A trip to Brussels gave Mark Essex renewed optimism that a Brexit deal could be done…as long as the EU27 member states can fall into line.
What you read in the press and what you hear in the room are often very different things. British media reported Europe's chief Brexit negotiator Michel Barnier’s warnings to the City and more tough talk on negotiations. I was at that speech in Brussels and the message I drew listening to him was more positive than the headlines suggested.
Of course he had to play to the EU gallery for much of the speech, talking about the EU’s unity on banking and monetary policy, and lobbing the odd bon mot at UK Brexit secretary David Davis’s expense. His firm approach went down well with the Europhile audience and gave British journalists what they needed.
But one part in particular buoyed my optimism, where Monsieur Barnier outlined his ambition around the future relationship. The EU’s preferred option, he said, was an orderly withdrawal, with common ground found on key issues such as fair competition, state aid, tax dumping, food safety and social and environmental standards.
Subject to that – and this was the crucial line largely missed in the media coverage – he added, “the EU will of course be ready to offer its most ambitious FTA approach.”
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To me, that sounded like Barnier effectively saying a deal could be struck that goes beyond the trade agreement with Canada, so often held up as the far limit of what UK negotiators could achieve.
If Tuesday provided the optimism; Wednesday’s Budget offered the cold shower of pragmatism. The Chancellor of the Exchequer set aside £3 billion to fund ‘no deal’ preparations and my advice is that businesses follow his lead.
Why? Because for all Barnier’s positivity, the veteran diplomat will have his work cut out finding a common line among the EU27 once the issue of money is settled. The priorities of those with a substantial agricultural sector will be very different from those whose prosperity depends on frictionless manufacturing supply chains. Those whose real economy relies on access to London’s financial centre versus those who see themselves as rivals. Meanwhile the question of how to tackle the Irish border issue is rapidly becoming the greatest threat to a breakthrough at the EU summit in December.
For all of us hoping for a deal, I see green shoots emerging from Whitehall as the UK’s cabinet seem to have agreed a truce on an offer of around £40 billion to settle the divorce bill. I’m also encouraged by Barnier’s subtly sunnier language. But to really get a sense of how likely a deal is, we have to keep gauging the mood among the member states themselves. What clearly came through on the side lines of the conference in Brussels were the deep divisions, narrow national interests and opposing philosophical views, lurking just behind the blue and yellow flag. They may yet scupper a Brexit deal.
My advice to businesses who are weighing up whether to stick or twist on activating contingency plans is to pay just as much attention to politics on the other side of the Channel as they do to events in London.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders