Last week, we wrote that the bonds of the Conservative Party appeared strengthened with the emergence of the ‘Malthouse-compromise’ and formation of the Alternative Arrangement Working Group (AAWG), while the onus was being pushed back onto the EU to provide clarity over what the revised backstop would look like.

If we needed further evidence of the futility of predicting the political direction, this week brought it in spades – the AAWG has already fallen apart, there are reports of a split in the European Research Group (ERG) and Corbyn’s approach to Brexit has been welcomed by the EU.

Despite a positive start on Monday, by Tuesday leaks from the AAWG indicated infighting and accusations of a No 10 ‘plot’ to scare the hard-line Brexiteers through meetings with Northern Irish manufacturers. In an ordinary political era, a group that sought to unite opposing factions of a party is likely to have faced challenges. At this time, it is unsurprising that it took only three days for relations to break down. Given that their plan A solution was to utilise technology that does not exist and ignore the EU’s requirement of physical inspections, it was always going to have to resort to its plan B of a ‘managed no-deal’. However, this offers nothing to those wanting to avoid crashing out of the EU in all but name.

What is more significant is the reported split within the ERG on the Irish backstop and compromise. The ERG to date has held great sway over the direction of Brexit, with the prime minister forced to marry the group’s hard-line demands with the practicalities. As a group, the ERG is not prone to leaks nor public disagreements, so a report that some members are thinking of supporting May’s deal – however it returns next – is one of the few surprising elements of Brexit news this week.

The other, is that Labour has quietly dropped its previous six tests for Brexit, now publicly advocating a new set of demands for the EU negotiation in a letter to the prime minister. Jeremy Corbyn continues to insist on a UK-wide customs union with a say in future trade deals, as well as: close alignment with the single market; ‘dynamic alignment’ on rights and protections; continued participation in EU agencies and funding programmes; and cooperation on security. It has since been welcomed by both Guy Verhofstadt and Donald Tusk as a ‘promising way’ out of the impasse. However, closer to home the soft-Brexit proposals have caused upset – both to the left and the right. Apart from the obvious fact that it crosses May’s red line of ensuring the UK can negotiate independent trade deals, many Labour MPs are angry that there is no mention of a people’s vote, for which they claim there is 90% support among Labour members. Senior Labour MPs maintain a second referendum is still on the table, but it is significant that no mention was included in the letter, nor has it been adopted as official party policy.

Best for Britain

As we rapidly approach exit day, companies are still attempting to reinforce the need for clarity on trade. In what has been a constant theme throughout the negotiations, there is frustration and confusion in industries reliant on international trade deals – both from within the UK and globally. On Wednesday, the international trade secretary Liam Fox indicated a ‘possibility’ of cutting tariffs to zero but noted that Cabinet discussions were still ongoing. The GMB Union has since condemned the idea as the ‘ultimate Brexit betrayal’, opening up the country to an influx of cheap goods. Meanwhile, business secretary Greg Clark stressed the need for urgency to the BEIS Committee, highlighting that – for example – any firms exporting to Japan via sea need six weeks’ notice of any new trading arrangement to ensure paperwork and accounts were correct. As the committee flagged, this would mean a deadline for a deal of ‘mid-February’ – a mere week away. Also of note is the attitude with which countries are beginning to approach trade deals in our perceived weak state, with the Huffington Post providing an overview of US lobbyist demands to Trump – including changing how the NHS evaluates drugs in a way that would suit American firms.

Back to the drawing board?

So where are we now? And what will happen next week? May and Juncker have committed to meeting again before the end of February, and Stephen Barclay and Michel Barnier are set to speak on Monday; this indicates that a real meaningful vote will now be bounced from next week to sometime in March. The prime minister has however pledged to provide an update to the House of Commons next week, and is also likely to issue a statement after her lunch time meeting in Dublin today. Remainers will get a second chance to delay Brexit in the so called ‘Valentine’s vote’ on Thursday, with Yvette Cooper presumably resubmitting her narrowly defeated motion to delay Brexit by up to nine months. So with the seeming failure to date to convince the EU of the Malthouse compromise, is a technical extension looking like the only way forward? We wouldn’t want to say.

For further information, contact deputy managing director Daniel Cambers here.