Gov­ern­ment has con­tin­gency plans ‘for all Brexit sce­nar­ios’

Irish Examiner - - News - Daniel McCon­nell, Juno McEn­roe, and Elaine Lough­lin

Con­tin­gency planning for Brexit is be­ing car­ried out “for all sce­nar­ios”, the Gov­ern­ment has con­firmed.

For­eign Af­fairs Min­is­ter Si­mon Coveney has con­firmed that, should the North leave the cus­toms union, some cus­toms check­points will have to ex­ist.

“If goods are trav­el­ling on the is­land of Ire­land and move from one cus­toms union to an­other, there have to be cus­toms checks some­where, whether that’s in a farm­yard, in a fac­tory, in an of­fice or in the back of a truck,” said Mr Coveney.

“So we want to avoid that, we have been very clear and con­sis­tent on that. Some peo­ple have ac­cused the Ir­ish Gov­ern­ment of hard­en­ing or chang­ing its po­si­tion in the last few days —that is not the case.”

In the Dáil, Taoiseach Leo Varad­kar con­firmed that con­tin­gency planning “for all sce­nar­ios” is un­der way.

Mr Varad­kar also sought to deny that work has been un­der­taken to de­velop bor­der in­fra­struc­ture to deal with a worst-case sce­nario, but the Rev­enue Com­mis­sion­ers has un­der­taken work to ex­plore the im­pli­ca­tions of Brexit.

It has been con­firmed that Rev­enue Com­mis­sioner of­fi­cials have been en­gaged to de­ter­mine all “le­gal and prac­ti­cal im­pli­ca­tions of a range of sce­nar­ios” re­lat­ing to Brexit.

Se­nior Gov­ern­ment sources have ad­mit­ted that this in­cludes deal­ing with the move­ment of goods and ser­vices across the bor­der to the North.

Mr Varad­kar has in­sisted that work on de­vel­op­ing bor­ders is not un­der way and he de­nied that he stopped the Rev­enue Com­mis­sion­ers from de­vel­op­ing such con­tin­gency plans.

“We are cer­tainly not de­sign­ing cus­toms forms, nor would it be within our re­mit to do so as it is an exclusive com­pe­tency of the Euro­pean Union,” he said. “We are not look­ing to hire Bor­der staff or any­thing of that na­ture and any planning op­er­ates on a con­tin­gency ba­sis.”

Mr Coveney said he did not think hard bor­der check points will re­turn, and added that “every­one is com­mit­ted to en­sure that doesn’t happ­pen”.

“I don’t think that we are go­ing to see phys­i­cal check­points on the bor­der,” said Mr Coveney. “Every­one is com­mit­ted to en­sure that doesn’t hap­pen. But that doesn’t mean there wouldn’t be bor­der in­fra­struc­ture some­where else on the is­land of Ire­land, in terms of check­ing sys­tems.”

How­ever, he did ac­cept that some form of check­ing will have to ex­ist if the North does exit the Cus­toms Union.

He said: “If you have some reg­u­la­tory di­ver­sions, there has to be some check­ing sys­tem. If you don’t per­ate to the same rule group, there needs to be some check­ing.”

Mean­while, for­mer taoiseach Ber­tie Ah­ern said that he does not see any re­turn to the tower blocks and high se­cu­rity along the bor­der.

“I don’t think there is any pos­si­bil­ity of us get­ting back to tower blocks and high se­cu­rity,” said Mr Ah­ern. “I don’t think that’s what it is but what we want is a bor­der that al­lows free trade, free move­ment to con­tinue.

“Europe are good at find­ing imag­i­na­tive so­lu­tions and I think we need to get an imag­i­na­tive so­lu­tion to this.

“It’s not good enough for the Euro­pean Union, the Bri­tish gov­ern­ment and the Ir­ish Gov­ern­ment to all say they are all in favour of to­tally open, fric­tion­less bor­der and then we end up that we can’t find one that works.”

Theresa May’s plan to write the date of the UK’s sep­a­ra­tion from the Euro­pean Union into law has been dis­missed as a “gim­mick” and led to fresh warn­ings it could pro­voke a Tory re­volt as MPs de­bated the Brexit leg­is­la­tion.

