In Nicky Donnelly’s latest Brexit update, we hear how negotiations are going, what the most difficult issues are and other key developments.

STATE OF PLAY 

No breakthrough was achieved in the Brexit negotiations this week, with Cabinet Minister Michael Gove saying that British negotiators needed to see “movement on the EU side”.

A UK government source said that one of the most difficult issues was state aid, explaning:

“We have a different view from the EU on what is appropriate on level playing field issues. We have been clear that we can look at common principles for our different subsidy systems and perhaps even at the ability to act if a major subsidy genuinely distorts trade.

What we can’t agree to are arrangements which would require us to operate systems of laws equivalent to the EU’s and make us pay a penalty if we moved away from them.” 

Trade talks are now expected to be extended beyond the mid-November deadline and to continue in Brussels next week. The next informal deadline suggested by EU officials is now the videoconference of European leaders which will take place on 19 November.

If a deal is not been reached by then, one EU official said that Brussels will put forward the contingency legislation it has prepared to prevent a cliff-edge scenario in the event of a no-deal. 

Meanwhile, the UK Government is intensifying talks with industry as it seeks to avert Brexit disruption at year-end, with companies facing upheaval even if the UK and the EU sign a trade deal.

The Cabinet Office said that Ministers will begin holding weekly meetings with the UK’s five biggest business groups and particularly-affected sectors to discuss Brexit preparations.

Separately, the House of Lords has voted overwhelmingly to remove a section of the Government’s proposed Internal Market Bill that would allow Ministers to break international law.

The Government has said that it will reinstate the clauses when the Bill returns to the House of Commons in December.

OTHER KEY DEVELOPMENTS 
  • The European Commission and the UK Government are reportedly discussing introducing a potential grace period for any new regulatory requirements for Northern Irish retailers, following the end of the Brexit transition period. The proposal would include a temporary adjustment period to allow retailers time to adapt to changes under the NI Protocol, allowing food from Great Britain to be imported without additional checks and costs. 
  • Speaking to the House of Commons committee on the Future Relationship with the EU. Elizabeth de Jong, the policy director of Logistics UK, which represents the freight industry, has criticised the Government for delays in producing a handbook to help truck drivers prepare for new border controls. A new draft is due on 18 November, while the final version is not expected to be delivered until 7 December. 
  • Chancellor Rishi Sunak announced that the UK would grant equivalence to EU and EEA financial services firms, ensuring they can continue to have access to UK markets. He also urged Brussels to make a similar decision about UK firms to maintain stability and “to reach a comprehensive set of mutual decisions on equivalence”. However, EU sources said that the City of London will lose access to EU markets on1 January, as the “The EU doesn’t have the legal mechanism to grant equivalence yet” and will introduce a new regime in June 2021.
  • This week, Politico featured an interesting article on where the UK-EU relationship might be heading post-Brexit, noting that “Even if the UK and EU clinch a deal, it will not be the end of the wrangling. The debate will fast turn to how Britain might use its new freedom to diverge from EU rules — and how Brussels might punish London for doing so… The issue will be complex and fraught with diplomatic and financial risk. A tactless move could see the relationship descend into economic warfare.”