Brexit Bulletin: No-Deal Mk II

Days to Brexit: 10

(Bloomberg) --

What’s Happening? The idea of divergence is back, and with it comes the threat of a no-deal divorce.

Just what is Boris Johnson’s appetite for a broad deal with the European Union after Brexit? Talks haven’t officially started, but as Therese Raphael points out in her column for Bloomberg Opinion today, both sides are already testing out their negotiating lines.

The British prime minister wants a free-trade agreement similar to the EU’s deal with Canada, only with added agreements on services, data and other areas. But Brussels wants to tie the Brits in more closely — and get them to commit to a level playing field when it comes to tax, environmental and state aid rules. This is shaping up to be the political battle of 2020.

Conventional wisdom says that the U.K.’s desire to maintain the access of its financial services industry to the EU will keep it at the table; and that this might be traded for concessions on fisheries. That may be a miscalculation, Raphael argues.

U.K. Chancellor of the Exchequer Sajid Javid claims he wants a comprehensive trade agreement, but at the same time says Britain wants to diverge from EU rules after Brexit. That, together with the tight December deadline the government has set itself, suggests any such deal will be all the skinnier. In that case, would it be worth having one at all?

If the two sides can’t agree on what frictions they are prepared to tolerate, a no-trade-deal in 2021 could easily follow.

Beyond Brexit

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• The Green 30: Climate warriors to watch beyond Thunberg, Musk and Gates.
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• Our editor-in-chief outlines Bloomberg Green’s ambition: “To be the indispensable guide to anyone who wants to understand this great transition.”

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Brexit in Brief

Cliff Edge | Johnson’s government will ensure that U.K.-based carmarkers don’t face a damaging regulatory cliff-edge at the end of 2020, Business Minister Nadim Zahawi said. “We will make sure our rules are as good as the industry needs to be in order to take the opportunity of selling into America, selling into Europe, selling all over the world,” Zahawi said. 

Rate Cut? | The number of people in work in the U.K. surged by 208,000, the most in almost a year and double the market forecast. The jobless rate held at a four-decade low of 3.8%, although basic wage growth slowed modestly. Nevertheless, observers still believe a reduction in interest rates is more likely than not later this month.

On the Markets | The pound rose on the back of the employment numbers, gaining against all of its G-10 peers and edging back above $1.30.

Losing Battle | Johnson lost another vote on his Brexit bill in the unelected House of Lords on Tuesday, with peers voting to reinsert a provision to protect child refugees after Brexit. On Monday, the Lords voted three times against government plans. However, the upper house has no power to force its views into legislation, and Johnson’s spokesman confirmed that he does not intend to accept any amendments.

Megxit | Harry and Meghan are already there, and a trade deal with the EU is on the books already. Britain should look to Canada after Brexit, Tom McTague writes for The Atlantic, a place that’s “prosperous, open, devolved and free-trading—but without pooling sovereignty with the giant next door.”

Then There Were Four | Jess Phillips dropped out of the the race to become the opposition Labour party’s next leader, saying she is not person who can “unite all parts of the movement.” Pollster YouGov updated its projections and finds shadow Brexit Secretary Keir Starmer still the most likely to succeed Jeremy Corbyn. Here’s our guide to all the remaining candidates.

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

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