Brexit Latest

Since the historic vote to leave the European Union in June, aside from the weakening of Sterling and a heightened sense of uncertainty as to what might happen long-term, there have been relatively few concrete developments.  Indeed, with agricultural commodity prices rising as a result of the fall in Sterling and the improved competitiveness of UK exports, farming is currently experiencing a ‘Brexit Boost’ which looks set to continue for the foreseeable future.

Although the official position of the EU is that Exit negotiations cannot formally begin until Article 50 is triggered, behind the scenes conversations are likely to have taken place between the Prime Minister and other European leaders at the recent G20 Summit.  In addition, it has also been announced that Michel Barnier and Guy Verhofstadt will be leading the negotiations on behalf of the European Commission and European Parliament respectively.  Both are perceived as being tough negotiators but are also seen by some as being pragmatists.  However, whilst the European Parliament will have a vote on the eventual Exit deal, it is the European Commission and the European Council that are the most influential.  Therefore, whilst Mr Verhofstadt, who previously served as Belgian Prime Minister, is seen as being intransigent with respect to the ‘four freedoms’ (goods, services, capital and people), Brussels commentators state that the Parliament’s role should not be overstated.  Mr Barnier, the former Internal Market Commissioner, has clashed with George Osborne in the past over financial services regulation and there is concern in the Treasury and the City regarding his role. 

On the British side, following the appointments in July of Boris Johnson, Liam Fox and David Davis to the roles of Foreign Secretary, International Trade Secretary and ‘Brexit Secretary’ respectively, there seems to have been limited activity.  Indeed, David Davis’ statement to the House of Commons earlier this month revealed little detail on the type of relationship that the UK is seeking to have with the EU post-Brexit.   Based on statements emanating from the Government, it would appear that it is going to seek a tailored solution that represents the “best deal for Britain” rather than an “off-the-shelf solution” similar to the Norwegian or Swiss models.

At this stage, it is understandable that the Government does not want to reveal its strategy ahead of the negotiations officially starting. That said, it will be important for the government to set-out its vision when it triggers Article 50 to address concerns amongst investors and the business community.  The Japanese government has been particularly vocal regarding the future relationship that Japanese investors would like to see between the UK and the EU post-Brexit and is pushing for as little change as possible.  The extent to which that can be achieved is questionable, especially in the light of the desire amongst the UK electorate to control freedom of movement from the EU.  During the negotiations, there is going to be a major trade-off between Single Market access on the one hand and sovereignty issues on the other.  These encompass freedom of movement, EU budget contributions, the extent to which EU regulations would apply to the UK and the ability of the UK to set its own trade policy with non-EU countries.  The EU has already stated that it will not permit the UK to have an “a la carte” arrangement with the EU and the British government will need to proceed with caution to balance the needs of business and investors with the desires of the UK electorate.

Overall, until Article 50 is triggered which we believe will take place in early 2017, it is unlikely that there will be significant public announcements from the UK or the EU.  However, activities behind the scenes will be gathering momentum in preparation for the mammoth negotiating task that lies ahead.