Brexit Bulletin: Why Won’t They Budge?

(Bloomberg) -- Today in Brexit: U.K. lawmakers hope for concessions on Theresa May’s divorce deal. That won’t be easy.

It’s quite simple, the pro-Brexit members of Parliament say: The European Union just has to remove, or at least schedule an end to the much-hated “backstop” for preventing a hard Irish border and they can all support Prime Minister Theresa May’s Brexit deal after all.

The European side doesn’t see it that way. Diplomats have spent the past two years not quite understanding the British approach to negotiation, which seemed at times to elicit the good old days when chaps could negotiate over a friendly pint. The EU, with its pesky rules and boring procedures, seemed an immovable force. 

To the EU, it makes perfect sense why you’d include what diplomats like to describe as an “insurance policy” to guard against a return to infrastructure re-emerging on the Northern Ireland-Ireland frontier, which for decades was the focus of violence and bloodshed between groups loyal to London and Dublin. The EU has three main factors in mind:

• Protecting its single market. The Irish border will, after Brexit, become the EU’s “external” frontier. That border would be policed rigorously to prevent substandard goods or unsafe food entering the European system. As EU chief Brexit negotiator Michel Barnier said yesterday: “Beyond the Irish specificity, the border in Ireland is the border of our 27 countries” so “all goods arriving from Northern Ireland come not only to Ireland but also to Belgium, Italy or the Czech Republic.”

• One for all. The EU sees its strength in treating its smaller countries the same as its larger ones. For all the talk of France and Germany dominating the bloc, there are countless examples where Brussels has stood up for its tinier nations. Ireland is one of those countries and has lobbied hard to make the EU see the importance of the backstop. If the EU disregards Ireland’s concerns it risks losing its credibility from Estonia to Portugal and Slovenia to Cyprus.

• Better off in. As far as the EU is concerned, the U.K. isn’t supposed to get an easy ride. With populists on the rise across the bloc, and Europe-wide elections in May, Europe’s decision-makers are determined to ensure leaving is painful. The backstop doesn’t suit you? Tough. It was your decision to leave.

EU governments don’t want a no-deal Brexit either. And they are still prepared to do more to help May sell her deal. The latest thinking is that if the U.K. signed up to a full customs union, the EU could bolster its Brexit deal wording on future ties and make a large part of the backstop seem irrelevant (although it wouldn’t be removed).

But as the clock ticks down to Brexit day, it could come down to who blinks first. As EU diplomats are fond of saying, get 28 leaders alone in a room together and you can never rule anything out. Just don’t put money on it.

Today’s Must-Reads

• Breaking news as the Brexit Bulletin went to press: Airbus says it could be forced to move future investments out of the U.K. in case of a no-deal scenario, with Chief Executive Officer Tom Enders slamming the “madness” of Brexit supporters who assume the planemaker won’t abandon Britain. “If there is a no-deal Brexit, we at Airbus will have to make potentially very harmful decisions for the U.K.,” he says in a video message shared this morning.
• Behind the Davos platitudes, Citigroup CEO Michael Corbat made a veiled threat about Brexit’s impact on London’s position as a financial center.
• BrewDog Plc is known for its zesty “punk” ales and over-the-top publicity stunts. Now, one of the U.K.’s most successful craft brewers dreads Brexit.

Brexit in Brief

Hold Fire | The risk of a no-deal Brexit appears to be receding after calls for a delay to the U.K.’s exit from the European Union won powerful backing in London and other EU capitals. 

Ready to Suspend | Senior figures in the French and German governments said they’d be open to extending the Brexit deadline as momentum built for a delay in the U.K. Parliament. May herself remains unpersuaded of the case for a delay, although — once again — she stopped short of ruling out an extension.

Going Dutch | The number of companies that are exploring the possibility of moving to the Netherlands from the U.K. because of Brexit now stands at 250, Michiel Bakhuizen, spokesman at the Netherlands Foreign Investment Agency, said. The number is up from 150 at the beginning of 2018 and 80 at the start of 2017.

Worse Off | The prospect of a delayed Brexit may be pushing up the pound, but it’s not the best news for the U.K. economy, Bloomberg reports. Sterling has rallied above $1.30 this week amid increasing signs of support from the British Parliament for extending the negotiating period. While that would remove the imminent possibility of a chaotic no-deal scenario, it would leave the U.K. worse off than if Parliament accepted Prime Minister Theresa May’s current plan, according to economists.

Hobby Horse | Spanish officials have demanded the inclusion of a footnote in all the EU “no-deal” Brexit legislative proposals to recognize Spain’s continued dispute with the U.K. over Gibraltar, the Telegraph reports, citing a leaked draft of proposed EU legislation.

Even Him | U.K. International Trade Secretary Liam Fox suggested he could live with a delay to Brexit if more time is needed to implement the divorce agreement. “A delay because we’ve got a deal and want to implement it, that would be one thing,” Fox said in a Bloomberg TV interview on Wednesday. 

Being Prepared | Norway is ready for the U.K. to tumble out of the EU with no deal at the end March, confident that its enormous gas exports will be unaffected. Foreign Minister Ine Eriksen Soreide and Trade Minister Torbjorn Roe Isaksenon met with a broad range of businesses to discuss concerns over a hard break in the trading relationship with the U.K.

Election Forecast | May’s Conservatives would lose a snap general election because they are “woefully underprepared” to fight one, according to an internal party assessment reported by the Sun.  The paper says “secret party projections” make Labour leader Jeremy Corbyn prime minister, in charge of a rainbow coalition government including the Scottish nationalists and Liberal Democrats.

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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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