return for a free trade deal, the British government should commit to ‘dynamic alignment’ with the EU’s state aid rules – the so-called ‘level playing field’ commitments. The UK government, however, wants to have its own ‘separate and independent’ policy on state subsidies. The EU’s fear is that if it gives British firms free trade access to the single market without assurances on state aid, the government in the UK could subsidise green technology, for example, and undercut European made products, undermining the principles of the single market. The EU’s objections are quite reasonable – if you want to be a member of a club, you need to play by the rules. If there can be no agreement between the two sides, the UK will leave the EU on 1 January 2021 without a deal, an outcome that is looking increasingly likely (and even desirable to some within Downing St).

What’s the plan?

Should the UK leave without a deal, the government will not be able to splash the cash wherever it wants, as it will still be bound by World Trade Organisation (WTO) rules on state aid. One crucial difference though is that the WTO state aid restrictions only cover goods, while the EU’s rules cover both goods and services. This opens the door to the UK being able to financially support a range of industries in the service sector, an area where the UK already has a competitive advantage, especially in financial and professional services.

Dominic Cummings recently told civil servants in the Department for Digital, Culture, Media and Sport that he was working on a plan to help the UK build ‘$1 trillion tech companies.’ Cummings views a no-deal Brexit and the removal of EU state aid restrictions as an opportunity for the government to support British start-ups to become genuine players on the world stage, having historically lagged behind the United States and China.

Looser rules on state aid would also help the UK be more flexible in times of emergency. At the height of the Covid-19 pandemic, HM Treasury was restricted in its ability to offer CLBILS loans to private equity-backed firms due to the EU’s rules on ‘businesses in difficulty.’ Due to the leveraged financial structure of these firms, under EU rules, they were not eligible for government financial support. Outside of the EU’s legal framework on state aid, the government would be free to financially aid whichever businesses it chose to, an option that will only become more appealing as the reality of increasing unemployment kicks in.

Will it work?

The idea of a British tech giant is an appealing one for the government. Foreign technology firms are difficult to tax, and it would make the government’s life a lot easier if it had a homegrown firm it could draw revenue from. The creation of high quality, well-paying jobs would also be a bonus.

There are some problems with Cummings’ plan, though. Historically, the British government has a chequered record of success in ‘picking winners.’ When compared to the private sector, governments lack the knowledge, expertise and market discipline to sustain and grow companies. This means risk is often not weighed effectively, leading to either over or under-investment. There is also the risk that business decisions get made not for sound commercial reasons but to fulfil some other government priority.

The interaction between the state aid tech giant plan and the government’s levelling up agenda also throws up some inconsistencies between its wider priorities. Tech firms tend to thrive in big cities and those that are home to elite universities. These are precisely not the areas the government wants to ‘level up’: post-industrial towns in the north and midlands. The price of state support for the tech sector would be the government trading off the UK’s remaining manufacturing base in the north and midlands by removing tariff-free access to its biggest market.

State aid is an appealing idea, but to be implemented well it requires a government to have patience, skill and good judgement. It will also involve the government having to make an unappealing sacrifice that will undermine its levelling up agenda. The deeper message of the government’s interest in state aid is that it is no longer ideologically wedded to the ideas of the past and it is more than willing to deviate from them if it is politically expedient to do so.

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Brexit explainer – what is the Internal Market Bill and why does it matter?

For avid Brexit-watchers, the headlines from the past week may seem like the country has been transported back to October 2019. With restless backbenchers, strongly worded statements from EU Chief Brexit negotiator Michel Barnier, and journalists running to the nearest legal expert, Westminster is suffering from a collective case of déjà vu. For those just tuning back into the Brexit negotiations, here’s what you need to know.

What is the Internal Market Bill?

The Internal Market Bill is intended to create a framework for trade to operate across the four UK nations post-Brexit. The Bill attempts to ensure the whole UK operates as its own single market. It would establish two legal principles – mutual recognition and non-discrimination – to ensure there are no new barriers for businesses trading across the UK, allowing a good or service to be sold anywhere in the UK without any internal standards blocking the movement of goods.

Why is the Bill so controversial?

The principal issue is that the Bill would reverse the Northern Ireland protocol contained in the Withdrawal Agreement, which was signed by Boris Johnson and passed by the current Parliament on 24 January 2020. The protocol settled the issue of post-Brexit trade across the Irish border by applying some EU customs regulation to goods travelling between the rest of the UK and Northern Ireland to avoid checks at the Irish border. The Bill would contravene the Agreement in three ways:

It gives ministers powers to not to apply EU standards on paperwork for goods leaving Northern Ireland going to the rest of the UK.
It gives ministers the power to disapply or modify state aid rules in Northern Ireland, which the Withdrawal Agreement stated would continue to be governed by EU state aid rules. Those powers also allow the UK Government to ignore decisions of the European Court of Justice and EU legislation on state aid.
It would prevent individuals from enforcing the provisions of the Withdrawal Agreement in UK courts by stating the measures in the Bill are ‘not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law’.

The second issue with the Bill is the decision to apply mutual recognition to the devolved nations without their consultation. Mutual recognition means goods lawfully produced in England according to English standards can be sold in Scotland, even if Scotland has higher (and thus more expensive) standards. This means the devolved nations are not allowed to exclude goods from other UK nations made to lower standards, undermining their ability to set their own regulations.

