Brexit update

Chancellor’s Mansion House speech

On 20 June 2017, HM Treasury published the Chancellor’s Mansion House speech.

In his speech the Chancellor discusses a “Brexit for Britain”, where the UK leaves the EU but in a way that prioritises British jobs and underpins Britain’s prosperity. The Chancellor states that this can be achieved by: (i) securing a comprehensive agreement for trade in goods and services; (ii) negotiating mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges; (iii) agreeing frictionless customs arrangements to facilitate trade across UK borders and to keep the UK’s land border on Ireland open and free-flowing.

The Chancellor states that avoiding fragmentation of financial services is a “huge prize” for the economies of Europe. He believes that this can be avoided if the challenge is approached with three simple principles: (i) a new process for establishing regulatory requirements for cross-border business between the UK and EU. It must be evidence-based, symmetrical, and transparent. It must also reflect international standards; (ii) cooperation arrangements must be reciprocal, reliable and prioritise financial stability. They must enable timely and coordinated risk management on both sides; and (iii) the arrangements must be permanent and reliable for the businesses regulated under these regimes.

Governor of the Bank of England Mansion House speech

On 20 June 2017, the Bank of England (BoE) published its Governor’s Mansion House speech.

In his speech Mr. Carney stated that “now is not the time” to tighten monetary policy, listing mixed signals on consumer spending and business investment, subdued domestic inflationary pressures and anaemic wage growth as reasons to hold off from reducing the stimulus measures the BoE introduced in August 2016. Before changing policy Mr. Carney said that he, personally, would like to see how weaker household spending is offset by better trade or a rebound in investment; whether wages start to increase and “how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

Mr. Carney warns that without a transition arrangement, some companies on both sides of the English Channel may soon need to activate contingency plans.

Mr. Carney also defended London’s role as a hub for global derivatives trading. He stated that fragmentation was in no one’s economic interest nor was it necessary for financial stability. However, he also acknowledged European concerns but felt that they could be addressed through “common standards and cooperative oversight.”

David Davis statement following the opening of EU exit negotiations

On 19 June 2017, the Secretary of State for Exiting the EU, David Davis MP, issued a statement following the opening of the Brexit negotiations. Key points in the statement include:

agreement has been reached on how the talks will be structured over the coming months. Michel Barnier and David Davis will meet every four weeks. A number of technical working groups, tasked with driving progress on the detail, have also been established. These groups of experts have now met for the first time; and
there is much common ground on the issues around the rights of UK citizens living in the EU and EU citizens living in the UK. The UK Government will publish a paper outlining its position on Monday, 26 June 2017.

Michel Barnier statement following the opening of the negotiations with the UK

On 19 June 2017, the European Commission’s (Commission) Chief Negotiator, Michel Barnier, issued a short statement following the opening of the Brexit negotiations. Key points in the statement include:

the first stage of the negotiations will be broken down into three groups: citizens’ rights, the single financial settlement, and other separation issues. The second stage will be to scope the future relationship; and
a dialogue on Ireland will also be started. The protection of the Good Friday agreement and the maintenance of the Common Travel Area are the most urgent issues to discuss.

EU terms of reference for the Article 50 negotiations

On 19 June 2017, the Commission published terms of reference for the Article 50 negotiations.

As stated above negotiating rounds will be organised once every four weeks in principle. The terms of reference states that the indicative dates are: