U.K. Progress on Brexit Questioned as Key Point Still Unresolved

Brexit watchers doubt whether the U.K. has done enough to convince the European Union to allow trade talks to start as soon as October.

Despite a swathe of policy documents, with a new one on data protection scheduled for release on Thursday, analysts say Prime Minister Theresa May’s government is still hazy on where it matters most to the bloc.

“It remains unlikely that enough progress can be made to move on to the future EU-U.K. relationship anytime soon,” said Carsten Nickel, director of research at Teneo Intelligence. “Despite the position papers, the U.K.’s preferences for the future relationship remain vague, and progress on key divorce items has been limited.”

That’s not to say the U.K. hasn’t made some concessions. On Wednesday it accepted EU law will have sway in Britain even after Brexit, potentially smoothing the way for deals on citizens’ rights and commerce. By seeking a transition for after March 2019 it has also dropped threats that “no deal is better than a bad deal.”

The problem is that while May is fixated on future relations the EU is concentrating on settling the terms of separation such as the Irish border, giving protection the Europeans living in the U.K. and the divorce bill.

Only when “sufficient progress” is made on those topics will the EU acquiesce to moving on. The danger is that the U.K. is deemed not to have caved enough and time is not on its side.

Who’s in Charge?

With talks set to resume next week in Brussels, European Commission spokesman Alexander Winterstein on Wednesday reminded the British of the bloc’s priorities.

“Our own position is very clear, is very transparent, and is unchanged,” he told reporters in Brussels. “We hope to make progress on the three main issues that we — not only we but also the EU27 — have set out and need to be clarified upfront.”

The U.K. is playing a “risky game by not offering anything new on two sticking points — the divorce bill or the rights of EU citizens, said Andrew Goodwin at Oxford Economics. 

“This increases the likelihood that progress will be slow, which would put further pressure on what is already a very tight timetable,” he said.

Others are more optimistic. The position papers represent a “sensible U.K. approach hiding in plain sight,” Rupert Harrison, a former Treasury adviser now at Blackrock Inc., said in a tweet on Wednesday.

The Pesky Bill

As well as giving ground on the EU Court of Justice, the U.K. has also said EU citizens will continue to enjoy visa-free travel on Brexit and in July conceded it would make a financial settlement though it remains extremely cagey on what it’s willing to pay.

The final paper this week reveal the government plans to adhere to European data-sharing rules, to minimize disruption for U.K.-based companies conducting business with the bloc. To be sure, it’s relatively easy for the U.K. to seek alignment with the EU when it’s convenient.

Global tech companies including Facebook Inc., Alphabet Inc. and Snap Inc. have been expanding operations in the U.K. over the past few years. Any issues with the transfer of data between the U.K. and Europe will cause these companies unwanted headaches.

The real test is still to come. May has paved the way for a compromise over ECJ jurisdiction, but now EU negotiators will be looking for any other red lines she is willing to blur.

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