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UK Brexit Bulletin: Friday September 25

UK Brexit Bulletin: Friday September 25

The final stages of the Internal Market Bill will be delayed until later in the year in a move to assuage EU concerns about the proposed legislation

  • The change comes as the Government says it is no longer concerned that the EU could block food trade from Great Britain to Northern Ireland in the event of trade talks failing.
    • The Government decided to delay the House of Lords stages of the Internal Market Bill until after a summit with EU leaders in mid-October. The bill is then not expected to return to the Commons, after committee and report stages in the Lords, until December at the earliest.
    • The Cabinet Office said the EU has confirmed that the UK would not be disadvantaged in the process to grant the necessary third-country status, saying that  “the EU has now said to us that normal processes will be followed on third-country listings. So there are no obstacles to listing our food and agricultural products as our food standards rules will be exactly the same as the EU’s.”
    • The row over third-country listings had escalated rapidly in recent weeks with the UK accusing the EU of threatening its integrity because not securing the status would prevent Great Britain from moving food to Northern Ireland. Third-country listings were put forward as the main justification for the controversial Internal Market Bill, which would allow UK ministers to potentially override some aspects of the divorce deal the UK agreed with the EU27 last year.
    • The bill has passed its latest stage in the House of Commons this week after potential Conservative rebels backed a compromise with Ministers that would hand Parliament a say before the Government could use powers in the bill to override parts of the Brexit divorce deal in relation to Northern Ireland. MPs will vote on it again next week, before it goes to the House of Lords.
    • However the European Commission has said it will still investigate legal remedies at the end of the month if the UK does not adjust parts of the Bill.
    • Former Prime Minister Theresa May told the Government she will not support the Bill, despite concessions from Boris Johnson. May accused the Prime Minister of behaving “recklessly and irresponsibly,” and said the Government’s acceptance of an amendment that would allow MPs a vote before ministers could breach the Withdrawal Agreement with the EU does not go far enough.
    • The EU and the UK have agreed to hold the next meeting of the Joint Committee on the Withdrawal Agreement on 28 September to continue negotiations on which goods from Great Britain to Northern Ireland will need to be checked. The UK delegation will be travelling to Brussels for the meeting.

Cabinet Office Minister Michael Gove has warned that up to 7,000 lorries carrying goods from the UK to the EU might face two-day delays in Dover after the transition period

  • Gove warned that the Government’s “reasonable worst-case scenario” forecasts two-day delays due to border controls regardless of the outcome of future relationship negotiations between the EU and the UK.
    • He warned these predictions would only happen if traders were not ready for new rules on the border, and if the French authorities “declined to be pragmatic”, saying they would have the power to send back lorries without the necessary paperwork and so “clogging the Dover to Calais crossing.”
    • The Government estimates that between 40 and 70 percent of lorries traveling to the EU might not be ready for new border controls, while the lack of capacity at French ports could force trade flows through the Channel to drop by between 60 to 80 percent compared to normal levels.
    • Gove added that from January 1st lorry drivers will need permits to enter Kent. The Kent Access Permit system would be enforced by police and automatic number-plate recognition cameras, and is intended to ensure hauliers have the right paperwork.
    • Under the proposals, HGV drivers will also have to use a Government app to self-declare that they have the correct paperwork for all their consignment. Those who fail to do so risk being stopped and turned back, with £300 fines for those not complying with the new system. The intention is to minimise the number of lorries being delayed or turned back at Calais.
    • The Government is growing increasingly concerned that between 50 and 70 per cent of large businesses, and 20 and 40 per cent of small and medium-size enterprises, are ready for the new customs arrangements. Government data revealed that about half still think that the transition period will be extended.
    • They are also concerned that if a deal is struck in the next month or so many of those businesses will wrongly assume that they need to do nothing. A big Government advertising drive urging businesses to prepare that was launched in July does not seem to have been very effective, and reports suggest that officials have conceded that there is only so much that the Government can do to make them prepare.

Other Brexit news

  • The Government has been heavily defeated in the House of Lords over a cross-party move to guarantee high food standards post Brexit. Peers backed by 307 to 212 a change to the Agriculture Bill aimed at blocking the import of foodstuffs produced abroad at lower animal welfare standards. The amendment requires food products imported under future trade deals to meet or exceed domestic standards, to prevent UK farmers being undermined.
  • The Government is set to scrap former Prime Minister Theresa May’s plan to replace access to the EU’s satellite navigation system Galileo after Brexit with a home-grown equivalent. The UK Space Agency is expected to announce that contracts awarded to UK space companies to build the British Global Navigation Satellite System (GNSS) will not be extended beyond their expiration date at the end of this month. The Government will instead ask companies to put forward “innovative” solutions that give the UK additional resilience to that of Galileo and GPS, the US satellite navigation system.
  • The Financial Conduct Authority has proposed its approach for licensing of international firms seeking permanent establishment in the UK after the end of the temporary permissions regime, a sort of bridge period to allow firms and investment funds continue their UK business with minimal disruption when the passporting regime ends at the end of the transition period. The FCA said it would follow the same principles as when UK firms seek authorization, and it will “pay particular attention” to potential insolvency, the role of senior managers and the level of cooperation from the home country’s supervisor. Replies to its consultation are due by 27 November.
  • Business Secretary Alok Sharma held a call with representatives from a cross-section of British industry to canvas ideas of what the UK’s state aid regime should look like after the Brexit transition period. Car and plane manufacturers, steel firms, pharmaceuticals, ports and agricultural representatives were among those involved.
  • Representatives of the Governments of Gibraltar, Spain and UK have met this week to continue their negotiation on the post-Brexit future of The Rock. The talks are stuck on whether Gibraltar should join the Schengen passport-free zone and how the border would be patrolled if they did. Spain is proposing this should be a task for its police officers, whereas Gibraltar is calling for “neutral” solutions such as giving the job to the EU’s border management agency Frontex.
  • LCH and other British clearinghouses can keep handling euro derivatives for EU clients until midway through 2022. The European Commission formally announced the temporary “equivalence” finding this week to avoid the prospect of disrupting markets at the end of the year. The 18-month reprieve, trailed last week, also gives time for EU dealers to move business into the EU, and for EU clearinghouses to gain capacity. The Bank of England said the timeframe means the EU can finalize “the remaining steps for recognition” of UK clearinghouses — which, as of August, managed £60 trillion of derivative contracts for EU traders. The central bank pointed to its own temporary regime for EU central counterparties, kicking in 1 January, to keep servicing UK clients.

The Irish government is bringing forward new legislation to recognise UK divorces in Ireland after the Brexit transition period expires at the end of the year.

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