The Prime Min­is­ter wants 11 pm GMT on March 29, 2019, en­shrined in law as the point that the UK breaks away from Brus­sels.

But as the Com­mons be­gan its first day of de­tailed scru­tiny of the Euro­pean Union (With­drawal) Bill, the move was con­demned by Labour and re­la­tions within the Tory party were de­scribed as “stormy” as a re­sult of the Gov­ern­ment’s han­dling of Brexit.

Mean­while, Brexit Sec­re­tary David Davis sought to re­as­sure busi­nesses that progress was be­ing made in talks with Brus­sels and said agree­ment on an im­ple­men­ta­tion pe­riod be­tween the date of leav­ing the Euro­pean Union and the start of a new trad­ing re­la­tion­ship could be se­cured “very early next year”.

But the Euro­pean Par­lia­ment’s Brexit co-or­di­na­tor Guy Ver­hof­s­tadt sug­gested there had been “no progress” in the talks and cast doubt on whether EU lead­ers would give the green light to move onto the next phase — cov­er­ing the im­ple­men­ta­tion and fu­ture re­la­tion­ship — at a crunch sum­mit next month.

In the Com­mons, the so­called re­peal bill be­gan eight days of de­tailed scru­tiny, with key votes ex­pected later in the process.

Pro-EU Tory Anna Soubry said a pri­vate meet­ing be­tween Con­ser­va­tive MPs and party whips on Mon­day evening was “stormy”, with crit­ics go­ing be­yond the usual po­ten­tial rebels.

And in fur­ther sign of the dif­fi­cul­ties faced by the Gov­ern­ment, which will be forced to rely on DUP votes for a ma­jor­ity, se­nior Tories spoke out in the Com­mons.

For­mer chan­cel­lor Ken Clarke said the amend­ment on the date was “not just ridicu­lous and un­nec­es­sary — it could be pos­i­tively harm­ful to the na­tional in­ter­est”.

Ex-at­tor­ney gen­eral Do­minic Grieve said the move was “very strange” and could dam­age the gov­ern­ment’s ne­go­ti­at­ing po­si­tion by lim­it­ing the flex­i­bil­ity avail­able to min­is­ters.

Shadow Brexit sec­re­tary Keir Starmer said the Gov­ern­ment’s bid to write the date of with­drawal into the law was a “des­per­ate gim­mick” from the prime min­is­ter in an ef­fort to keep her party’s Euroscep­tics in line.

Mr Davis ad­dressed fi­nanciers fol­low­ing warn­ings from busi­ness lead­ers that un­less an im­ple­men­ta­tion pe­riod is agreed by Christ­mas, firms will in­creas­ingly be forced to make ar­range­ments to move work to other EU na­tions.

Mr Davis ac­knowl­edged that in­vestors needed cer­tainty and “with­out such an im­ple­men­ta­tion pe­riod, some of these de­ci­sions would need to be taken in the com­ing Jan­uary”.

“That is why we want to agree this pe­riod as soon as the EU have a man­date to do so. Which I be­lieve can be done, very early next year.”

But Mr Verh of stadt warned that the UK’s of­fer on cit­i­zens’ rights does not go far enough to al­low Brus­sels to con­clude that “suf­fi­cient progress” has been made in di­vorce talks at next month’s sum­mit of EU lead­ers.

An­a­lysts are more op­ti­mistic than the UK gov­ern­ment that an agree­ment will be reached with the EU next month to move Brexit talks on to trade, even as Theresa May’ s po­lit­i­cal trou­bles con­tinue to weigh on the coun­try’s be­lea­guered cur­rency.

A Bloomberg sur­vey of seven banks pegged the odds of a UK-EU ac­cord in De­cem­ber at 68%. That’s more than UK Brexit sec­re­tary David Davis, who put the chances of a break­through by De­cem­ber at 50-50, ac­cord­ing to Euro­pean busi­ness lead­ers he briefed at a meet­ing this week. His spokesman, how­ever, de­nies he made the com­ment.

Com­mon­wealth Bank of Aus­tralia’s Peter Kin­sella sees the prob­a­bil­ity of a deal at 80%, the high­est in the sur­vey, with the low­est es­ti­mated by Mizuho Bank’s Neil Jones at 35%.

