Brian Hayes MEP speech to the Association of Compliance Officers in Ireland (ACOI) Annual Conference, Friday 10th November 2017
“The clock keeps ticking on Brexit. Uncertainty is growing day by day in the business community. While the EU continues to take an uncompromising stance and while Theresa May’s Cabinet is crippled with controversy, the whole European financial system will suffer hugely if both sides don’t get serious with these talks. It would be an economic and political disaster if no agreement came from Brexit negotiations. A cliff edge is the worst outcome.
“It is an absolute priority for Ireland to move onto phase two of Brexit negotiations as soon as possible. In fact, if the EU moves onto trade talks already, it makes the duration and early negotiation of the transition period easier to get agreement on – this is vital for Ireland and for business certainty in Europe.
“But there is a fundamental flaw in the way the EU is conducting Brexit negotiations. Michel Barnier’s negotiating mandate, as it stands, requires that sufficient progress must be made on three key divorce issues, before talks can begin on trade negotiations. As we know, one of the three issues is around Northern Ireland and the border.
“The border issue is intrinsically tied up in trade negotiations. What happens when goods pass between Ireland and Northern Ireland? Trade, of course. To get to a soft border, we clearly need no disruption to trade. This is obviously a very difficult task given the UK’s stated position of not remaining in the Customs Union post-Brexit.
“The European Parliament has recognised that Northern Ireland could be part of some form of Customs Union post-Brexit, which does leave the door open. While the importance of North/South cooperation is instrumental, we cannot forget how vitally important our East/West trade ties are to the Irish economy.
“The EU needs to be open to move onto phase two quickly. We cannot settle Northern Ireland and border issues without moving onto trade talks. What should be sufficient is a principled agreement on the broad parameters of future North-South cooperation post-Brexit, in line with the Good Friday Agreement, to allow us to move to phase two of the negotiations.
“At the same time, the British need to come to their senses on the Brexit bill. This is where the real deadlock lies in the Brexit negotiations. We all know there are liabilities, existing and future liabilities. The UK needs to bite the bullet on this one, they are not going to win out against a united front of 27 Member States that are all saying that they don’t want to pay one cent more nor one cent less when the EU budget comes along next year. The Brits are going to have to pony up what they owe. Any figure above 30 billion is going to look bad in the British press and may cause fractures within the Tory government but this is where the Brexit reality bites.
“Theresa May’s government wants to get to phase two without a figure on the bill being publicised. This may be possible. The way forward for now should be to agree on the legal principles of how the bill is calculated. Reaching agreement on the final sum is essentially a matter for accountants and potentially arbitration by an independent body.
“Economic realities are beginning to have an impact on the politics of Brexit. The cold harsh fact is that Brexit is making the UK poorer. Last week, a study by the UK National Institute of Economic and Social Research found that British households are £600 a year worse off since the Brexit vote.
“One of the major concerns is the UK government’s continued lack of willingness to engage in debate on single market access and customs union post-Brexit. The City of London keeps the European economy ticking; this is where all the big European corporates come to access the capital markets. To have such an interconnected hub of European finance cut off in one fell swoop is going to have major systemic implications.
“The EU negotiating strategy is centred around safeguarding the integrity of the single market. The UK should be under no illusion that if they do not start to move on single market access and customs union, they will be treated as a third country. While Ireland might be an outlier, I do not see a willingness from many Member States to give UK special treatment on internal market access post-Brexit.
“At least to give some certainty to businesses in Ireland and Europe, we need an early agreement on a transition period. We cannot have a situation where the transition period would be agreed in last minute Brexit negotiations. This would be absolute chaos for all EU businesses that trade with the UK.
“Financial institutions, for the most part, are planning to conclude irreversible contingency plans by the end of the first quarter of 2018. This means that the value of a transition period becomes less and less useful the longer the negotiations go on.
“Daniele Nouy, Chair of the Supervisory Board at the ECB, told MEPs just yesterday that 50 banks have approached the ECB since the Brexit vote, with many submitting a formal request for a license to operate in the Eurozone. Up to 75,000 financial sector jobs could be lost in the UK. Ireland may reap some of the benefits of financial relocation, but the cost of losing our seamless trade links with the UK outweighs any benefits.”