Johnson and Varadkar to Meet as Deal Chances Fade: Brexit Update

Johnson and Varadkar to Meet as Deal Chances Fade: Brexit Update

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The U.K. stepped up preparations for a no-deal Brexit in three weeks’ time as negotiations with the European Union headed toward a breakdown. In a call on Tuesday morning, Boris Johnson told German Chancellor Angela Merkel a divorce agreement is essentially impossible if the EU demands Northern Ireland must stay in the bloc’s customs union. Johnson spoke later to Irish Prime Minister Leo Varadkar and the two agreed to meet for talks before the end of the week.

As the pound fell on news of clashes between the U.K. and EU leaders, Johnson’s government published a 156-page report setting out what the country is doing — and what businesses and citizens must still do — to prepare for leaving the EU on Oct. 31 without a deal.

Key Developments

EU Council President Donald Tusk accuses Johnson of playing Brexit “blame game”Ireland sets aside $1.3 billion for no-deal divorceJohnson speaks by phone with Merkel and VaradkarScottish Court to rule Wednesday on enforcing anti no-deal lawJohnson Warned Against Big Tax Cuts as U.K. Faces No-Deal ShockPound slips 0.5% against the dollar

Johnson and Varadkar Agree to Meet this Week (6 p.m.)

Boris Johnson and Irish Prime Minister Leo Varadkar spoke by phone for 40 minutes on Tuesday afternoon, their offices said in near identical briefings about the call.

“Both sides strongly reiterated their desire to reach a Brexit deal,” a spokesman for Johnson said. “They hope to meet in person later this week.”

The meeting is most likely to happen on Thursday or Friday, Johnson’s office said.

Grieve Says Tory Win Not Assured (5:20 p.m.)

Dominic Grieve said a Conservative win in an early general election is not assured, and disagreed with Brexit Party Chairman Richard Tice about the potential margin of victory if the two parties form an alliance.

“You may well end up with another hung parliament and absolutely the same problem coming down the track of what are we going to do when we are about to crash out?” Grieve, who was thrown out of the Parliamentary Tory Party last month, told the Bloomberg Invest conference in London.

Grieve said the Tory party is in a “parlous” state in London as well as the southeast and southwest of England. The party would have to win “an awful lot” of leaver votes in the Midlands and northern England to make up for those losses, he said.

“If this government goes into an election saying that they believe in a no-deal Brexit, then not only the remainer votes, but I actually think some of the soft leaver votes in the Conservative Party will look at this madness and depart,” he said.

Former Tory Grieve Accuses Government of Lies (5 p.m.)

Former Attorney General Dominic Grieve said he believes a law passed by Parliament to force Boris Johnson to request a delay to Brexit if he can’t get a deal by Oct. 19 is fit for purpose.

Alluding to the government’s repeated assertions that Britain can both obey the law and leave the EU without a deal on Oct. 31, he told the Bloomberg Invest conference in London that it’s “fantasy” that the government can avoid sending a letter to the EU requesting an extension to talks.

“I’ve never experienced a situation where you get a government which is prepared to lie so serially as a matter of policy,” Grieve said. “We now have a government which appears to enjoy doing this,” he said, “it’s slowly trashing the constitutional and institutional base of the country.”

Germans Not Impressed By Johnson’s Behavior (4:40 p.m.)

German officials took a dim view of what they described as Boris Johnson’s attempt to dole out blame after his call with Chancellor Angela Merkel. Johannes Wadephul, a deputy parliamentary group leader in Merkel’s Christian Democratic Union, said the U.K. prime minister’s strategy would backfire.

“If Johnson points a finger at Merkel, then three point back at him,” Wadephul, a foreign-policy expert, said in a text message. “He doesn’t want to recognize that the so-called backstop is unavoidable.”

Brexit Party Chief Says Pact Could be Winner (4:20 p.m.)

Brexit Party Chairman Richard Tice said he doesn’t believe the government has a “cunning plan” to avoid having to delay Brexit, and predicted the EU will decide to give the U.K. an extension that’s “somewhat longer” than the three months currently envisaged. The best thing then would be an early general election, he said.

