Brexit Begins: What you Need to Know Today

Conservative-DUP Coalition heightens uncertainty over Brexit outcome
 
Last week’s remarkable UK General Election result that brought about a hung parliament has only added to the greater level of anxiety around the EU over how Britain’s exit negotiations will proceed. Prime Minister Theresa May is in a weekend position, given that she lost her overall majority and will now seek to govern through a confidence and supply agreement with the Democratic Unionist Party (DUP).
 
Discussions between the two parties are still ongoing, but many observers believe that such an arrangement will bring about a softer Brexit due to DUP demands that there be continued free movement of people and no hard border erected on the island of Ireland.  This is in addition to calls for cross-party talks within the Parliament to forge a common approach to Brexit. Numerous Tory, Labour, and SNP politicians have urged such discussions to proceed.
 
Hopes for a softer Brexit will be dampened, however, for several reasons. The DUP campaigned for Brexit and want to end ECJ jurisdiction over the UK, while Tory euro sceptics will hold the Prime Minister under greater scrutiny to deliver a hard Brexit after her poor performance in the general election. One such Conservative MP will be the Eurosceptic Steve Baker who was appointed as junior Brexit minister under David Davis.
 
The biggest concern felt around European capitals is the increased possibility of a chaotic Brexit. Although discussions between the EU and the UK will begin next Monday, a Conservative-DUP deal has yet to be resolved and a newly formed minority government will have to revisit some of its basic Brexit questions. With the negotiating clock already counting down and two months already passed, the odds of a chaotic Brexit have shortened considerably.
 
Brussels looks to control euro clearing post-Brexit
 
The European Commission this week published plans that would give it greater oversight over the City of London’s lucrative euro-clearing trading business, as it prepares itself for life without the bloc’s largest financial hub. London is currently the global centre for euro clearing, a financial transaction process that is worth around €1 trillion a day, and the City has feared ever since the Brexit vote that Brussels may seek greater control or even forced relocation of the industry once the UK leaves the EU.
 
Euro-clearing is critical component of the global financial sector and it is essentially the flow of money around the world. It refers to the trade of financial products, such as derivatives that are priced in euros, between clearing houses who act as buyer and sellers in the transactions. London-based clearing houses currently dominate the euro side of the trade and convert the amount into the foreign currency.  
 
While the move stops short of forced relocation, the proposal states that the Paris-based European Securities and Markets Authority (ESMA) could agree with relevant EU central banks over whether a particular clearing house has ‘’specifically substantial systemic significance’’ to the financial system. Thereafter, the European Commission would have the decision to relocate these activities to within the EU if it wants the regulatory approvals needed to operate smoothly on the single market.
 
Companies and industry groups within the City have voiced concern over any attempt of increased control of the euro-clearing business, claiming that such moves by Brussels could inflict unnecessary damage to the EU and increase risk. These fears were dismissed by Validis Dombrovskis, the Commission vice-president in charge of financial stability, putting forward that ‘’the purpose of our legislative proposal is to ensure financial stability and not moving business for the sake of moving business’’.
 
Head of Scottish Conservatives demands UK exit from Common Fisheries Policy
 
The Scottish Conservative leader, Ruth Davidson, has informed the Prime Minister Theresa May that the British government must not trade away any fishing rights in the upcoming Brexit negotiations, insisting that the country must leave the EU common fisheries policy (CFP) completely.
 
Ms. Davidson is in an emboldened position after last week’s general election as she helped increase the number of Tory seats in Scotland from one to thirteen, thereby saving Ms. May from suffering an even bigger loss from her election gamble. The Scottish leader made protection of fishing one of her red-line Brexit issues and is aware that her party’s biggest advances in votes came from the northeast of Scotland where the bulk of the UK’s fishing fleet is located.
 
The CFP is designed to manage the European waters as a common resource, granting all European fishing fleets equal access to EU waters and fishing grounds and allows to fishermen to compete fairly. British fishermen are a vocal critic of the measure as it allows rival shipping fleets from the likes of Spain and France to fish in UK waters.
 
Ms. Davidson has called for the UK to leave the CFP completely and erect a rigorously enforced 200-mile fishing limit around its water which would restrict any EU fishermen to enter and fish from its waters. This would have enormous implications for the remaining EU27 but it is believed that Ms. Davidson sought reassurances from the Prime Minister when they met this week that the UK’s finishing rights would not be thrown out.

Compliments of Vulcan Consulting, a member of the European American Chamber of Commerce