Brexit Bulletin: No Breakthrough in Sight

(Bloomberg) -- Today in Brexit: The U.K. Prime Minister heads for talks in Ireland but there’s no solution in sight to end the deadlock.

Theresa May’s meetings with the European Union’s most senior officials yesterday were described in a joint statement as “robust but constructive.” In truth, said one person with knowledge of the talks, robustness far outweighed constructiveness.

With Brexit day coming and no clear solution emerging about how to break the deadlock, the U.K. and EU are still talking past each other. For all the rhetoric about working together, and the decision to get both negotiating teams back to the table, the stark reality is nobody’s got the foggiest about how this plays out. “What do you think’s going to happen?” European officials are frequently heard to ask in the corridors of power in Brussels. They don’t know the answer any more than we do.

The strained faces of May and the EU chiefs she met separately yesterday, Donald Tusk and Jean-Claude Juncker, tell their own story. Where May pushes options for changing the much-loathed Irish border backstop arrangement in the deal, by asking for a unilateral escape clause, a time-limit or replacing it with technological alternatives, the EU rejects them all. It instead suggests rewriting the non-binding declaration on future relations while urging her to accept Labour leader Jeremy Corbyn’s demands to join a customs union.

May and Juncker will meet again at the end of February to take stock, by which time there’ll be less than a month before the U.K.’s scheduled leaving date. EU leaders would have to get together to approve any changes to the deal, and the British and European parliaments would still have to vote on it. “Still no breakthrough in sight,” Tusk tweeted after his meeting with May. It’s clear to see why EU officials now believe that negotiations will go to the wire and that a postponement of the U.K.’s exit looks more and more inevitable. 

Today’s Must-Reads

• From Japan to India and Australia, there’s incredulity over the U.K.’s political contortions to leave the EU.
• Labour leader Jeremy Corbyn is opening up a possible path for Theresa May to get her Brexit deal through Parliament. It’s just not the one he says it is.
• The Financial Times has a wide-ranging profile of Home Secretary Sajid Javid: “I don’t regret my decision at all,” Javid says of voting to remain in the EU. But he’s now focusing on delivering Brexit.

Brexit in Brief

Jobs Impact | Cracks are appearing in the U.K. labor market, with the number of people placed in permanent jobs falling last month for the first time since the 2016 vote to leave the European Union. A survey for KPMG and the Recruitment and Employment Confederation published Friday found uncertainty over Brexit is making firms increasingly hesitant about taking on staff. At the same time, people in jobs are unwilling to leave them, forcing companies to raise pay to attract candidates.

Afterthoughts | A secret group at the heart of the British government is working on a plan dubbed “Project After” to revive the economy in case there’s a no-deal Brexit, the Financial Times reports. It’s being led by Cabinet Secretary Mark Sedwill and has brought together senior figures from the Cabinet Office, the Treasury, the business department and the international trade department, in close contact with the Bank of England, the paper says.

Irish Preparations | Irish Prime Minister Leo Varadkar said Ireland is “working to achieve the best solution” on Brexit but is also “preparing ourselves for the worst.” He said he’s alerted the European Commission that Ireland will seek emergency aid in the event of a no-deal Brexit to help mitigate the impact on Irish trade.

German Warning | The financial industry needs to prepare for the ripple effects of the U.K. leaving the EU without a deal that spells out its future relationship with the bloc, said German Finance Minister Olaf Scholz. “We want to ensure that even in the case of a hard Brexit, there is no danger for the stability of individual firms and the financial system as a whole,” Scholz told bankers and other finance industry professionals at a reception held by the operator of the Frankfurt stock exchange on Thursday.

Ships Ahoy | British exporters risk their goods sitting in quarantine and not being paid for unless a Brexit deal can be found by the end of next week. That’s when the first set of ships leave the U.K. that will arrive in southeast Asia after the scheduled leaving date of March 29, said Stephen Phipson, chief executive of the EEF manufacturing lobby group. “If products get loaded on the ships, exporters have no idea when they land whether they’ll be on a 20 percent tariff regime. Will they need rules of origins certificates?” he said.

Brexit Fog | Brexit uncertainty is cascading through the U.K. economy, rattling households and companies, according to Bank of England Governor Mark Carney. In its Inflation Report on Thursday, the central bank delivered a pessimistic view, with Carney warning that the “fog of Brexit” is creating tensions. Even based on a smooth exit from the EU, it still sees the economy growing at its weakest pace in a decade, a dramatic investment slump and weaker pay gains.

Swedish Solution | Sweden’s government has submitted a bill aiming to allow investment firms based in Britain to continue providing services during a transitional period after the country leaves the EU. The measure would mean that U.K.-based investment companies that are currently not required to be licensed by the Swedish regulator will be allowed to continue doing business under the same terms until the end of 2021.

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To contact the editor responsible for this story: Timothy Coulter "Tim" at tcoulter@bloomberg.net, Jones Hayden

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