Brexit: Keep single market for transition period – Labour

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Labour would keep the UK in the EU single market and customs union for a transitional period after leaving the EU, the party has said.

Shadow Brexit secretary Sir Keir Starmer set out Labour’s new position in the Observer.

The shift in policy would mean accepting the free movement of labour after leaving the EU in March 2019.

Sir Keir said the transition would be “as short as possible but as long as necessary”.

Meanwhile, Brexit Secretary David Davis urged the European Commission to have a flexible approach to talks.

Labour’s leadership has been criticised by opponents for a lack of clarity on what deal Britain should seek immediately after the EU.

Sir Keir said a transitional period was needed to avoid a “cliff edge” for the economy, so that goods and services could continue to flow between the EU and UK while complex negotiations on the permanent deal continued.

“Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU,” he wrote.

“That means we would seek to remain in a customs union with the EU and within the single market during this period.

“It means we would abide by the common rules of both.”

‘Unlimited migration’

He compared this with the government’s preference for “bespoke” transitional arrangements, which he said were highly unlikely to be negotiated before March 2019.

He did not say how long the transitional period would be – only that it would be “as short as possible, but as long as is necessary”.

The customs union is the EU’s tariff-free trading area, while the single market also includes the free movement of goods, services, capital and people.

“Those who campaigned to leave the EU are likely to be concerned that this could see unlimited migration continue for some time after Brexit,” said the BBC’s political correspondent Iain Watson.

After the transitional period, Sir Keir said, the new relationship with the EU would “retain the benefits of the customs union and the single market”, but how that would be achieved “is secondary to the outcome”.

Remaining in a form of customs union with the EU was a “possible end destination” for Labour, he said, but that must be “subject to negotiations”.

“It also means that Labour is flexible as to whether the benefits of the single market are best retained by negotiating a new single market relationship or by working up from a bespoke trade deal.”

He said a final deal must address the “need for more effective management of migration”.

Party leader Jeremy Corbyn’s office confirmed that the proposals had been agreed with him and were official policy.

TUC general secretary Frances O’Grady said it was a “sensible and reasonable” approach to take, and would give working people “certainty” on their jobs and rights at work.

But Liberal Democrat Brexit spokesman Tom Brake said it was “all spin and no principle”.

‘Temporary customs union’

The government has also called for a transition period to help business adjust after Brexit.

But chancellor Philip Hammond and trade secretary Liam Fox said the UK would be “outside the single market and outside the customs union” during this period.

A paper subsequently published by the government said it could ask Brussels to establish a “temporary customs union” after March 2019.

But during this period, it would also expect to be able to negotiate its own international trade deals – something it cannot do as an EU customs union member.

Meanwhile, Brexit Secretary David Davis will meet the European Commission’s chief negotiator Michel Barnier on Monday to formally open Brexit discussions.

The government said this week’s negotiations were “likely to be technical in nature”, ahead of more substantial talks in September.

It said both sides must be “flexible and willing to compromise” when it comes to solving areas where they disagree.


Crawford Falconer takes up post as UK’s top trade negotiator

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Crawford Falconer takes up post as UK’s top trade negotiator. The man in charge of negotiating the UK’s trade deals once Brexit is finalised, starts his job this week.

Crawford Falconer will take up the post of chief trade negotiation adviser at the Department for International Trade.

Leaving the single market would mean the UK would have to establish new bilateral trade agreements, but cannot formally do so until after Brexit.

However, one economist suggested Mr Falconer would already be “building bridges” with the European Commission.

The UK faces a huge challenge in resetting its trading relationship with the EU and other countries when Brexit takes effect.

Trade pacts that have been negotiated by the EU with the rest of the world will no longer apply to the UK, while Britain will also need to define new trading relationships with the EU itself.

Membership of the EU has meant the UK does not have a large bank of trade negotiators with recent experience.

Prof Alan Winters, from the University of Sussex’s UK Trade Policy Observatory, said Mr Falconer’s experience and contacts at the WTO would mean the groundwork for separating UK trade policy from Brussels would be made easier.

“He knows quite a lot of the main players at the WTO and can build bridges at the European Council, which is good as there is work to be done right now,” he said.

“There is work he can do, such as discussions on whether the UK uses replicas or changes trade agreements that we have with nations by way of membership with the EU.”

One suggestion has been that initially trade agreements could be adopted by the UK in their current form – replicating them – at the point of Brexit, to be altered subsequently as new deals are agreed.

International Trade Secretary Liam Fox said of the new appointee: “Crawford Falconer brings a wealth of international trade expertise to our international economic department, ensuring that as we leave the EU, the UK will be at the forefront of global free trade and driving the case for international openness.”

