The UK’s Future in Europe: You Wouldn’t Start From Here!
September 24, 2018

The dust is settling on yet another European Council summit at which there has been no material progress towards agreement on the UK’s withdrawal from the EU nor any substantive progress on the UK’s future relationship with the EU.  Of course the EU27 has consistently resisted getting into the detail of the latter until the former has been settled and the UK has been equally consistent that there would be no final agreement on the former until the latter was meaningfully progressed.

The UK has now thrown the gauntlet down to the EU27 and is demanding the EU27’s counterproposals to the UK’s recent ‘Chequers’ proposals – which clearly involved several further concessions to the EU27.  We have said it several times before, but time is now very short.  For many international businesses, time has expired and they are now implementing contingency plans on the basis of no deal being reached.  The amount of time needed to put in place these arrangements simply means they have to be started now.  This isn’t a commentary on the UK Government, just business pragmatism given the continuing delays in making progress and the lingering uncertainty that remains.

Nevertheless, many insiders still anticipate a deal being concluded at the last minute which often does happen in EU matters.  And, the intensity of engagement and negotiation has definitely increased over the last few weeks.  Could it be that allowing a 24 month period to negotiate an exit simply led to not much of anything happening for many months?  What if that period was only 9 months?  Would we have arrived at this point sooner?  Time and time again we see that long dated deadlines lead to less focus and that only an impending deadline really triggers action.  I have seen that myself in many negotiations as well as planning for the last three major EU changes to Financial Services legislation.

There is also the prospect that neither side truly understands the objective of the other or the ‘home state’ political considerations of each.  Prime Minister Theresa May does not have much room to make further concessions without political cover.  In addition, any deal – even the current ‘Chequers’ proposals – may fail to be approved by the UK Parliament.

In any successful negotiation, it is important to understand the other side’s objectives and to understand what it means if you fail to reach an agreement.  The problem of course is that there is no consensus on either there side on what these are.

For example, in the UK many remainers would probably admit that they have issues with the EU concept of ‘ever closer union’ and in the EU, there are various parties that see the UK’s membership of the EU as a ‘disruptive presence’ and consider that the the UK is not critical to the EU’s future success.  The UK Government itself is split on the benefits of continued EU membership and the main opposition party, Labour, struggles to articulate its Brexit position.

Prime Minister May will be giving her speech to the Conservative Party annual conference next week and she will be under significant pressure from within and from without.  In the meantime, further papers are expected to be published by the UK’s Department for Exiting the EU setting out plans for a no deal outcome.  The next European Council summit is scheduled for 18 October and we will have to wait to see if there are any meaningful compromise proposals made by the EU27 in the meantime.

One thing is for certain, if you wanted to create a thoughtful arrangement for the future UK-EU relationship, you wouldn’t have started from here!

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