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The EU Exit Endgame

With Henrik von Sydow, of Carnegie Private Banking, and Erik Lagerlöf, of Advokatfirman Vinge & Stockholm School of Economics

Henrik von Sydow:

Every day we ask ourselves 3 questions: What happens in the world? What kind of future can we believe in? What should we invest in?

October has seen a more intense progression of discussions on Brexit which means fewer people on both sides are involved- with Lord Frost and Mr. Barnier having a one-on-one meetings.

There will almost certainly not be a deal at this week’s European Council due to gaps on key questions. This is more of a stepping stone.

Both von der Leyen and Barnier are likely to want to end the negotiations.

The Council meeting is likely to be followed by a ‘tunnel’- which is the process in which the two sides will enter to hammer out a joint legal text. The cut-off date for this will be at the end of October.

Assuming a legal text is agreed, before the 31^st of October, the draft will have to be shared with EU capitals and the EU Parliament. The member states will likely take a lot of time to study the text.

The draft EU timetable then shows that the EU Parliament will then provide a principle sign-off on the 23^rd-26^th of November with a formal consent vote on the 14^th-17^th of Decemeber.

Both sides inching towards a zero-tariffs trade deal.

London and Paris disagree on fishing- this could hold back negotiations and, for example, a previous deal between Norway, Iceland and the EU failed because of fishing rights.

Merkel is well known for being slow on decisions which may lead to fishing rights being slowly phased out.

The silence on what is in the trade deal is a good sign- as a higher level of trust is being proven.

A probability of 60% for a deal being signed at the end of November.

Brexit is no longer a major headline (replaced by the US election and the pandemic) and is having less of an impact upon the financial markets- however, turbulence lies ahead in November.

Erik Lagerlöf

The UK left the EU on the 31^st of January

The Withdrawal Agreement will be of concern to those involved with intellectual property rights, VAT, Customs, etc.

We are now in the 2^nd phase (of 3) which is the transition phase and so for most businesses: Brexit has not happened yet.

The preparations for Brexit so far are lacking in most countries- both Swedish and British businesses have not sufficiently prepared.

A UK Minister confessing that the country would break International Law has not helped build trust with the EU- which is essential in a trade negotiation.

Negotiations only began, properly, this year- which allows for very little time.

Ratification and implementation are key- if individual EU member states are also (as well the EU) obliged to ratify the agreement then the deal will be delayed. Britain could then fall back on WTO rules.

Future agreements will be on goods but regulatory requirements will be different.

We hope for an agreement, likely complicated, between data transmission across the UK and EU.

One issue will be the lack of individual rights in the agreement. For instance, if a company has an issue with a national law that is not in compliance with a future agreement with the UK-EU Agreement: there will be no possibility to rely on EU law.

The UK has historically stood for many values in the EU institutions that Sweden highly values. Sweden’s place in the EU has now changed- such as the Coronavirus Relief Package which Sweden opposed and could have been prevented with the UK.

The EU will shift to more of a South-East of Europe focus.

The UK will pull through in the long-term post Brexit.

Questions

• The Irish issue: von Sydow: a lot of lack of details connected with Internal Markets Bill by PM Johnson. Lagerlöf: we still do not know how the UK will be able to properly implement the border.

• Trust: Lagerlöf: trust is a major issue and a UK Minister confessing that the Government is prepared to break international law is a great rarity. A situation which could be compared with Thatcher (early 1990s) on EU positions which went down badly with member states. Von Sydow: in September trust was at an all-time low. We may be more positive on the trade deal due to a potential London-spin.

• Political influence Sweden can use in the endgame: von Sydow: we ‘could’ be politically involved but I am not really seeing Sweden as a key player in these talks. Lagerlöf: when Sweden pushed against the Coronavirus Relief Package it was one of the first times Sweden was heard. Von Sydow: we have to look for new alliances in the EU such as the Netherlands and Ireland.

• Market Outlook: von Sydow: Brexit has not materialised yet, even with a deal, we are yet to find out what to expect.

• Deal likelihood: Lagerlöf: more likely, than not, for an agreement to be signed before the end of the year. This may be the end of the beginning but it is not the beginning of the end for a deal. Von Sydow: negotiations will continue for years to come.

Our thanks go to our speakers and Carnegie Private Banking for hosting this event with the BSCC