Brexit Bulletin: Trick or Treat

(Bloomberg) -- Today in Brexit: With Monday’s budget out of the way, there are signs the Brexit talks are flickering back to life. 

Brexit was supposed to be finished by Halloween, but an agreement scheduled for mid-October came and went. The ghosts of the Irish border still haunt the divorce accord. U.K. and European Union negotiators still haven’t unmasked what the political declaration on their future partnership could look like. The specter of “no deal” looms large.

And tomorrow November comes. Some EU diplomats speculate that an agreement won’t be wrapped up until a summit in December. If then. They see negotiations bleeding into the New Year. But the U.K. has always indicated that this is too late. As two British officials told Bloomberg late yesterday, the ambition is still for the deal to be wrapped up in the coming month. If leaders don’t meet until December, that should largely be a signing ceremony. 

The EU is more relaxed about the ticking clock than is the U.K. But officials in Brussels do understand the constraints that Britain is under. “It’s squeaky bum time,” said one Brexit diplomat from an EU member state in Brussels (proving he’s learned more about British culture than merely the politics of how to leave the EU). For British negotiators, it’s about the time needed to pass legislation through Parliament.

The government needs to begin legislating to leave the bloc – and to start the transition period – within a matter of weeks because of the time the deal will take to pass through both houses. The same would go for legislation needed for “no deal.” It all needs to be done before the scheduled departure date of March 29. Conversely, the European Parliament, which also needs to approve any agreement, should be able to go through the process rapidly, EU officials say.

As my colleague Emma Ross-Thomas wrote in yesterday’s Brexit Bulletin, Monday’s budget opened a path for Prime Minister Theresa May to restart talks and the possibility of a window of opportunity if she comes up with some concessions now. One possibility: tying the U.K. to the EU for longer than her party wants. Another: agreeing to let Northern Ireland be treated differently than the rest of Great Britain when it comes to customs and regulatory standards. Contacts have restarted. The U.K.’s chief negotiator, Olly Robbins, was back in Brussels yesterday. Today, the EU’s 27 ambassadors discuss the latest with the European Commission.

Today’s Must-Reads

• The FT’s long read on the Irish backstop, what it means and how it came about: “It is the story of two years of painstaking Irish diplomacy that locked in a formidable EU alliance, helped along by British missteps and miscalculations.”
• “One of the ugliest aspects of Brexit is that it has generated a resurgence of casual abuse of foreigners, and of Europeans in particular,” writes Max Hastings in the Times.
• The commemorative 50-pence coin the U.K. is issuing to mark Brexit reminds the Guardian of a gold medallion struck during the “first dramatic Brexit” – in the third century AD.

Brexit in Brief

Sounding Downbeat | The risk of the U.K. leaving the EU without a trade deal has increased enough to affect the country’s credit rating, according to S&P. A no-deal Brexit would result in a “moderate recession” for as many as five quarters in Britain, with the economy contracting by 1.2 percent in 2019 and 1.5 percent in 2020, the ratings company said on Tuesday. In such a scenario, unemployment would rise from record lows to more than 7 percent by 2020 – a level not seen since the financial crisis, S&P said. The pound fell on the statement.

Patently Risky | The future of a Unified Patent Court in the EU could be at risk if the U.K. leaves the bloc without a formal agreement, an attorney who is helping to establish the court said. “Without the English judges and their influence – and I’ll be frank – without the economic contribution to the budget, there is a real risk that it won’t work, and that would be a tragedy,” Kevin Mooney, an attorney who chairs a committee tasked with drafting the rules of the UPC, said yesterday at a House of Lords EU Justice Subcommittee hearing.

Preparations Por Favor | Spanish Prime Minister Pedro Sanchez urged companies to prepare contingency plans in case the U.K. leaves the EU without reaching an exit agreement. The Spanish government is preparing for such an outcome and companies should do the same, Sanchez told a meeting of the Spanish family business institute in Valencia.

Lacking Confidence | Optimism in Britain’s economy slumped in October to the lowest level this year, with confidence falling in almost all parts of the country, Lloyds Bank said in a survey published today. The concern is spread across firms of all sizes, with big and small companies increasingly nervous about the U.K.’s impending exit from the EU, according to the survey.

Merging Advice | The U.K.’s Competition and Markets Authority said that in the event of a no-deal Brexit, it will have the jurisdiction to review mergers if the European Commission hasn’t yet issued a decision. In guidance planning published yesterday, the CMA said it wanted merging companies to engage with it at an early stage and that it may advise firms to begin prenotification discussions.

Access Remains | The EU said it won’t allow a no-deal Brexit to cut the bloc’s banks off from London’s crucial financial infrastructure, which would put trillions of dollars of derivatives contracts at risk. The European Commission, the EU’s executive arm, will ensure that financial firms don’t lose access to clearinghouses such as LCH Ltd., a unit of London Stock Exchange Group, even if political negotiations break down and Britain quits the bloc abruptly next March, a commission spokesman said. 

Work Check | Employers will have to check whether EU nationals have the right to work in the U.K. if there is a no-deal Brexit, U.K. immigration minister Caroline Nokes told lawmakers, the Guardian reports. “If somebody hasn’t been here prior to the end of March next year, employers will have to make sure they go through adequately rigorous checks to evidence somebody’s right to work,” she said. 

Passport Surge | The number of U.K. residents applying for Irish passports has nearly doubled since the EU referendum in 2016, the Times reports. Ireland’s embassy in London received 44,900 applications from January to June, putting this year on course to be the busiest so far of the post-Brexit rush, official figures show, the newspaper said.

Want to keep up with Brexit?

You can follow us @Brexit on Twitter and join our Facebook group, Brexit Decoded.

Global leaders will gather in Singapore for the inaugural New Economy Forum Nov. 6 - 7. The event, set up by Michael Bloomberg, founder and majority owner of Bloomberg LP, aims to solve the world's biggest challenges through coalition building, analysis and expert perspectives. Join the community by watching livestreams of the panel discussions and follow Twitter, Facebook and LinkedIn for the latest information.

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

©2018 Bloomberg L.P.