08 January 2018

Financial Times: Brussels warns UK companies of shut-out in event of no-deal Brexit

Even as negotiators neared a breakthrough in Brexit divorce talks, EU regulators issued a flurry of “be prepared” memos to about 15 industries in November and December, ranging from drugmakers, seafarers and mineral water producers to hauliers and airlines that rely on UK operating licences.

The documents call on companies to be ready for the UK to become “a third country” on March 29 2019, with no automatic right to operate in the single market. They also warn that operating licences will automatically lapse after Brexit and that many groups may have to create EU entities for continuity of business.

The warnings triggered an angry response from David Davis, the Brexit secretary, who accuses the EU of measures that could jeopardise existing contracts or force British companies to decamp to the continent if the two sides fail to reach a deal.

Mr Davis’s complaints were outlined in a letter sent last month to prime minister Theresa May and leaked to the FT this week.

“We are surprised . . . the UK government is surprised the commission is preparing for a no-deal scenario,” retorted Margaritis Schinas, the commission’s chief spokesperson, on Tuesday.

The flare-up highlights the contrasting approaches to no-deal preparation taken in Westminster and Brussels. While the UK has emphasised government contingency planning, laying aside £3bn to build up regulatory and customs capabilities, the EU is highlighting risks so the private sector makes arrangements for “all circumstances”.

EU negotiators see it as a positive if companies take no chances and trigger comprehensive contingency plans for Brexit, especially if that involves moving business activity from Britain to the continent. A strict approach has also been applied in the awarding of some EU contracts and funding applications.

“We’ve heard pretty concerning reports about negative treatment of UK businesses and universities since the referendum, either on contracts, collaboration or funding,” said Adam Marshall, director-general of the British Chambers of Commerce. Mrs May’s government sealed a divorce deal with the EU in December and hopes to agree transition arrangements by the end of March.

But although some EU notices made passing references to a possible transition deal after 2019, most of the papers issued by the European Commission did not.

The commission repeats in several notices that “preparing for the withdrawal is not just a matter for union and national authorities, but also for private parties”. [...]

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Financial Times: David Davis attacks EU’s ‘damaging’ no-deal Brexit planning

David Davis has consulted lawyers over the EU’s preparations for a no-deal Brexit, claiming Brussels’ planning is harming British business and breaching the UK’s rights as a member state.

In a letter sent to Theresa May, UK prime minister, last month and seen by the Financial Times, the Brexit secretary pointed to EU “measures” that could jeopardise existing contracts or force British companies to decamp to the continent if the UK leaves the EU without a deal.

Mr Davis said in the letter that he would ask the European Commission to revise its guidance to business so it highlights the potential for a future transition and trade deal.

But the demand drew accusations of hypocrisy from some British MPs, given that UK ministers have emphasised the extent of their own no-deal planning.

[...]Mr Davis said in his letter to Mrs May that the guidance from EU agencies sees the UK becoming a “third country” when it leaves the bloc in March 2019, without referring to the British government’s hopes of sealing a two-year transition period or trade deal.

Mr Davis said this treated the UK differently from other member states, even before it left the bloc, “in a way which is frequently damaging to UK interests”.

“The EU has adopted a number of measures that put agreements or contracts at risk of being terminated in the event of a ‘no deal’ scenario and/or would require UK companies to relocate to another member state,” Mr Davis said.

[...] Stephen Kinnock, another Labour MP, said the government was “naive” not to imagine that the EU would want to prepare for scenarios including a no-deal Brexit.

“The passive-aggressive tone of the letter demonstrates that the government doesn’t have a clue,” he said. “The relationship between the EU and UK does seem to be falling to pieces.”

[...]Mr Davis wrote in his letter that the measures amounted to “potential breaches of the UK’s rights as a member” of the EU. He told the prime minister the government “cannot let these actions go unchallenged”.

However, Mr Davis added that he had sought legal advice from officials, only to be warned that any legal challenge would probably fail.

“Any legal action would also be high-risk politically and financially and may not conclude until after we exit,” he said. [...]

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