As Sherlock Holmes liked to point out, it is the dogs that do not bark that often give the best clues as to what is really going on.

 

After visits to six EU capitals and meetings at the highest level in Brussels with those responsible for negotiating the Article 50 Brexit deal, it is what is not happening that in some ways is the most interesting aspect.

Despite the excitement over the dates of 23 June 2016 and 29 March 2017 – the day of the referendum itself and when Prime Minister Theresa May sent her letter invoking Article 50 – the most important event is that the UK has not left the European Union.

We are still fully in. The UK economy is profiting from the general reprise of EU economic activity after the lost decade following the crash of 2007-09. Unlike its predecessor of 1929-31, our generation’s crash has not ended with protectionism, extreme nationalism and ultimately open conflict.

As I was told recently in the Prime Minister’s office in Portugal, “we would like our people back from the UK. Growth is back and the qualified, educated, now English-speaking citizens that you have kindly looked after for the last few years can come home.”

In Brussels, it was made clear that Article 50 negotiations will not cover the services sector, notably the banks, trading houses, clearing services, and investment, wealth management, pension and insurance funds that constitute the City’s wealth-creating financial services sector.

As Michel Sapin, France’s finance minister, made clear again this week, the EU post-Brexit would insist that trades and clearing in euros came under EU supervision as a matter of “sovereignty”. That position has been reinforced by every EU finance ministry if anyone bothered to check.

Every firm in the City will have to make its own risk analysis, as the EU’s Article 50 team will not be negotiating on trade in services or euro clearing before the UK has left the EU on the generally accepted date of 29 March 2019.

Simply put, the Article 50 talks will not cover aviation landing rights, equivalence, or euro trades and clearing. They will not decide on special work permit quotas for the City as suggested by the London mayor Sadiq Khan.

They will focus instead on what liabilities and outstanding obligations the UK has. They are closer to a receivership negotiation when a firm closes down but still has to pay off its outstanding subscriptions and promissory notes.

Then there is the problem of residence rights for 3.5m EU citizens here and an estimated 2m British expats living in Europe. A list of their names, when they arrived, whether they have dependents, or how long they have been here has not been produced. It will be a herculean bureaucratic task to establish those lists and it will not happen fast.

If the UK does not in the first instance repudiate the Single Market and the Customs Union, some arrangement can be found. But if customs and passport posts are installed as they have to be on any border between an EU and non-EU nation that has no Customs Union or Single Market arrangement, then all the soft words in the world will not hide the fact that there will be a return to a hard border and a bitterly divided island.

Finally, Brussels wants a tariff free deal on goods provided they are not produced outside rules of origin norms and the UK accepts there will not be any social or fiscal dumping – that is the UK will pledge not to seek to make use of a provisional free trade deal in goods to secure unfair competitive advantages by reducing worker and trade union rights, or offering tax inducements as if Britain were a giant Cayman Islands.

All of this is more than enough for the, at best, 15 months of real negotiations before Article 50 talks shut down in October next year to allow for all governments and the European Parliament to ratify the deal.
Then the real business of negotiating a full and complete Brexit, including rules covering the 80 per cent of the UK economy based on services, can get under way. This will last well into the next decade.
In the meantime, it is what is not happening that may give the best clues as to what eventually will happen.

City AM Wednesday 12 April 2017

http://www.cityam.com/262789/real-implications-brexit-found-exit-deals-silences

Denis MacShane is the former minister of Europe and is author of Brexit: How Britain Left Europe (IB Tauris). He is senior adviser at Avisa Partners in Brussels and worked for 15 years as an international trade union official before becoming an MP.