Mr Falconer will lead trade policy and negotiation teams at the DIT. His appointment was first announced in June.

A New Zealander, Mr Falconer has more than 25 years trade experience. He has represented New Zealand at the World Trade Organization (WTO) and held various posts in foreign and trade affairs in his home country.


Bank of England says Brexit transition desirable for UK, EU banks

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The Bank of England said a transition period after the Britain leaves the European Union would give banks more time to make orderly changes as Brexit poses risks to financial stability.

With UK due to leave the bloc in March 2019, the BoE’s Prudential Regulation Authority (PRA) said it faces heavy demands from Brexit fallout on banks and insurers.

BoE Deputy Governor and PRA Chief Executive Sam Woods said “some form of implementation period is desirable” between Britain leaving the bloc and start of new trading terms to “give UK and EU firms” more time to make necessary changes.

But he stopped short of saying what sort of transition he wanted in a reply to Nicky Morgan, new chair of parliament’s Treasury Select Committee, who asked him this month for his views on the design of such a period.

The UK government has not presented the EU with any firm request for a transition period as it still seeks internal consensus.

UK-based firms are not waiting for clarity and are announcing new hubs in the EU27 to be sure of serving customers there after March 2019 – and avoid the destabilising ruptures in financial links the BoE fears.

Woods had asked banks to spell out how they would cope in particular with a “hard” Brexit where Britain crashes out of the EU with no transition or trading deal.

In a letter to Morgan made public on Wednesday, he said 401 responses were received, which revealed “significant issues for many firms” and the BoE will reach a view on the plans in the autumn.

The submissions provided “further evidence” of risks the BoE had already identified, specifically relating to the continued servicing and performance of existing contracts and restriction on data transfers.

There could be a sharp rise in the number of insurance policies shifted from one country to another, a switch that involves the courts, he said.

“Re-structuring by firms to mitigate risks to their business will in general increase complexity.” Dislocation and fragmentation of markets could bump up costs and cut activity.

The BoE will need to ensure that supervising firms with links between the EU and a Britain outside the bloc, is still doable, he added.

The PRA faces having to authorise and supervise a significant number of additional firms, which could place a material extra burden on resources, Woods said.

London is home to branches of banks from continental Europe and they face having to become subsidiaries, meaning they would be directly supervised by the PRA.

Woods said the issues set out in his response to Morgan “pose a material risk” to the PRA’s objectives as a supervisor, and that this work is a top priority.

“It is incumbent on us to manage this burden but we may have to make some difficult prioritisation decisions in order to accommodate it,” Woods said.


HSBC profits rise as it prepares for UK ringfence

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HSBC has reported a rise in its first half profits and announced a share buyback as it prepares to ring-fence its UK retail arm by 2019.

Europe’s biggest bank reported a 5% rise in pre-tax profit of $10.2bn (£7.8bn) for the first six months of 2017, up by about $500m.

As widely expected, the bank has also announced a share buyback of up to $2bn which it expects to complete by the end of 2017.

HSBC shares rose 3% on the news.

The bank’s shares fell back later but its share price has rallied over the past year, helped by the weak pound which makes profits earned abroad more valuable when repatriated to the UK.

Since the 2008 financial crisis, HSBC has been cutting jobs and selling assets to make the group more profitable, while still making dividend payments to shareholders.

“In the past 12 months, we have paid more in dividends than any other European or American bank and returned $3.5bn to shareholders through share buybacks,” HSBC’s chief executive Stuart Gulliver said.

The bank has used share buybacks to offset the impact of shares being paid out as dividends.

The announcement takes the total of HSBC share buybacks since the second half of 2016 to $5.5bn.


Brexit: Race to host EU agencies relocated from London

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EU countries have until midnight to enter a race to bid to provide a new home for two agencies that will be relocated from the UK after Brexit.

The European Banking Authority and the European Medicines Agency, based in Canary Wharf in London, employ just over 1,000 staff between them.

The banking and medicines agencies are seen as the first spoils of Brexit by the 27 remaining members of the EU.

About 20 countries are expected to enter the bidding process.

Glossy brochures

There will be fierce competition to attract the agencies’ highly skilled employees, their families and the business that comes with them.

This includes 40,000 hotel stays for visitors each year.

Countries have printed glossy brochures, posted promotional videos online and hired lobbying firms.

The contest has pitched larger countries against smaller ones from across the EU.

The European Commission will assess the entries based on the quality of office space, job opportunities for spouses and transport links.

European ministers will use a complicated voting system to choose the winners in November.


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