Brexit Bulletin: Who Would Build the Border?

(Bloomberg) -- Today in Brexit: The mood music is getting worse, but officials are strangely silent on what might happen along the Irish border if it all ends without a deal.

The European Union has one clear Brexit message from its leaders’ summit in Brussels: Governments and companies need to plan for the worst. But no one is saying what should happen to the Irish border if the U.K. tumbles out of the bloc without a divorce deal next year.

The Irish border issue – or how to prevent the new EU-U.K. land frontier from bisecting the island of Ireland with customs posts and police – is the most important obstacle to a Brexit divorce deal. But in the event of no deal, it would also be a major headache, threatening political turmoil in Ireland and tensions at the heart of the EU.

The question, Dara Doyle reports, is whether the Republic of Ireland could refuse to build a border, as it has hinted it might.

“The U.K. has said they won’t do it,” Irish Prime Minister Leo Varadkar said in an interview with broadcaster TV3 this month. “And I’ve made it very clear to other European prime ministers and presidents that’s something Ireland will never do.”

But speaking privately, one senior European official suggested the Irish should take a more measured approach or risk embarrassment if talks collapsed.

The EU official said that while there would be sympathy for Ireland in the event of the U.K. crashing out of the bloc without a deal, controls would eventually have to be implemented. Ireland would be given time to organize a border, and some leaks and smuggling may initially be tolerated, according to the official. But ultimately a border would probably have to go up.

France is among countries most concerned about protecting the integrity of the EU single market – which allows the free movement of goods, services and people. Any failure to adequately police the frontier in the event of a no-deal Brexit would create major problems with the European Commission and other member states. EU officials have shown unprecedented solidarity with Ireland over the issue of the border. That could be tested if it all goes wrong.

Today’s Must-Reads

• Businesses are getting gloomier about how Brexit will affect them, according to data from the Bank of England.
• There’s a compelling case for a second referendum as most lawmakers think Brexit will make the country worse off, Philip Stephens argues in the Financial Times.
• It took them until dawn, but European leaders reached an agreement on dealing with the migrant crisis.

Brexit in Brief

Terror Tactics | In Brussels, Prime Minister Theresa May accused the EU of putting the safety of its citizens at risk by blocking a broad Brexit deal on security. During a working dinner, May said Britain wants to play a major role in European security after it leaves but that the EU’s rules-based, inflexible approach is standing in the way. The prime minister also wants flexibility from the EU on the terms of a final trade deal, but the EU rejects that as “cherry-picking.” The mood is increasingly frosty, with European Commission President Jean-Claude Juncker telling May to get her Cabinet in line.

Tragedy | Michael Roth, Germany’s deputy foreign minister, urged Britain to put “good arguments and a strategy” on the negotiating table and define what it wants from the split. “It’s a tragedy to see that the negotiations are so difficult,” he said.

On the Markets | The pound hit a fresh seven-month low on Thursday, falling as low as $1.3066. Trading the pound is effectively a binary bet on the outcome of Brexit negotiations, says portfolio manager David Rule of Manulife Asset Management.

Population Slows | The U.K.’s population is growing more slowly than at any time since the EU expanded eastward 14 years ago. Driving the slowdown in the year to June 2017 was a sharp fall in immigration, particularly among EU citizens looking for work. The slowdown was most pronounced in areas that have experienced high levels of immigration in recent years, Andrew Atkinson reports.

Hedge Funds | U.K. lawmaker Bob Seely called for a parliamentary inquiry into the use of private polling data by hedge funds. Bloomberg reported on Monday how hedge funds hired private pollsters to help them get a trading advantage on referendum night in 2016.

The Brexit World Cup | Theresa May arrived in Brussels hours before England and Belgium faced off in the World Cup, and her fellow leaders had a surprise for her. In front of the world’s television cameras, Belgian Prime Minister Charles Michel handed May the bright red shirt of the Belgian national team, bearing the name of (Eden) Hazard.

May soon retaliated by giving Michel a couple of England shirts. Belgium won, and a comical goal celebration by Belgium’s Michy Batshuayi prompted some Brexit-metaphor excitement on Twitter.

Something to add? 
Please join our Facebook group, Brexit Decoded, and follow us @Brexit on Twitter. 

Bloomberg is now also on WhatsApp. Sign up here to get the latest business stories and analysis, on-the-ground updates, breaking markets news, and more. 

To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net, Jones Hayden

©2018 Bloomberg L.P.