Brexit Bulletin: The Threat of No Deal

(Bloomberg) -- Today in Brexit: As lawmakers in the U.K. are trying to stop a no-deal scenario, the EU is stepping up its own contingency plans. 

The threat of Brexit without a divorce agreement is back and this time it’s coming from the European side.

EU leaders may issue a warning to the U.K. after this month’s summit that a breakdown in talks is a real possibility, according to people familiar with the situation. At the same time they may tell their own governments to step up contingency planning to cope with such a scenario, Ian Wishart reports. Diplomats are discussing the option, which would also include a warning that the transition period agreed to earlier this year – crucial to business – won’t happen if there’s no deal.

Progress in negotiations has all but stalled since March and the EU is weighing how to respond when leaders gather for a summit on June 28. The meeting, once expected to be a landmark session before a final deal in October, is now expected to focus more on what hasn’t been done than on what’s been agreed to. Other issues have also taken precedence in the EU, including the migrant crisis, knocking Brexit off the top spot on the agenda.

While U.K. and EU officials are holding low-level talks in Brussels this week, they’re unlikely to unblock the biggest political issues. Tuesday will see officials focus on the Irish border, and then they will turn to the future relationship between the two sides on Wednesday (even though the U.K. hasn’t yet decided itself how close that future relationship should be.)

The negotiators are planning to publish a report as early as Tuesday on progress since the last summit in March. While there has been some movement on the more technical aspects of the divorce, the document is likely to underscore the lack of agreement on handling the border between EU member Ireland and the U.K.’s Northern Ireland, the role of the European Court of Justice in settling disputes arising from the divorce treaty and the issue of whether the U.K. will recognize the EU’s special-status labeling for food and drink. EU chief negotiator Michel Barnier speaks at 10 a.m. in Vienna on Tuesday.

The slow progress in talks has added urgency to the debate in the U.K. about the role Parliament should have if the government fails to clinch a accord, or brings back an agreement that lawmakers find unacceptable. Lawmakers will vote on how much power parliament should have in the final stages of talks on Wednesday and Brussels will be watching closely: The more power Parliament has, the greater the chances that the U.K. heads toward a “soft” Brexit, one that maintains closer EU ties. By the same token, Brexit supporters fear a greater role for Parliament because they suspect some lawmakers want to thwart the split. They are urging the U.K. government to do more to prepare for such an outcome.

Some EU countries are already taking the threat seriously and taking steps to prepare. Belgium, whose sea ports are deeply integrated with Britain’s, is bolstering its customs force with drones, dogs and dozens of new officers. The country is ready for “a cliff-edge Brexit,” Belgian Finance Ministry spokeswoman Florence Angelici said.

The same probably can’t be said for the U.K.

Today’s Must-Reads

• May is defeated in the House of Lords on the so-called “meaningful vote” amendment, setting up a knife-edge vote in the Commons on Wednesday. The government isn’t planning more concessions. Need a catch-up on what it all means? Here’s one.
• Where could May find the money to spend more on the National Health Service? Jessica Shankleman looks at the options.

Brexit in Brief

Seeking a New Home | BT Group Plc is seeking a new base in the EU to make sure it meets the bloc’s data protection rules after Brexit, Suzi Ring and Tom Seal report. The former monopoly is weighing which national watchdog to choose to oversee its compliance with EU data laws and want to make a decision this year. The Netherlands, Belgium and Ireland are in the mix.

Trust Isn’t Enough | The European Union won’t allow future security cooperation with the U.K. to be based on trust alone, according to the latest document from the bloc’s Brexit negotiators. They warned that Britain’s plan risks undermining European police and justice systems.

State Aid Warning | The EU must ensure that the U.K. doesn’t skew competition after Brexit by giving unfair state aid to companies, EU antitrust commissioner Margrethe Vestager told a European Parliament Committee on Monday:“Even after the U.K. has left we must make sure it doesn’t give state aid that undermines a level playing field.”

No More Money | Chancellor of the Exchequer Philip Hammond told Cabinet colleagues on Monday that there's no more money left for anything else after May said she would meet a Brexit-campaign pledge to spend more on the National Health Service, the Times reports.

Peace Coffee? | Hardline Brexit backer Jacob Rees-Mogg and leading pro-EU rebel Dominic Grieve held peace talks on Monday in one of Parliament’s most public venues, Rob Hutton and Tim Ross report. They spent 25 minutes discussing their differences sitting in the Despatch Box cafe in Portcullis House, as fascinated colleagues looked on. Grieve paid for the coffee. Rees-Mogg told reporters afterwards that Grieve was the cleverest man in the Commons.

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To contact the editor responsible for this story: Anne Swardson at aswardson@bloomberg.net, Jones Hayden

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