Brexit – where are we now?


Two and a half years after Britain voted to leave the EU, Mrs May presented the draft withdrawal agreement drawn up by British and European negotiators to her cabinet last week.
The series of ministerial resignations began on the day after.
Many observers believe the deal will not get through parliament, leading either in a challenge to May’s leadership, a general election, or even a second referendum.
We look at what is going on – and what it might all mean.

What is the withdrawal agreement?

The withdrawal document – it seems rather premature to call it an agreement – is an outline for Brexit. It is a weighty tome, running to 585 pages, and going into considerable detail, but with five key points:

• Britain’s financial settlement with the EU to meet agreed commitments – the ‘divorce settlement’.
• The post-Brexit rights of EU citizens in the UK and UK citizens within the EU.
• The problem of “hard border” with Ireland.
• A political declaration outlining the two sides’ ambitions for their desired future trading relationship.
• A transition agreement, until December 2020

The UK and EU negotiators agreed on the so-called divorce bill and citizens’ rights. The main sticking point has been over the border between Northern Ireland and the Republic of Ireland, which after Brexit will also become the border between the UK and the EU.

Both sides want to avoid a hard border with customs checks that could become a source of friction. The problem is that by taking the UK out of the single market and the customs union, customs and regulatory checks become almost inevitable.

The DUP, the Northern Ireland party on which the government depends for its majority is not indicating support for the proposed plan.

The backstop problem

Under the terms of Mrs May’s proposal, the Irish border problem will eventually be solved under the terms of a Free Trade Agreement that the two sides sign at some point in the future. However, this has still to be negotiated. The EU insisted on a “backstop” arrangement to avoid a hard border until a FTA was agreed. The row over the backstop is what has prevented progress.

Britain rejected the EU’s backstop, which would keep Northern Ireland in the customs union and single market because it would require customs checks for goods crossing the Irish Sea. This would mean that Northern Ireland was treated differently to the rest of the UK, raising the hackles of unionists.

The EU initially rejected Britain’s suggestion that the UK should therefore stay in a de facto customs union. Eventually a compromise was reached. Britain will be locked into the backstop until the EU agrees there is no prospect of a return to a hard border. It will mean special customs arrangements for Northern Ireland, and “level playing field” conditions for the whole of the UK.

This means that the UK will still be bound by EU rules.

Conservative Brexiters were appalled at the prospect of being trapped forever in a customs union with the EU and EU regulations. Dominic Raab, Brexit secretary resigned in recently, the first of several ministers to do so. The consensus is that this is not really a Brexit at all.
The EU has confirmed an emergency EU summit can be called for 25 November to formalise the agreement, after which the deal then has to pass through parliament early in December.
Many observers believe that rather than being nodded through, more likely results include a challenge to Mrs May’s leadership, a general election or even a second referendum.
As always, the Brexit process remains full of surprises. At time of writing, Mrs May remains not only in power, but upbeat, and her deal may be getting a positive response from Brussels – albeit with some tweaks. The only certainty is that, if you want to discuss its impact on your financial arrangements, at Continuum we will be very happy to help.

The value of investments can fall as well as rise and you may get back less than you invested.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate deposit accounts.

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Sources:
theguardian.com – Theresa May’s Brexit deal: everything you need to know – 15th November 2018
bbc.co.uk – Brexit: All you need to know about the UK leaving the EU – 17th November 2018

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