#r4today https://t.co/vGzsEmOXhf pic.twitter.com/7B5vNTDfIH

— BBC Radio 4 Today (@BBCr4today) October 8, 2019

Speaking at the Bloomberg Invest conference on Tuesday, Tice claimed that if Boris Johnson’s Conservatives agreed to an electoral pact with his party, the two combined could deliver a “thumping majority” of 60 to 100 seats in the House of Commons.

U.K. Manufacturers ‘Nowhere Near Ready’ (4 p.m.)

Make UK, the manufacturing lobby group, has issued a strongly-worded statement saying the country isn’t ready for a no-deal Brexit, whatever Michael Gove, the cabinet minister in charge of planning for that outcome, says.

“The more evidence that government publishes the more it confirms that we are nowhere near ready for a ‘no deal’ Brexit,” Make UK Chief Executive Officer Stephen Phipson said in a statement. “As it stands, exporters are going to be massively disadvantaged by leaving without an agreement.”

Phipson warned a no-deal departure would represent a “seismic change” and said there’s no resolution on post-Brexit arrangements for issues including the mutual recognition of goods and data transfer.

Labour MPs Urge EU Chiefs to Work for Deal (3:45 p.m.)

Nineteen MPs from the opposition Labour Party wrote to European Commission President Jean-Claude Juncker and European Council President Donald Tusk urging them to work “night and day, if required” to secure a deal.

“If a new deal can be brought back to the Commons in the coming weeks that avoids a no-deal Brexit and ensures greater certainty during the U.K.’s departure, we believe it serves Britain’s national interest to approve it,” The MPs wrote. “Our votes will be decisive in determining the approval of that deal.”

The intervention indicates far more Labour MPs are ready to back a Brexit deal in the House of Commons than was the case when Theresa May’s deal was last voted on in March. Then it garnered just five Labour votes.

U.K. Briefing Aimed At Varadkar, Coveney Says (3:15 p.m.)

Irish Foreign Minister Simon Coveney said he suspects a briefing given to The Spectator magazine on Monday evening was aimed at pressuring Prime Minister Leo Varadkar to move in Brexit talks.

The 800-word text message, attributed to someone in Johnson’s office and published on the magazine’s website, blamed the EU’s refusal to move on the Irish border question for the imminent collapse of the negotiations.

As he headed off to meet Michel Barnier in Brussels, Coveney said a deal is still possible, though the U.K. needs to bring forward solutions to break the impasse.

Scottish No-Deal Plans Published (2:50 p.m.)

The pro-independence Scottish government, which opposes Brexit, published details of contingency planning in the event of a no-deal split from the EU. Its authority includes control over education, transportation and the health service, while the U.K. is responsible for foreign policy and trade tariffs.

As well as efforts to maintain supplies of medicine and food, it aims to make sure the agricultural industry gets 95% of its entitlement to EU subsidies through a loan program and has also set aside an extra 7 million pounds to help the poorest people.

More ominously, Police Scotland has 300 officers on standby for any disruption at ports and borders as well as protests and potential unrest, the report said.

No-Deal Brexit Poses ‘Significant’ Challenges (2:20 p.m.)

A no-deal Brexit will throw up significant challenges, but Britain can get past them, Michael Gove the cabinet minister in charge of preparing for the outcome, told the House of Commons on Tuesday.

“It’s not my preferred outcome nor the government’s,” Gove said. “We want a good deal. But whatever challenges no deal may create in the short term, and they are significant, these can and will be overcome.”

Gove stressed that Prime Minister Boris Johnson doesn’t want to take the country out of the EU without an agreement, but that not honoring the 2016 referendum result would be “far worse” because of the damage it would do to democracy.

Business Says More No-Deal Work Needed (1:55 p.m.)

The U.K. needs to step up its engagement with business to prepare the country for a no-deal Brexit, the British Chambers of Commerce said in response to the planning document published earlier Tuesday.

“It’s good that government has got its shoulder to the wheel,” BCC Director General Adam Marshall said in a statement. “But it’s going to have to push a lot harder to give businesses answers to the many complex and detailed questions they have.”

Marshall urged the U.K. and EU to redouble efforts to avoid a no-deal divorce, and chided the U.K. government for taking so long to revise its schedule of tariffs for a no-deal Brexit, given that it made only “three changes.”

“Businesses will be frustrated that it took government so long to publish the updates,” Marshall said. “The delay has real-world impacts for businesses trying to plan for the unwanted prospect of a no-deal in a matter of weeks.”