What has the reaction been?

Reaction has been strong from both sides of the Brexit debate, fuelled by Northern Ireland Secretary Brandon Lewis admitting in the Commons that the Bill ‘does break international law in a specific and limited way’. Domestic opponents of the Bill suggest that it will damage the UK’s international reputation, preventing it from being taken seriously when addressing illegal acts conducted by other nations and making trade talks harder.

Scottish First Minister Nicola Sturgeon has described the Bill as an “assault on devolution”, an accusation that is unlikely to hurt the SNP’s standing going into the Scottish Parliamentary elections next year. Sturgeon has now pledged to campaign to demand a new independence referendum as “the only way to protect the Scottish parliament from being undermined and its powers eroded”.

The European Commission has threatened the UK with legal action and trade sanctions if it does not withdraw the controversial clauses in the Internal Market Bill by the end of September. Irish Taoiseach Micheál Martin has also personally criticised the Bill, stating that he is now pessimistic about the chances of agreeing a trade deal with the UK. Despite this, the EU has no intention of immediately shutting down its talks on the UK/EU future-relationship, saying it would amount to falling into a trap set by the UK.

Across the Atlantic, US Speaker Nancy Pelosi has warned that there is “no chance” of the US signing a trade deal under a Biden presidency if the UK goes ahead with the Internal Market Bill in its current form because it undermines the Northern Irish peace process.

Why has the government done this?

The government has stated that the Bill is merely its way of tidying up “loose ends” in the Withdrawal Agreement that it says were caused by passing the Agreement “at speed”. The policy is described as a ‘safety net’ by ministers, to protect Northern Ireland’s position if a deal on future relations with the EU cannot be reached.

The UK has also claimed Michel Barnier has threatened not to include the UK on the list of “third countries” on food standards, which would effectively make it illegal to move food from Great Britain to Northern Ireland.

This defence has been met with scepticism by political commentators, the EU and some UK politicians, who believe the UK Government is either trying to force more concessions from the EU, attempting to force the EU to walk away from negotiations or simply did not realise the implications of the Withdrawal Agreement during the negotiations.

Of course, more than one of these reasons can be true at the same time, and it is entirely possible the UK Government feels it is a necessary action to take to protect trade with Northern Ireland, while also using the Bill as a way of shaking up, or perhaps deliberately destabilising, the trade talks.

What happens now?

The government has told the EU it doesn’t intend to withdraw the Bill, meaning it will be debated in Parliament. Conservative MP Bob Neill has tabled an amendment that would give parliament a veto on any decision to breach the Withdrawal Agreement. A significant number of other amendments are also expected. The passage of any amendment would require a significant Conservative rebellion, as well as the support of Labour, the SNP and the smaller opposition parties.

The Bill must also pass in the House of Lords, where it has been widely condemned, including from Conservative peers. The Lords are highly unlikely to block the Bill but may introduce amendments to force the Bill back to the Commons. It is almost certain to back any amendments passed in the Commons designed to water down the Bill. The Bill can’t pass into law until both Houses pass the same version of the Bill in full.

What happens if the Bill passes?

The passage of the Bill in its current form is likely to cause a serious impasse between the UK and the EU. European Parliament leaders, representing a majority of MEPs, have issued a statement declaring they will block the EU-UK trade deal if there is any breach of the Withdrawal Agreement. This marks a line in the sand from which neither side is backing down and makes the possibility of leaving the transition period without a trade deal significantly higher.

While it is highly unlikely the Bill will be voted down, it may be passed with amendments that either remove or significantly waters down the current provisions. The government is considering implementing sanctions, including a ‘nuclear option’ of withdrawing the whip from rebel Conservative MPs.

The Bill also has implications for the union. The Scottish and Welsh Governments have set out strong opposition to the Bill and with Scottish Parliamentary elections on the horizon in 2021, the Bill is set to further provoke anti-Westminster sentiment among Scottish nationalists. Polls have consistently shown a majority in favour of Scottish independence since the onset of the coronavirus pandemic, and this Bill is likely to cement opposition to the current Westminster Government in Scotland.

The matter may well be settled in the courts. Although the UK Supreme Court is unlikely to have jurisdiction over the issue due to parliamentary sovereignty, the EU may choose to take the case to the European Court of Justice which has jurisdiction over the interpretation and implementation of the Withdrawal Agreement.

Whatever happens over the next week, the UK Government has chosen a provocative approach that will have significant implications for the outcome of the UK-EU trade negotiations, its relationship with its own MPs, the strength of the union and its international reputation.

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Archive for the ‘EU’ Category

The UK and France – A Family Affair

What are the chances of a breakthrough on the Northern Ireland Protocol?

WA Explainer: What is the Northern Ireland Protocol and why is the government trying to change it?

What is the Northern Ireland Protocol?

What is the government trying to change?

What is the likely response of the EU?

Where do we go from here?

Solvency II reforms: a key Brexit win for the government?

What is the government’s plan for state aid?

Brexit explainer – what is the Internal Market Bill and why does it matter?

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