A Brexit deal in November?

Could Britain and the EU move towards signing a Brexit deal in November? After weeks in which the UK-EU talks had been in stalemate, signs of optimism are suddenly emerging.

Until now, progress in the talks has been so limited that many have forecast that a deal cannot be signed until the December European Council at the very earliest.

But several developments have contributed to an upbeat mood — at Westminster, anyway.

First, as the FT reports, Brexit secretary Dominic Raab stated in a letter to MPs that a deal with the EU could be finalised by November 21.

Some EU officials are mystified by this statement from Mr Raab. And his department was quick to play down the comment, saying “there is no set date for the negotiations to conclude”.

However, George Parker and Alex Barker write in the FT that “there is a growing mood of optimism in London that a Brexit deal is close”. One UK official told Bloomberg that Mr Raab’s letter, while a week old, still reflected current thinking.

The second contributor to optimism was a story in The Times saying Britain and the EU have reached an agreement on trade in financial services after Brexit.

The suggestion that a deal on financial services has been finalised has been heavily downplayed in London and Brussels. But the pound rose sharply on Thursday on the report, which could certainly make any deal more palatable to British MPs.

Of course, optimism about a Brexit deal is premature.

The central problem remains the backstop to the Irish border (a question examined in depth  here  by the FT’s Alex Barker and Arthur Beesley). As they argue, London and Brussels remain far apart over how that backstop can be designed to the satisfaction of all sides. 

However, some commentators perceive signs that the EU may be willing to compromise on this issue, and that this may be the real cause for optimism in London.

Until now, the UK has demanded that an invisible border should be maintained by means of an all-UK customs backstop and that this arrangement should be written into the Article 50 treaty itself.

This has been rejected as legally impossible by Michel Barnier’s team who argue that Article 50 can only deal with issues relating to “severance”.

However, Mujtaba Rahman of the Eurasia Group consultancy says: “There are indications that Brussels is willing to negotiate the details of an all-UK customs backstop under Article 50 and not just the principles of it.”

He says: “If the EU were to accept the idea, it would potentially remove the need for a Northern Ireland-only backstop to be written into the Article 50 treaty, something which Mrs May finds anathema.”

Theresa May has always objected to the idea of a backstop that only applies to Northern Ireland, because it would mean that a customs and regulatory border would be drawn down the middle of the Irish Sea. Mrs May believes any separate status for Northern Ireland from the rest of the UK would be potentially damaging to the union as a whole.

Mr Rahman says an all-UK backstop would also allow the government to spin the idea that the future relationship will be something other than a customs union.

This compromise is also explored in a piece in the Telegraph by Peter Foster. He says Mr Barnier is under growing pressure to accept British proposals that the Withdrawal Agreement should now include an open-ended customs union with the EU.

For the moment, this potential development has to be treated with caution. “It’s far from clear whether this compromise will happen,” says Mr Rahman. “But that’s where it seems negotiations are leaning. If it’s correct, it’s a big move towards unblocking a deal.”

Further reading

Greece shows Britain a maverick state can recover from disorder

“Viewed from EU capitals, the UK looks like an acutely polarised, chaotically governed nation that has gone slightly off its rocker, losing global influence in the process. Yet the lesson from Greece is that such disorder need not last for ever.” ( Tony Barber in the FT)

Why UK economy should grow faster in the short term if there is no deal

“The UK is a larger net importer from the EU. We import about €4 worth of goods and services for every €3 we export. So if barriers to exporting and importing are fairly similar (as UK policymakers would surely ensure they would be in most areas), the expected net impact will surely be a larger drop in imports than exports. So from this source, we’d expect a short-term boost to GDP, as net imports fell and the UK’s trade deficit improved.” (Andrew Lilico, former chairman of Economists for Britain, on BrexitCentral) 

Arron Banks’s bullyboy tactics will not stop me pursuing the truth

“Arron Banks, the chairman of Leave.EU, has taken the unusual step of writing to each household in my parliamentary constituency of Folkestone and Hythe, telling them that I am a ‘disgrace’ and a ‘snake in the grass’. He claims that ‘I have never respected the result of the [Brexit] referendum’. However, he is unable to point to anything in my voting record in parliament to substantiate his assertion.” (Damian Collins MP, in The Guardian)

Hard numbers

Shares in the four largest UK-listed banks by market capitalisation have suffered during the past 12 months. In fact, three of the top four — excluding Royal Bank of Scotland — are each trading at a near two-year low, or around post-EU referendum depths. However, state-backed lender RBS has been the worst performer during the past year, with the shares down about a fifth over 12 months.

Brexit-induced jitters have played a part in turning investors off Lloyds, RBS and Barclays, which have the biggest exposure to the fortunes of the UK economy.