Welcome to our latest issue of Boardroom Brexit, covering developments during the period 25 - 29 March 2019. This week, we strayed from our usual Friday distribution to ensure we captured and reported on the outcome of last Friday's House of Commons vote.
Key developments this week in the UK
- Following the House of Commons (Commons) taking control of the legislative timetable last week, indicative votes were cast on a range of eight Brexit options on Wednesday 27 March in an attempt to break the impasse. While none received a majority of support from MPs, the option of a customs union with the EU was the closest to achieving a Parliamentary majority. The full results were:
- Permanent and comprehensive customs union with the EU: lost by 8 votes
- Any withdrawal agreement and framework for the future relationship requiring a confirmatory public referendum: lost by 27 votes
- Labour’s alternative plan of a customs union, close alignment with the single market and dynamic alignment on rights and protections: lost by 70 votes
- Common Market 2.0, under which the UK would join both EFTA and the Customs Union: lost by 95 votes
- Revoke Article 50 on the day before the UK is due to leave the EU if the Withdrawal Agreement has not been approved, in order to avoid a no-deal Brexit: lost by 109 votes
- Leaving the EU without a deal: lost by 240 votes
- Standstill agreement in the event of a no-deal Brexit: lost by 283 votes
- Membership of EFTA & EEA, but not membership of the Customs Union: lost by 321 votes
- Tonight (01.04.19), further votes will be held when MPs once again take over the Parliamentary timetable. The Speaker of the Commons is likely to select three or four of the above bullet point options to put to a vote, with the option of a permanent and comprehensive customs union with the EU seen as most likely to command a Parliamentary majority. However, it would be politically difficult for UK Prime Minister, Theresa May, and her government to deliver on any option which involves a customs union as it would contradict an explicit pledge made in the Conservative Party's 2017 general election manifesto. Therefore, if this proved the only means of progressing through the Commons, a further general election (and the necessary longer extension to Article 50 this would require) is more likely. Meaningful Vote 3 and 4?
- Last Friday (29.03.19), for the third time, and by just 58 votes, MPs rejected Theresa May's Withdrawal Agreement. As matters currently stand, the UK is now due to leave the EU without a deal on 12 April 2019, unless the EU27 agree to a further extension. If granted, this is likely to be a lengthy extension - from 6 to 18 months - with the UK participating in European Parliamentary election and the EU demanding a clear plan on how the UK government intends to use such an extension. Theresa May also alluded to such a reality when, in her statement to the Commons following last Friday's vote, she said she feared "we are reaching the limits of this process in this House" and that an "alternative way forward" is now required. Many observers interpreted this statement as an acceptance of the increasing likelihood of a snap general election. Depending on the results on the indicative votes this evening (01.04.19), the government may bring forward a fourth vote on the Withdrawal Agreement this Thursday in hope that further Conservative Brexiteers back the Theresa May's plan as the only means to guarantee Brexit. Should the Withdrawal Agreement fail at the fourth so-called meaningful vote, Theresa May's limited options are (a) accept the will of Parliament and negotiate a customs union, (b) force through a no-deal Brexit, or (c) seek to call a general election or second referendum.
Change to exit day
- In order for the exit date in UK law to reflect the European Council's decision to extend the Article 50 period, both UK and EU Houses of Parliament voted last week to approve a statutory instrument which changes the date of ‘exit day’ in the European Union (Withdrawal) Act 2018 to 12 April 2019 (in the event that the Commons doesn't agree the Withdrawal Agreement by today (01.04.19)) or 22 May 2019 (if the Commons does agree the Withdrawal Agreement by today).
- Last Wednesday (27.03.19), Theresa May committed to Conservative MPs that she would resign before the next stage of the EU negotiations if her Withdrawal Agreement was approved in the Commons. While this has persuaded some obstinate Conservative MPs to support her deal, the Democratic Unionist Party (DUP) - whose votes Theresa May's administrative depends upon - corroborated that they would continue to oppose the deal. Tonight, should Parliament vote in favour of an alternative Brexit outcome, the question of the Theresa May's position will surely once again be under close scrutiny.
The view from Europe: Key developments this week in the EU-27
EU to hold 'emergency summit' on 10 April
- Last Friday (29.03.19), within minutes of the House of Commons' third rejection of the Withdrawal Agreement, European Council President, Donald Tusk, convened an extraordinary European Council summit on Brexit to take place on 10 April 2019 to decide next steps. EU leaders had granted the UK until last Friday to adopt the Withdrawal Agreement so that an orderly Brexit could take place on 22 May 2019 - one day before the start of the European Parliament elections. With the Withdrawal Agreement rejected again, there is a widely shared perception in the EU that a no-deal Brexit is becoming increasingly likely.
