Brexit Bulletin: Getting the Hang of It

343 Days to Go

(Bloomberg) -- Today in Brexit: The latest phase of talks got off to a typically slow start, but there are signs that this time the U.K. may be ready to take the initiative. 

The negotiations on Brexit are unlike any the world has known. They’re not like classic trade talks where two sides barter over a common goal. They’re more complicated than simply a reversed version of the process by which countries join the European Union. The architects of the Article 50 rules setting out the method for leaving the EU left much open to interpretation.

In short, they’re making it up as they go along.

But, nine months on from the first round of talks, and as negotiators enter the final phase, they’re getting the hang of it. A certain rhythm has become perceptible: each period starts slowly after the EU fixes its position, and there’s scant progress for weeks as British negotiators decline to reveal their hand. Then there’s a flurry of activity shortly before EU summits (which have acted as deadlines). In these final days, the U.K. tends to accept much of what it had initially said was unacceptable.

“They lost a lot of precious time like that,” said one senior EU official involved in the talks. The official recalled how the U.K. accepted in December that it would pay a financial settlement twice as large as it was prepared to pay in October; in March, Britain agreed to the EU’s version of the transition period, one it had rejected three months earlier. Not that the European side doesn’t understand. “It’s based on what’s politically feasible domestically,” the official said. “Mrs. May calculates how far she can take her troops each time without a revolt.”

This raises the question of how far British policy will shift between now and the summit in October, which is supposed to be the negotiations’ final deadline. Again, talks have started slowly. And there are signs that May could, again, be ready to soften her position, in particular on membership of a customs union with the EU, as lawmakers prepare to vote against her original stance. EU officials think a defeat in parliament could give the prime minister a convenient excuse to U-turn on customs. But they don’t expect anything to happen this side of the U.K.’s local elections on May 3.

But could change be afoot? As The Times reports today, the government is considering whether to publish its own “draft” agreement to try to set the agenda and avoid the EU settling for a “lowest common denominator” position. It would leave many questions unresolved and be more detailed than the European Commission wants. If this is the case, more than a year after the Brexit process started, the U.K. might really be getting the hang of it.

Today’s Must-Reads

  • A U.K. idea to break the Irish border impasse  doesn’t impress the EU, Bloomberg reported late last night. The Daily Telegraph says British plans got a “systematic and forensic annihilation” this week
  • The Labour Party gave its clearest signal yet that it will join forces with rebel Tories in an attempt to defeat Theresa May on Brexit. Spokesman Keir Starmer told Bloomberg there’s a “ growing chorus of cross-party voices that think the prime minister has got it wrong”
  • And the Economist says it’s  Parliament, not the people, that is more likely to derail Brexit.

Brexit in Brief

Going Up | The U.K’s Brexit payments to the EU could exceed the £39 billion ($55 billion) ceiling of the Treasury’s estimate, the government auditor said, reviving discussion about one of the most controversial elements of December’s divorce agreement.

Urgent Issue | The U.K.’s top financial regulators called for lawmakers on both sides of the Channel to defuse the threat posed by Brexit to £96 trillion ($137 trillion) worth of derivatives contracts. 

Trade-Off | U.K. Shadow Chancellor John McDonnell gave an interview to Bloomberg yesterday in which he said a Labour government would be willing to set aside voter demands for an immigration clampdown in order to secure a Brexit deal that keeps financial services companies in London.

Cutting Back | The European Investment Bank has slashed deals with U.K. venture capital and private equity groups by more than two-thirds following the Brexit vote, the Financial Times reports. Britain last year accounted for 8 percent of the bank’s equity investments, compared with 27 percent the year before.

Harmful Decision | “Our aim is to minimize the damage” on people, Peter Ptassek, Germany’s Brexit Coordinator, said in a chat on Facebook. He warned that the U.K.’s withdrawal from the EU “will inevitably lead to significant changes in citizens’ everyday lives.”

Flat Batteries | The U.K. is at risk of missing out on the EU’s booming digital market that spans robotics, battery-powered vehicles and three-dimensional printing, according to Austrian Economy Minister Margarete Schramboeck, who is preparing for her country to take over the bloc’s rotating presidency. “We have some big challenges between Brexit and the digital common market,” she said in an interview.

Taking the Biscuit | The European Court of Justice’s advocate general advised that Nestle shouldn’t be able to trademark the four fingers of its KitKat chocolate bar. The KitKat, first manufactured in the U.K. about 100 years ago, isn’t sufficiently recognized across the EU to get such protection, the advocate general said.

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