Delays throw early transition hopes into doubt
BRITAIN’S aim to secure an early transition agreement on Brexit is “not a foregone conclusion”, EU sources have warned. The Daily Telegraph can reveal that a deal last month between Britain and the EU which promised “an agreement as early as possible in 2018 on transitional arrangements” – meaning the March 22-23 European Council – has been thrown into doubt as France tries to pursue a business advantage. EU sources warn that bureaucratic delays, legal issues and political opposition from France, which wants to drive home its Brexit business advantage, all risk delaying an early deal. “It is absolutely not a foregone conclusion there will be a deal on transition in March,” said a senior EU diplomat. “There is a constituency that believes this would give away our leverage far too easily and wants to keep the pressure on the Brits.”
Failure to secure a “handshake agreement” on transition at the March European Council would be a major setback for Theresa May, who wants to seal a deal on transition and clear the way for negotiations on the EU-UK future relationship.
This week a top supervisor at the Bank of England warned MPS that preparations by the banks for Brexit would “go up a gear” if the Government failed to secure transition by the end of March, in an implicit admission of UK vulnerability to EU foot-dragging.
Senior UK officials remain adamant that an in-principle deal can be done in March on the same basis as the December deal, with Mrs May and Jean-claude Juncker publicly committing to an agreement.
The final legal text would not become binding and ratified until the end of the deal process in March 2019, but the political agreement would provide businesses with the certainty they need. “Never underestimate the power of a handshake,” said a senior UK negotiator.
Others senior figures in Whitehall are privately less optimistic that the EU will not give in to temptation and delay an agreement transition.
“There is both a belief that fuelling uncertainty will be to their commercial advantage while others argue that increased uncertainty will force the UK to take a ‘more realistic approach’ to the trade negotiation,” a Whitehall source admitted.
The time frame even for an inprinciple transition deal remains tight, with the EU only due to approve formal guidelines on transition on Jan 29, allowing the Commission to produce an “essential principles” paper for EU member states early next month.
Formal negotiations on the transition are not, therefore, expected to start until mid-february, leaving just a few weeks before the March leaders’ summit to iron out any potentially divisive disagreements.
A leaked draft of the EU guidelines seen by The Telegraph this week shows the EU already toughening up terms for transition, in which the UK will have to continue to accept free movement and all EU laws. There also remain several outstanding areas from the first phase of the negotiations not agreed in December, including setting up a body to govern EU expats’ rights, as well as other separation issues, including intellectual property rights, data questions and customs issues.
According to the leaked guidelines, the EU will only make progress on trade and future relationships if all commitments made in December are “respected in full and translated faithfully in legal terms as quickly as possible”, opening up the pretext for delay.
The Telegraph understands Brussels negotiators are worried that Britain will not fully honour its December pledges, instead seeking only to mirror EU law and regulations, rather than accept them wholesale.
Mujtaba Rahman, a leading analyst at the Eurasia Group consultancy, said: “It’s giving rise to the view that the EU should skip the political declaration in March and move straight to legal text, which has the advantage of providing clarity but carries the risk of delaying and deepening the uncertainty over the transition,” he added.
With UK negotiators only beginning preparatory talks with their opposite numbers in Brussels this week, it remains unclear if a deal can be done in time, though pressure from more pragmatic member states could soften the hard lines taken in Paris and Berlin.
Charles Grant, of the Centre for European Reform, said both sides ultimately had an interest in moving on to second-phase negotiations.
“It would be difficult for Paris or Berlin to take such a line, partly because the British are likely to agree to most of what the EU requests during the transition, but also because some other member-states would object,” he said.
Brexit in depth
Increased uncertainty will force the UK to take a ‘more realistic approach’ to the trade negotiation