Brexit: All Eyes Turn On The UK Parliament

The EU will not grant London unlimited access to European financial marketsThe UK does still stick out as one of the best opportunities

A week is an infamously long period of time in politics and as bilateral negotiations approached their culmination early last Sunday morning, and no sooner had unanimous agreement been reached on the controversial draft outlining the terms of the UK’s departure and future ambitions on bilateral relations, a parallel document of intent was published, signed off by all remaining 27 EU leaders, sending a stern message about the future shape of political and economic ties, vowing to protect EU interests ranging from fishing to fair competition, the first of those concerns probably representing the most contentious battle to be fought in future negotiations beyond the deadline, next year.

Some EU leaders publicly backed UK Prime Minister Theresa May with statements of support, as Dutch Prime Minister Mark Rutte stated that Mrs May had “fought hard” and that the result was a good deal, or more notably, German Chancellor Angela Merkel’s gestures of a nod of good faith and the shedding of a tear on a face to face adios at what was likely to be the last time the UK sat at the round table. EU chief negotiator Mr Michel Barnier said these had been “extraordinary”, “complex” and “difficult” negotiations, whose consequences had led to to an “unprecedented and ambitious partnership”, adding to Mr Jean-Claude Juncker’s woeful comment of “tragedy” just as the exit deal had been agreed. A wistful “friends till the end of days and a day longer” was among Donald Tusk’s conclusive remarks.

Orchestrated, perhaps. The next fortnight back at Westminster is likely to be the toughest of Mrs May’s tenure, but equally a testing period for the EU with the prospect of a rejection by UK MP’s, which could ultimately send the process back to “square one” and “ open the door to more division and more uncertainty”, as Mrs May’s put it. Both sides officially manifest a no deal scenario as the worst possible outcome, a likelihood proving to be a very real concern given that the numbers for a parliamentary vote to be held in a couple of weeks seeking approval, fail to add up.

Yet the coordinated stance did  little to deter rogue comments from French and Spanish leaders.

Spanish Prime Minister Pedro Sanchez said on Sunday: “Really, regarding the departure of the United Kingdom, we are all losing, and it’s especially the United Kingdom who is losing, but regarding Gibraltar, Spain wins. And Europe wins.”

A stretch of the imagination for Mr Sanchez to argue that European leaders were set to profit on Gibraltar, all having visibly remained silent amid the sudden concerns publicly raised by both the Spanish PM and his foreign minister over the last few days, “at the last minute in our negotiations” stated Gibraltar Chief Minister Fabian Picardo, further claiming that “raising issues at the eleventh hour is a well-known tactic that has been used by Spain”. Despite threatening a political and moral veto at Sunday’s round table vote should a carefully worded reference detailing the independent nature of Gibraltar negotiations to UK-EU talks not be included in the draft, he backed down, conversely claiming victory, on talks he describes as joint sovereignty, possibly with next month’s regional elections on his mind?

French President Emmanuel Macron’s comments, however, commanded sober attention as his words aggressively focused on securing fishing rights in UK waters as a central part to any kind of post-Brexit trade deal negotiation. Mr Macron’s stance, clearly interpreted as seeking to replicate the Common Fisheries Policy with guaranteed powers for EU fisherman, probably more so for the French fisherman than anyone else, is widely viewed as potentially holding the UK to ransom because of the Irish backstop which would ultimately lock the UK into an eternal third party customs union, in which Britain would have neither voice nor unilateral decision to exit, which is not quite the return of sovereignty that the electorate voted for in the June 2016 referendum.

A comprehensive, favourable trade deal was clearly never going to be on the cards on an issue which has successfully divided the government, the country and absolutely every business and social group within the United Kingdom. Not so much the 21-month or more transition period but rather the real elephant in the room, the legally-binding text of the backstop, is undoubtedly and understandably fuelling the controversy which ultimately strips the UK of the unilateral authority to walk away in the event of the failure of the UK-EU to see eye to eye. The dream of being an independent coastal state could be blown apart if the European Court of Justice finds grounds on which to stand firm, effectively trading in the £39bn payment on trust, or rather, into the hands of a select committee of European Judges.

The real debate possibly dominating the agenda at present is whether the UK’s delivery on the referendum result, or at least Theresa May’s very personal interpretation of it, would actually place the country in a worse position than where it stands today. Downing Street must be praying that a hard core majority of politicians from both sides will just want to get on with it.

Between a rock, definitively not Gibraltar, and a hard place is exactly where Mrs May finds herself for the next fortnight as she seeks to further her campaign though uncommon media outlets and across platforms, with Downing Street sources suggesting she could even propose a televised debate with opposition leader Jeremy Corbyn, on the plight of her deal. Beyond this, and on the basis of a non-negotiable stance as reiterated by senior EU figures all weekend, failure on the parliamentary vote scheduled for 11 December could easily reignite sentiment for a party leadership no-confidence vote potentially sparking a general election, a new referendum whether on the draft agreement or Brexit itself, or lead to the feared no deal Brexit scenario.


About the Author

Chandra Roy
Educated at the LSE, Chandra joined Lehman Brothers where he initially traded commodity options, specialising in risk management through OTC & listed derivatives. His career spans over 25 years in international financial markets having held positions in fixed income & money markets, in both London & Madrid. He worked almost 18 years at Grupo CIMD, where he set up and managed the Emerging Markets & Credit division. He currently lectures in International Financial Markets at the Instituto de Estudios Bursátiles, Madrid.