The most bullish ster­ling fore­cast is from No­mura In­ter­na­tional, which sees it ris­ing 7% to $1.40 by year-end on the back of deal, while Com­merzbank’s call for the cur­rency to weaken as much as 10% in the ab­sence of an agree­ment is the most bear­ish.

Ster­ling fell as much as 1% ear­lier this week to $1.3062 af­ter the Sun­day Times re­ported 40 mem­bers of the UK par­lia­ment were ready to sign a let­ter of no con­fi­dence in the Bri­tish prime min­is­ter.

It later pared losses to close at 1.3116, be­fore slip­ping again by 0.3% in the most re­cent ses­sion.

The op­po­si­tion Labour party ac­cused Ms May of lack­ing the sup­port of her own party to de­liver the Brexit tran­si­tion pe­riod she’s pro­posed. Im­plied vo­latil­ity on pound-dol­lar op­tions ex­pir­ing in a month jumped 151 ba­sis points over the past two days, head­ing for the big­gest such in­crease since Oc­to­ber 2016.

With just over two weeks un­til EU of­fi­cials meet in Brus­sels and be­gin draft­ing the con­clu­sions for the De­cem­ber EU sum­mit, Bri­tain needs to make an of­fer on the di­vorce bill to move talks on to trade. De­spite a tick­ing clock and a weak­ened gov­ern­ment, strate­gists are op­ti­mistic that the UK will agree to a deal in time, boost­ing the pound.

Here’s a roundup of an­a­lysts’ views ahead of the De­cem­ber meet­ing:

No mu ra In­ter­na­tional sees a 60% prob­a­bil­ity that the EU will al­low talks to move on to trade in De­cem­ber.

“The leaked let­ter is just cap­tur­ing peo­ple’ s at­ten­tion ,” says cur­rency strate­gist Jor­dan Rochester, re­fer­ring to the Sun­day Times story. “My mind will change if 40 MPs be­come 48,” Mr Ro­chetser said.

“It still re­quires Theresa May to do some­thing in the next two weeks but I am as­sum­ing she will do just enough to get things mov­ing as it’s not in her in­ter­est to slow things down fur­ther,” said Com­mon­wealth Bank of Aus­tralia.

“The UK has a his­tory of play­ing this do­mes­tic po­lit­i­cal un­cer­tainty with Brus­sels and ex­tract­ing con­ces­sions from Brus­sels,” says Mr Kin­sella, se­nior cur­rency and rates strate­gist at Com­mon­wealth. He sees an 80% prob­a­bil­ity of a De­cem­ber deal. The pound is “priced in for the very neg­a­tive sce­nar­ios” mean­ing it could gain up to 3% if progress is an­nounced in sais Mr Kin­sella.

Stan­dard Bank head of cur­rency strat­egy Steven Bar­row sees the like­li­hood of talks ad­vanc­ing to trade in De­cem­ber as “quite high, 75%”.

“The mar­ket clearly seems more wor­ried af­ter the week­end but I don’t think the sto­ries made much dif­fer­ence,” he said.

Mr Bar­row sees the pound gain­ing to $1.32 on a De­cem­ber agree­ment

Comm erz bank sees the prob­a­bil­ity of mov­ing talks with the EU on to trade fol- low­ing the De­cem­ber sum­mit is “a lit­tle be­low 50%,” said econ­o­mist Peter Dixon.

“Both sides want to come to an ar­range­ment, but the Bri­tish are drag­ging their heels on ac­cept­ing the ex­tent of their li­a­bil­i­ties,” he said.

“Two of the three is­sues on the EU’s agenda have not been taken suf­fi­ciently se­ri­ously by the UK.”

For the pound, “the risks are for a much sharper de­pre­ci­a­tion due to the lin­ger­ing risk that the ne­go­ti­a­tions fail,” ac­cord­ing to cur­rency strate­gist Thu Lan Nguyen Mizuho at Com­merzbank.

There is a 35% chance of a deal by De­cem­ber, ac­cord­ing to head of hedge fund sales Neil Jones at Mizhuo.

The mar­ket’s think­ing is that Ms May is on the way out, given only an­other eight votes are re­quired to oust her, said Mr Jones, re­fer­ring to the news­pa­per story.

He sees the pound around $1.35 if progress in De­cem­ber, and “$1.28 ini­tially” if there is no agree­ment.

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