EU-27: "The Withdrawal Agreement is closed"
- Today (01.04.19), ahead of the Commons vote on alternative options to the Withdrawal Agreement, EU officials are reportedly stressing that the UK's only current options are of either adopting the Withdrawal Agreement or requesting a longer Brexit delay beyond 22 May 2019, which would require the UK to participate in the European Parliament elections.
EU debate on potential longer extension
- Last Wednesday (27.03.19), during a debate at the European Parliament's plenary session in Strasbourg, Donald Tusk called on all relevant EU stakeholders "to be open to a long extension if the UK wishes to rethink its Brexit strategy, which would of course mean the UK's participation in the European Parliament elections".
- Specifically as regards potential participation of the UK in the EU elections, Donald Tusk voiced that any reservations in this regard on the grounds of concerns that this could potentially be harmful or inconvenient for EU stakeholders are "unacceptable". He told Members of the European Parliament (MEPs): "You cannot betray the 6 million people who signed the petition to revoke Article 50, the 1 million people who marched for a people's vote, or the increasing majority of people who want to remain in the European Union." This statement was met with applause by MEPs.
- Donald Tusk directly addressed MEPs to ensure that those UK citizens opposing Brexit, if not feeling represented by the UK government, "must feel that they are represented by you in this chamber because they are Europeans."
Post-Brexit EU-UK Customs Union offer
- Ahead of the UK government's third vote on the Withdrawal Agreement last Friday, anticipating another rejection of the deal, Michel Barnier, the EU's Chief Brexit Negotiator, indicated that the EU would be "open to work on the principle of a permanent Customs Union, should the UK decide to take this path." He warned that a potential no-deal Brexit "has become more likely" and would entail a "lack of trust", and said , "[s]ometime later, the UK will knock on the doors of the EU, saying that they need a free-trade agreement, and we will be able and ready to discuss it with them."
- On Sunday (31.03.19), this willingness on the part of the EU to consider an EU-UK Customs Union on the basis of a common trade policy and external tariffs, after Brexit, was confirmed by Nathalie Loiseau, former French Europe Minister and the lead candidate for the European Parliament elections of French President Emmanuel Macron's "En Marche" party.
EU customs preparations
- Some EU member states, including Belgium, the Netherlands and France, have expanded the number of customs officers at the relevant border crossings, in order to prepare for a potential no-deal Brexit. Over 20 additional checkpoints will reportedly be established in six EU member states.
- According to EU officials, even despite the existing contingency measures, there may be delays in the flow of goods or in the cross-border movement of people, in the case of a no-deal Brexit.
German visa policy preparations for potential no-deal Brexit
- According to major German newspaper, Süddeutsche Zeitung, the German Interior Ministry is drafting a regulation that would allow UK citizens and their families currently living in Germany to continue to reside in the country in the event of a no-deal Brexit. UK citizens would, for the time being, continue with visa-free access for short-term stays, and would need to apply for a German residency permit, following a transition period.
EU Brexit preparedness
- Taking note that a no-deal Brexit is becoming "increasingly likely", the European Commission last Monday (25.03.19) reiterated that the EU and its member states are sufficiently prepared for this scenario, having put in place all the necessary contingency plans.
- One unresolved matter from the EU perspective is the Irish border, with the UK government continuing to reject the Withdrawal Agreement negotiated between the EU and the UK due to the inclusion of the so-called Irish "back-stop", while the EU insists on avoiding a hard border, in particular in the interest of the Republic of Ireland.
- The EU also requested that UK government indicate by 18 April its decision whether or not it will pay the UK's share of EUR 7 billion into the EU budget (also providing for EU funding for UK agriculture and research) for the year of 2019. EU officials have reportedly pointed out that the UK's contribution is essential to reflect the country's credibility for EU-UK trade talks that are to be held in the future. Moreover, EU representatives indicated that the UK would still be required to settle certain debts resulting from membership commitments previously made even if the country refuses to pay its regular share.
EU industry perspectives
- According to Michael Schmidt, President of the British Chambers of Commerce in Germany (BCCG), a potential no-deal Brexit would do "massive harm" of an estimated annual EUR 180 billion in goods and services to the UK-German trade relations. He stated that almost 25% of BCCG members are in the process of moving their operations out of Britain, and that already now, "damage for business is already here."