By Gökhan Kurtaran
London letter, week beginning Dec. 19


PM May’s Brussels visit - start of a long bumpy road to Brexit deal

Despite the fact that it has been more than six months since the U.K. referendum and the Brexit decision, members of the bloc and the U.K. seem to be having trouble digesting the result and making headway. The desire of mainly London-based financial institutions is to retain access to the EU by remaining in the single zone, however, both EU members and the U.K. are failing to find a sustainable solution that could secure passporting rights of these financial companies based in the U.K.  As Frankfurt, Paris and Luxembourg are the biggest competitors to London for luring international financial companies to their soil, it seems logical that there will be tense discussions for U.K. companies’ to have access to the EU market.

Last week a £50 billion divorce settlement bill proposed to May, was widely reported as being under discussion by senior EU diplomats at a European council meeting in Brussels. The bill would include Britain’s share of long-term liabilities such as pensions – one of the many issues that would need to be resolved during the Article 50 talks. However, according to the Guardian newspaper, May’s spokesman rejected the £50 billion figure, saying “negotiations have not begun and so that figure does not actually exist.”

As May left the summit in Brussels typically without giving a full press conference, and as her team gave no prior indication of submitting a Brexit update, there is no details on the direction that the Brexit talks will take.

However International Trade Secretary, Liam Fox came with an interesting proposal on Sunday while speaking on Andrew Marr’s BBC show. Fox suggested that the U.K. could follow a similar arrangement to Turkey, which broadly allows the country to engage in forms of free trade with non-EU states while taking advantage of tariff-free access to particular sectors within the EU.

Looking at the months ahead, the U.K. will have a very critical first quarter in 2017 regarding the pace of the exit from the EU, developments of which the markets will be closely watching.  In January, the U.K. Supreme Court is expected to deliver its ruling on whether PM May has the power to trigger Article 50 using a royal prerogative, rather than by an Act of Parliament.

March 31, 2017 is the deadline May set for invoking Article 50 by notifying the European Council of Britain’s intention to leave the EU.  Sept. 30, 2018 is also the date by which EU’s chief Brexit negotiator, Michel Barnier, wants to wrap up terms of Britain’s exit from the Union. On March 31, 2019, May wants to conclude negotiations over Brexit and finally Britain is expected to leave the EU, following ratification of the Brexit by all other member states in May 2019.

Regardless of whether the calendar will change or if the route will differ from planned, there will still be the high probability of uncertainty clouding the outlook with many more surprises ahead like the court decision for a Parliament vote to trigger Article 50. 

19 Dec,2016