Britain’s negotiations with the EU are at a crucial point as time ticks down to the UK’s scheduled exit from the bloc on March 29 next year.
Here the FT provides answers to some of the big questions about Brexit, including the key dates, news on the fraught discussions between London and Brussels and the impact on economic indicators such as house prices and the pound.
What is Brexit?
Brexit is a shorthand way of referring to Britain’s exit from the EU. It is partly based on the word “Grexit”, which referred to the possibility that Greece might leave the eurozone.
What is the latest Brexit news?
Negotiators in Brussels have ended months of talks by agreeing Britain’s terms for leaving the EU. UK prime minister Theresa May now has to sell the deal to her cabinet and parliament.
Pro-Europeans in the cabinet on Tuesday night said they were “optimistic” Mrs May could face down her critics, paving the way for a special EU summit on November 25 to ratify Britain’s exit terms.
Downing Street said the UK cabinet would meet at 2pm on Wednesday. The withdrawal accord, struck more than two years after the referendum vote to end four decades of EU membership, sparked a frenzied round of political activity in London as Mrs May prepared the ground for the crucial cabinet meeting.
Ratification of the accord would allow the UK a smooth departure from the EU on March 29, avoiding a disruptive “no deal” exit and paving the way for further negotiations on the final relationship during a 21-month transition period.
What happens next?
‣ See our timeline of key Brexit dates
MUST BE WRAPPED UP BY AUTUMN
- Terms of the transition
- Separation terms
- Future status of Northern Ireland
- Framework for future UK-EU relationship
TO BE COMPLETED BY MARCH 29 2019, BREXIT DAY
- Approval by at least 20 of the other 27 EU states at a summit
- UK parliament holds meaningful vote on deal
- UK parliament passes separate legislation to bring exit treaty into British law
- Consent vote by European parliament
TO END ON DECEMBER 31 2020
- Formal trade talks begin
- UK seeks to replace 750 EU international agreements
- Both sides prepare new immigration/customs/regulatory systems
- European elections in May 2019
What has been provisionally agreed?
Under the deal reached between London and Brussels, “backstop” provisions to avoid a hard border in the island of Ireland would keep all of Britain in a customs union with the EU until a more permanent solution was agreed.
The all-UK customs union would replace the EU’s original requirement that the treaty include a special customs arrangement for Northern Ireland — a demand that Mrs May said no British prime minister could ever accept.
But in exchange the EU would have a say over when Britain left such a UK-wide customs union.
The more than 400 page treaty text also sets up a prolongable transition period (scheduled at present to last until the end of 2020), as well as addressing issues such as the rights of EU and UK citizens in each other’s jurisdictions and Britain’s Brexit bill of around £39bn.
Read more on the price of Theresa May’s negotiating success
What is the problem with the level playing field?
Since the UK-wide customs union backstop would be written into the withdrawal treaty, the European Commission has pressed for guarantees across competition, taxation and the environment, which would restrict the UK’s ability to diverge in future.
These are known as “level playing field” provisions.
France, Germany, Denmark and the Netherlands have pressed for “very demanding” assurances and enforcement mechanisms, with Paris in particular asking the UK to “dynamically” align itself with future changes in EU law.
Some of the most sensitive level playing field provisions are environmental targets that the EU has agreed on for 2030. These aim to slash energy consumption by 32.5 per cent compared with business-as-usual projections. Another is a demand that the European Court of Justice oversees how the UK applies the bloc’s restrictions on state subsidies to companies.
More on the level playing field
Why is fish so important?
From the day it launched membership talks with Britain to the last days of the country’s negotiations to leave, the EU has been ruthless in advancing its interests in one sector above all:fish.
Nowfishing rights are emerging again as a big issue. Fishermen in France, Spain, Denmark, Netherlands, Sweden and Belgium are all dependent, to varying extents, on their EU allocated quotas of fish from British waters.
The EU’s original approach was to make access to British waters an explicit precondition for any future trade deal covering the entire UK economy. By contrast, Mrs May wants the complete power to decide on access to British waters “as an independent coastal state”.
The dispute has now spread to the negotiations over Britain’s exit treaty from the EU, since Brussels has now accepted that this could include a UK-EU customs union as part of a “backstop” plan for Northern Ireland.
Britain has worked up a possible compromise with the European Commission. This would exclude the fishing sector from any backstop arrangement for a UK-wide customs union until an agreement is reached on reciprocal access to waters.
While the compromise would mean that Britain did not need to give upfront concessions on access, it would hit British industry, since 75 per cent of its exports are to the EU and rely on the customs union. But some EU member states with big fishing industries are sceptical.
More on fish
What is happening with financial preparations for no deal?
Valdis Dombrovskis, the European Commissioner responsible for financial regulation, told the Financial Times that EU banks and companies could continue using UK-based clearing houses to process derivatives trades even if Brexit negotiations failed — but on a strictly short-term and conditional basis.
Banks and other institutions’ worries about the consequences of an acrimonious break-up between London and Brussels are far from over as Brexit day approaches. Those concerns are heightened by the two sides’ notable failure in recent weeks to strike a divorce deal.
Other big issues in which a no-deal scenario could put financial stability at risk include the validity of derivatives contracts; emergency capital for banks and the EU’s calls for lenders to keep planning for a no-deal Brexit. Despite the recent progress, both sides still suspect the other of seeking to exploit the debate about financial stability to its own advantage, whether to replicate the advantages of the single market or to tempt business across the Channel.
More on Brexit and financial stability
Will Brexit cause a recession?
The uncertainty over the outcome of the Brexit negotiations has affected the UK economy, eating away at business confidence and investment but making much less impression on consumer spending and the labour market.
How will Brexit affect the pound?
The aftermath of the 2016 referendum has led to some of the most volatile trading in the pound in the past half century and is expected to continue to do so up to and beyond March 29.
The most widely watched metric of sterling’s performance is its behaviour against the dollar. However, its movements against the euro, which have also been highly volatile, are widely seen as a proxy for Brexit risk.
‣ FT Markets Data: Compare GBP with other currencies
Will Brexit hit house prices?
Estate agents say the unknowns surrounding Brexit are weighing down the British property market. Although the market initially appeared little affected by the 2016 referendum, Mark Carney, governor of the Bank of England, recently warned that a disruptive no-deal Brexit could cut 35 per cent off house prices.
What are the customs union and the single market?
In 1968, just over a decade after the European Economic Community was founded, the European customs union was completed, with a common external tariff and the intent of establishing free trade within the area.
Almost 50 years later, the internal market — or single market, as it came to be known — remains a work in progress. The “four freedoms” — movement of goods, services, capital and labour — are a founding principle of the EU.
At stake in the Brexit negotiations are the kind of ties the UK will have with both the single market and the customs union, which could shape Britain’s future for decades.
When was the Brexit vote?
Britain’s historic referendum was held on June 23 2016. Initially the British government had wanted the question: “Should the UK remain a member of the EU?” But the country’s Electoral Commission, which by law has to be consulted, was unhappy with the phrasing, noting concerns that the question was biased and might encourage people to vote Yes.
It recommended in September 2015 that the question be amended to: “Should the UK remain a member of the EU or leave the EU”? The government and parliament accepted these changes and this was the question that was asked.
How many people voted for Brexit?
On a record turnout of 72.2 per cent, 17.4m people (51.9 per cent of voters) voted Leave, while 16.1m people (48.1 per cent) voted Remain in the referendum. The winning margin was therefore 1.3m votes.
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