EU Has Hardened Position, U.K. Official Says (1:40 p.m.)

The European Union appears to have hardened its position on Brexit since the weekend, a U.K. official said. But a deal is still possible and talks are ongoing, according to the person, who was speaking on condition of anonymity.

The main area of difference appears intractable for now: whether Northern Ireland is inside or outside the EU customs union after Brexit, the official said. The U.K. says it has to be out, and the EU wants it to remain inside.

The other main area of conflict is the mechanism by which Northern Ireland should consent to continued regulatory alignment with the EU. The U.K. has proposed that the Northern Ireland Assembly should be given a vote every four years, while the EU is concerned that gives an effective veto to the Democratic Unionist Party.

Fruit and Veg Supply Could be Hit by No-Deal (1:30 p.m.)

A no-deal split from the EU could cause shortages of some fresh fruits and vegetables because of possible threats to time-sensitive supply chains, the U.K. government warned in Tuesday no-deal planning document.

The “just-in-time” nature of grocery logistics in the U.K., which imports half the food it eats, means even short delays at the border could reduce the availability of a “limited number of short shelf-life” goods, according to the report.

Ireland Sets Aside $1.3 Billion for No Deal (1.20 p.m.)

The Irish government will make 1.2 billion euros ($1.3 billion) available to support the economy if the U.K. leaves without a deal, Finance Minister Paschal Donohoe said in his budget speech in Dublin.

About 200 million euros will be made available next year, while the government will borrow to intervene further in a hard Brexit, including 650 million euros for agriculture, enterprise and tourism sectors.

“A No Deal is unpredictable and different sectors could be impacted in different ways,” Donohoe said.

OK For Johnson to Commit to Oct. 31, Court Told (1:15 p.m.)

At the latest Brexit case in Scotland, the court heard that there’s nothing wrong with the government continuing to oppose an extension while saying Britain will leave on Oct. 31. That doesn’t mean it will break the law if it takes that negotiating position with the EU, the government’s lawyer said.

It also means there’s no need for judges to act on Boris Johnson’s behalf to ensure a law is upheld, in this case sending the letter requesting a Brexit extension if there’s no agreement by Oct. 19 (see 11:15 a.m.).

Keeping confidential how leaving at the end of the month might be achieved lawfully is the right of the government, lawyer Andrew Webster told the Court of Session. “These are delicate times and the court should be very slow to enter the negotiating field,” he said.

Lord Carloway, one of the three judges on the panel at the Court of Session in Edinburgh, asked if the court should determine matters now and then see what happens after Oct. 19. The court will give its ruling on Wednesday.

U.K. Says EU Needs to Compromise (12:55 p.m.)

Johnson’s spokesman, James Slack, has briefed reporters in London and reiterated the government line that the European Union now needs to compromise if there’s to be a Brexit deal.

It’s “not acceptable” for Northern Ireland to be kept in the customs union after Britain leaves the bloc – one of the main issues blocking agreement, he said.

While Johnson wants a deal, “we are only going to be able to achieve that if the EU works with us and compromises,” Slack said. “The prime minister’s position is a clear one: the U.K. needs to leave the EU in its entirety and it’s not acceptable for Northern Ireland to be left behind in the customs union.”

Slack said Johnson’s call with German Chancellor Angela Merkel lasted about 30 minutes and was a “frank exchange” (See 10:30 a.m.), and pushed back against European Council President Donald Tusk’s claim that the U.K. is playing a “blame game” over Brexit.

Oil Supply ‘Secure’ if No-Deal, U.K. Says (12:45 p.m.)

The supply of crude and refined fuels will be secure in the event of a no-deal Brexit, the U.K. government said.

“The U.K. can draw on both substantial domestic production and oil imports from diverse international sources, including Europe, meaning that supply is secure,” according to a no-deal planning document released on Tuesday.

If the risk to U.K. fuel supplies became material, the government would be able to activate the Downstream Oil Protocol, making a reserve fleet of 80 road tankers available to the industry, it said.

Financial Services Risks Remain in No-Deal (12:15 p.m.)

Customers of U.K. financial services companies that use passporting to trade in the European Economic Area cannot be fully protected from risks, according to the U.K.’s document on planning for a no-deal Brexit published Tuesday.

