With the majority of Europe’s media almost entirely and understandably focussed on the Covid-19 pandemic and the subsequent economic impact, it might be easy to have forgotten all about the small matter of Brexit.

As expected, and despite being only a fraction of the entire EU workforce (180k employees as at end 2017), the fishing industry, and who is allowed to fish in whose waters, remains a disproportionately large stumbling block to overcome. It is a very emotive subject for both sides.

What’s happened?

There have been a couple of noticeable (sizeable, even) developments this week:

• Clearing Houses – the Paris-based ESMA yesterday gave clearance to the major UK-based Clearing Houses (such as LCH) to continue operating out of London with EU-based accounts after 31-Dec-20. This is a critical part of the Banking industry and the re-settling of these institutions in the EU almost overnight was always a challenge (by way of example, LCH states that it “regularly clears in excess of $3trillion notional per day”). This follows a decision by the EC to find regulations for clearing “equivalence” for a period of 18months after the transition period ends. (source: BBG)
• This morning, according to the UK’s Times newspaper, European negotiators are indicating that they are willing to start writing a joint legal text of a trade agreement ahead of further fresh talks that resume today. This is a huge gesture from the EU who had previously been pushing for a broad agreement being put in place before putting pen to paper. In a return gesture, the UK is expected to allow detailed discussions on fishing quotas.
• Importantly, this week’s negotiations have been extended (yes, the clock IS ticking) and will focus on those persistent troublesome areas – notably, fishing and “level playing field provisions” (i.e. subsidies)
• Despite some glimmer of hope with the above points, both sides are urging caution stating that they “are still pretty far apart on the difficult things”.
• In case not widely covered in Europe, the UK had previously threatened to cancel certain parts of the Withdrawal Agreement (WA) most notably on the solution to a border in Ireland. Somehow, despite being widely seen to be breaking International Law if the UK had gone down this route, (and the US threatening “no trade deal whatsoever” if the UK went down this route) it did seem to give a much needed shot in the arm to negotiations with the EU standing down from its threat to walk away from the talks and the UK going out of its way to be more appeasing.

What’s next?

• Further negotiating to take place throughout this week
• The EU is holding a summit on foreign policy this coming Friday which Barnier may attend to update them post a breakfast meeting with Lord Frost
• The UK Gov’t threat to change the WA will likely come back to haunt them with EU leaders unwilling to sign a trade deal unless the WA remains intact
• EU summit on 15^th October is next critical deadline. If this week goes well then both sides are expected to step-up the intensity in the build up to the summit

Fuente: Bloomberg New, The Times