Brexit Bulletin: Divide But Not Conquer

(Bloomberg) -- Sign up to receive the Brexit Bulletin in your inbox, and follow @Brexit on Twitter.

The European Union’s united front on Brexit is set to splinter as negotiations move on to trade. That’s not necessarily a good thing for Britain.

The EU’s 27 remaining countries surprised themselves by defying years of talking at cross purposes to hold a common line on the U.K.’s withdrawal. But with leaders in Brussels set to formally agree on Friday that May has offered enough on the divorce settlement for talks to move on, there are already signs the unity has hit its high-water mark. Diplomats, and leaders, have warned the next stage could be messier.

“I have no doubt that the real test of our unity will be the second phase of Brexit talks,” EU President Donald Tusk, who chairs the summits, said on Thursday.

Brexit Bulletin: Divide But Not Conquer

Despite what some in the British government might think, such disunity wouldn’t necessarily suit the U.K. because it needs the EU to be able to stitch together an agreement. Talks on the future relationship won’t start till March and the outline deal needs to be done by October so that it can go to the European Parliament for approval. Bear in mind that Brussels closes down over the summer, and that’s a very short time frame.

The test will come when the negotiations start to tackle different areas of potential cooperation between the U.K. and the EU, such as aviation, financial services and trade in goods, which countries place vastly different degrees of importance on. The U.K. will fight for financial services and while the EU has indicated that won’t be possible, there are already signs of division.

While the EU won’t have finalized its position until March, it is so far offering the U.K. a deal like the one it gave Canada. The U.K. says that’s not good enough. It wants a free-trade deal that includes financial services and possibly greater mutual recognition of technical standards in areas such as pharmaceuticals, automobiles and agriculture. Brexit Secretary David Davis said on Sunday the U.K. was looking for an agreement best described as “Canada plus plus plus.”

Some EU countries have already hinted they would be willing to explore such a relationship. Others are in a less generous mood, depending on how much they have to lose, or gain, from a weaker deal.

“It comes down to the fact that countries have different economic models, different sets of existing ties to the U.K., different strategic interests,” said Agata Gostyńska-Jakubowska, senior research fellow at the Centre for European Reform.

Brexit Latest

Supportive Leaders | EU leaders voiced support for May, with Dutch Prime Minister Mark Rutte going so far as to call her a “formidable” leader. At dinner, May asked them to be creative and move speedily on to a transition deal. Her comments were met with a round of applause.

Russian Tweeting | U.K. lawmakers have called on Twitter Inc. to provide more information on accounts that may have influenced the Brexit referendum. The chair of Parliament’s Digital, Culture, Media and Sport Committee Damian Collins said a letter Twitter released on Wednesday about Russian involvement in the vote didn’t sufficiently answer the questions he posed. That letter was sent to the Electoral Commission, Britain’s elections watchdog, which is carrying out its own investigation into whether the campaign to leave the EU broke spending laws. Twitter did reveal that RT, an account run by the state-funded broadcaster formerly known as Russia Today, spent $1,031.99 on six advertisements related to the campaign. 

Star Wars Threatened | Britain’s movie industry is unquestionably booming, but a big part of the prosperity can be attributed to the country’s position as part of the larger European film business, which Brexit could threaten, Joe Mayes writes. It’s not uncommon for cast and crew to quickly shuttle to locations across Europe – parts of “The Last Jedi” were filmed in Ireland and Croatia – a practice that might be undermined by new visa restrictions or bureaucratic processes. And British producers enjoy EU financing to get projects off the ground as well as marketing support for their films on the Continent, benefits that would likely evaporate after Brexit.

Brexit Bulletin: Divide But Not Conquer

Ocado Squeeze | Ocado Group is struggling to find drivers to deliver Britons their groceries as Brexit puts a further squeeze on the U.K.’s tightest labor market on record. The online grocer on Thursday reported a slowdown in sales growth, saying it was held back by a shortage of drivers. 

Davis Cleared | David Davis was cleared by House of Commons Speaker John Bercow of holding Parliament in contempt over the release of documents on the impact Brexit would have on the economy.

On the Markets | U.K. government bonds gained and the pound erased an earlier advance against the dollar after the Bank of England kept interest rates on hold and maintained a cautious economic outlook. On Friday the pound was little changed at $1.3441.

And Finally...

Liberated from public office as soon as this weekend, outgoing Austrian Chancellor Christian Kern spoke his mind about Brexit, Lyubov Pronina reports from the summit in Brussels.

“I hope that it could be reversed,” Kern said in English, when asked if he felt there was a chance that Brexit might not happen. He cited “a lot of big issues, challenges not easy to solve,” along with “a lot of tensions in the domestic political area in Great Britain.”

“So who knows,” he said. He added that it might be “better to bet on dogs.”

For more on Brexit follow Bloomberg on Twitter, Facebook and Instagram

To contact the authors of this story: Emma Ross-Thomas in London at erossthomas@bloomberg.net, Ian Wishart in Brussels at iwishart@bloomberg.net.

©2017 Bloomberg L.P.