BAD NEWS BEGINS TO EMERGE

The banks are now convince we will lose access to the single market and are said to be accelerating plans to pull staff out of London (HERE). With the legal judgement coming tomorrow the government are said to have prepared four different versions of the Article 50 bill, depending on what the Supreme Court says (HERE) although the Telegraph thinks it is "in the balance". We shall see.

Northern Ireland's exit from the EU will destroy the peace deal. Apparently the Good Friday agreement gives people in the north rights to Irish citizenship and this will be difficult if not impossible to continue to have effect (HERE).

Meanwhile a cross party group of MPs are trying to block plans for what they call a hard brexit (HERE).  The BBC have a report about the difficulty under WTO rules to have what the PM describes as "sectoral deals" since and free trade agreement has to cover "all or substantially all" trade between two countries (HERE) and finally, retail sales took a nose dive in December (HERE). Since consumer spending is what is keeping the economy going these are dangerous times.

Prosper like never before!

SWISS ROLL?

There are some interesting developments in Switzerland.  They narrowly voted in a referendum i n 2014 to curb freedom of movement of people and have been negotiating with the EU ever since. The deadline is fast approaching and new talks are scheduled for next week (19th Sep).  Switzerland seem to be backing down in the face of the EU's hard line (HERE) with most political parties now supporting a plan to ask companies to prefer local candidates over those from the EU, a significant watering down of the original proposal and even then the EU may not accept it.

I think it shows how much Switzerland values the limited access to the single market that they have (it excludes financial services).

However, now they are to visit the UK for discussions with our government on ways in which the two countries together can force the hand of the EU.  The Swiss are some 8 million people so they don't add an enormous amount of weight and many eastern European countries are adamant about the free movement principle. Nonetheless, it will be interesting to see how it all pans out.

THE SPECTATOR SEES CLUES IN DAVIS' STATEMENT TO PARLIAMENT

The Spectator was a cheerleader for Brexit and James Forsyth has gone through David Davis' statement and the follow up answers to see if it can discern the direction the government is taking (HERE).  He sees says this:

"...Davis indicated that he didn’t favour paying anything or conceding anything on border controls to get a free trade deal with the EU. When Andrew Tyrie, the chairman of the Treasury select committee, pressed him on whether the UK would remain inside the customs union once it left the EU, Davis said the government hadn’t yet decided whether to do this. But the language of his answer strongly suggested that he agreed with Liam Fox, the Secretary of State for International Trade, that the UK should leave the customs union so that it has a free hand to do trade deals outside it."

On this basis the UK will not be part of the EU, the EEA, EFTA or even the customs union.  In Europe we will be totally different to every other nation and means a deal similar to the one Canada has with the EU.  This does not include financial services at all and has quotas on some agricultural products. Manufacturers have to abide by EU regulations and when shipping into the EU must provide certificates of origin (costed at £3Bn per year for British Industry).  

I wonder how Phillip Hammond's meeting with the bankers went after this?

PHILLIP HAMMOND MEETS THE BANKS

There is a meeting today at The Treasury between Phillip Hammond and various large bank and financial institutions (HERE). They are apparently seeking clarity on the government's plans for Brexit and in particular what this will mean for the passporting system that allows them to trade with other EU countries.  Banks want to keep the status quo according to Bloomberg (HERE).

I am sure they will be disappointed. I don't think the government knows what it will get from the EU and even if it did, they will not tell the banks in case (a) it's bad news and (b) it leaks out.  One unnamed banker said:

"If the government doesn't have a clear idea of what it wants the banks will just go," said one senior banking source, who asked not to be named. "They are not going to be hanging around waiting for the cliff edge."

I don't know what the government are expecting. The EU have already made it perfectly clear that banks will lose access if we leave (the last time just a few days ago HERE) but they continue to hold out the prospect that something can be negotiated. Other countries have no interest in conceding passporting rights when it is they who will gain when banks move to the EU.  Bankers are among the most cynical of people and if one bank announces a major relocation you can bet there will be a domino effect.

This morning's Brexit Bulletin from Bloomberg says:

"Hammond's meeting is well timed. UBS Chief Executive Officer Sergio Ermotti said yesterday that he may have to move as many as 1,500 jobs, the equivalent of 30 percent of the total, from the U.K. Lloyds of London Chairman John Nelson warned on Monday that he and other insurers would be forced to go elsewhere if the government fails to secure continued access to the single market."

CAN THE UK EVER BE INDEPENDENT OF THE EU?

I came across this very interesting article (HERE) published by Edinburgh University's European Futures website about what the EU is like for non-members in Europe, as we are likely to be in a few years.  The point of the article is that the EU has become so large and powerful that it completely dominates Europe or has hegemony over it as the article puts it.

Countries like Norway and Switzerland have voluntarily entered into agreements where they accept EU rules and directives and shape their laws to be directly equivalent to EU laws. They have allowed the EU to have hegemony in Europe.  If we leave the EU and do not become part of EFTA or the EEA and we even exit the customs union (as we must if we are to sign separate trade agreements) we will be the only European nation to be completely independent of the EU.  But in practice, how independent would we really be?

We would have to abide by a lot of EU rules if we are to continue to trade with them. Our financial services sector would have to show equivalence with EU financial regulation.  There is bound to continue to be cross border cooperation on environmental issues as well as security.   EU citizens in the UK will almost certainly continue to enjoy the same rights as they do now and UK citizens in the EU will have reciprocal rights.

The UK will therefore ipso facto be forced to accept many rule changes and new directives but will have little or no influence in shaping them. The article puts it this way:

"What is peculiar about the form of dominance that the associated non-members experience is that it is both structural and at the same time voluntary. It is an arrangement that accidentally inhibits and intimidates the parties. The management of externalities and collective action problems created by interdependence is skewed by a European political order in favour of full members of the EU. By being excluded from common decision-making procedures, the citizens of the associated states find themselves as second-rate Europeans".