“The EU authorities and some individual Member States have taken legislative steps to prepare for leaving without a deal, which the government welcomes, but in the absence of further actions by EU authorities residual risks remain,” the document said.

Contract continuity is a key issue. About 16 trillion pounds ($19.3 trillion) of swaps contracts between U.K. and EU traders mature after October. While the contracts will remain valid, the Bank of England and industry lobby groups have warned so-called life cycle events in the contracts — such as extending the maturity of a trade — could face hurdles.

Smith Rejects Threat to Security Cooperation (12:10 p.m.)

Northern Ireland Secretary Julian Smith attacked the overnight briefing from Johnson’s office that Britain could stop cooperating on security issues if the EU doesn’t give way.

“I am clear that any threat on withdrawing security cooperation with Ireland is unacceptable,” Smith wrote in a Twitter post after Tuesday’s cabinet meeting. “This is not in the interest of Northern Ireland or the Union.”

For a minister to use Twitter to attack the policy advocated by the prime minister’s office is a sign of how far, and how fast, relations have deteriorated in Johnson’s government. Were the prime minister to attempt to fight the next election on a no-deal platform, it suggests he’d face losing the support of some of his most senior ministers.

Negotiations Resume In Brussels (12 p.m.)

Talks between U.K. officials, led by Johnson’s envoy David Frost, and the European Commission are resuming in Brussels, despite the prime minister saying a deal is essentially impossible as things stand.

Frost and his team will be continuing to discuss the U.K.’s proposals with the EU side and give clarifications, a U.K. official said.

U.K. Commits to No Infrastructure on Border (11:50 a.m.)

The U.K. Vowed not to build any infrastructure on the Irish border in the event of a no-deal split, but acknowledged U.K. exports would face tariffs and checks as they pass into Ireland.

It said in a no-deal Brexit planning document published Tuesday morning that it would not introduce new checks on goods moving into Northern Ireland and would try to maintain the status quo “as far as possible.”

But it said the policy might not be sustainable and would seek a permanent solution in talks with the bloc.

“Significant risks remain as this policy is temporary in nature and unilateral,” the document said. “The U.K. Government will look to engage with the Irish Government and the EU as soon as possible following Brexit.”

Reserved response from Berlin After Call (11:45 a.m.)

The response from the German Chancellery was very reserved in response to reports in London about the Tuesday morning call between Angela Merkel and Boris Johnson (see 10:35 a.m.).

A government spokesman confirmed the call had taken place but declined to comment on the content of the conversation.

The Chancellor is well aware of the blame game which Downing Street has started, but does not intend to enter it, a German official said under the condition of anonymity.

Tusk Says Brexit Not ‘Stupid Blame Game’ (11:40 a.m.)

EU Council President Donald Tusk held no punches in the ever escalating war of words between Brussels and London, accusing Boris Johnson of playing a ‘stupid blame game’ in his dealings with the bloc.

“What’s at stake is not winning some stupid blame game. At stake is the future of Europe and the U.K. as well as the security and interests of our people,” Tusk wrote on Twitter. “You don’t want a deal, you don’t want an extension, you don’t want to revoke,” the Council President added, before asking “quo vadis?” the Latin for “where are you going?”

DUP’s Foster Assails ‘Crazy’ Merkel Demand (11.30 a.m.)

DUP leader Arlene Foster assailed German chancellor Angela Merkel’s reported comments that Northern Ireland must remain in the EU customs union (see 10:35 a.m.), describing the idea as a “surrender.”

“For the U.K. to be asked to leave a part of its sovereign territory in a foreign organisation of which the U.K. would no longer be a part and over which we would have no say whatsoever is beyond crazy,” Foster said in a statement.

Johnson Can’t Be Trusted, Scottish Court Told (11:15 a.m.)

Brexit is back in Scotland’s highest court as a group of petitioners argue it should write the letter to the EU requesting more time, as required by an Act of Parliament last month. The letter would then be sent in the event of Boris Johnson failing to comply with the law.

Aidan O’Neill, the lawyer representing the group, told the panel of three judges at the Court of Session in Edinburgh that Johnson just can’t be trusted, a line that’s underpinned a series of legal challenges.

“What happens if he leads some sort of conscientious objection?” O’Neill asked. “We have a prime minister who apparently thinks he can continue his practice as a journalist by making things up and telling lies.”

The judges asked why the case on appointing someone to write the extension letter had come to them. The arguments will continue through the day.

Starmer Says Johnson Wants No-Deal Split (10:45 a.m.)

Keir Starmer, Brexit spokesman for the opposition Labour Party, accused Johnson of following a “cynical” strategy to intentionally “sabotage” the talks with the EU.

“Boris Johnson will never take responsibility for his own failure to put forward a credible deal. His strategy from day one has been for a no-deal Brexit,” Starmer said in a statement. “It is now more important than ever that Parliament unites to prevent this reckless Government crashing us out of the EU at the end of the month.”

Johnson to Merkel: Deal Essentially Impossible (10:35 a.m.)

Boris Johnson held what seems to have been a very difficult phone call with German Chancellor Angela Merkel on Tuesday morning.

According to a British official, Merkel told the premier Northern Ireland must remain part of the EU’s customs union if he wants to secure a divorce agreement with the bloc. Johnson told the German chancellor that this demand, along with the EU’s unwillingness to engage with his new proposals, makes a deal essentially impossible.

With little progress made in recent days, U.K. officials now believe Brexit talks are close to collapse. The BBC, which first reported details of the conversation, said Johnson’s office regarded the call as a clarifying moment.

Brexit Deal Looks ‘Difficult,’ DUP Says (10 a.m.)

DUP Deputy Leader Nigel Dodds said it looks unlikely a deal to break the impasse over Brexit will be reached this week, as the U.K. and EU remain divided over a plan which would effectively offer his party a veto over measures to avoid a hard border in Ireland.

In an interview with Bloomberg TV, he said he doesn’t see Boris Johnson watering down the consent principle and accused Dublin of wanting to have “its cake and eat it” on the issue.

Irish Prime Minister Leo Varadkar appears to be “desperate” to avoid the blame for a no-deal Brexit, Dodds said.

Shapps Denies U.K. Planning to Punish EU States (Earlier)

Transport Secretary Grant Shapps denied the U.K. Government is drawing up plans to punish EU member states that agree to a delay to the Oct. 31 Brexit deadline. The threat was in a text message from one of Boris Johnson’s advisers published by the Spectator magazine.

The note, attributed to a “contact in Number 10”, said that any EU member state that agrees to delay Brexit would go to the back of the line for cooperation on defense and security.

“I don’t think that’s the case at all,” Shapps told BBC Radio. He said it isn’t clear who wrote the text and insisted the government is in serious talks with the EU to get a deal.

Rudd Accepts Case For Second Referendum (Earlier)

Amber Rudd, who quit Boris Johnson’s cabinet last month in protest at his Brexit policy, said she now accepts the case for a confirmatory vote on any deal agreed with the EU.

“We need to look much more carefully about how to find a compromise,” she told BBC Radio, accusing Johnson of giving up on reaching agreement with the bloc.

“I still believe that we could find a deal that gets through the House of Commons,” she said. “But we need to make sure that the Number 10 machine works with MPs, stops expelling MPs — perhaps from its own party, works cross-party with Labour, and yes, may indeed have to have a confirmatory referendum on a deal at some stage to get it through.”

U.K. Tweaks No-Deal Brexit Tariffs (Earlier)

The U.K. revamped the tariffs it will levy after a no-deal Brexit following warnings from industry that its earlier plans risked making domestic producers uncompetitive.

Import duties for heavy goods vehicles will be reduced to 10%, in a boost to the road haulage industry, while levies for bio-ethanol will be raised and new tariffs for clothing introduced, the Department for International Trade said on Tuesday.

Earlier:

Boris Johnson Preparing for Brexit Talks to Collapse: SpectatorU.K. Tweaks No-Deal Brexit Tariffs for Trucks, Fuel and ClothingJohnson Warned Against Big Tax Cuts as U.K. Faces No-Deal Shock

–With assistance from Anna Edwards, Nikos Chrysoloras, Emma Ross-Thomas, Arne Delfs, Ian Wishart, Tim Ross, Robert Hutton, Jessica Shankleman, Helen Robertson, Greg Ritchie, Peter Flanagan, Rodney Jefferson and Patrick Donahue.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net;Dara Doyle in Dublin at ddoyle1@bloomberg.net;Robert Hutton in London at rhutton1@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Thomas Penny

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