The Brexit Bill has passed, subsequently meaning that the UK is now officially out of the European Union and into a transition phase. With negotiations surrounding the new trading relationship in full swing, a number of obstacles have already been identified. France, Spain, Ireland and the Netherlands have pushed to tighten up Michel Barnier's instructions regarding fishing rights. The original terms referred to building on the existing relationship, and they want nothing less than the status quo, with access to all the UK's fishing grounds. Meanwhile, at the top of the UK's agenda is the financial services. The Brexit agreement said little about the UK financial services industry's access to European markets. As a result, the City of London's access to the EU will depend on the EU judging that the UK has equivalent regulation. The UK government is seeking permanent equivalence so that the financial services industry can continue to trade in Europe after the end of the transition period. Michel Barnier has said that this is not on offer. Therefore, as we enter the trade negotiations, we may hear as much about fishing and finance as we heard about the Irish border during the withdrawal agreement phase. In the end, Boris conceded to special arrangements around Northern Ireland, effectively allowing border checks on trade across the North Sea. Although this was much to the dismay of the DUP, it was what was needed for Boris to get his Brexit deal done.
The UK fishing industry has been in decline for many years and much of the blame for this has been attributed to EU fishing policies. As a result, there are just 12,000 fishermen left, with 2,400 part-time. The financial services and insurance industry employs around 1.3 million people, contributing significantly to the tax intake. No doubt, many European countries would like to take a share of this business from London. On financial grounds alone, the finance industry is much more important than fishing. Therefore, if it comes to a trade-off, the EU will hope that this allows them to get what they want on fishing. However, that ignores the symbolic nature of fishing to the UK – an island nation whose national dish is arguably fish and chips. One of the mantras in the Brexit campaign was that we would take back control of our fishing grounds, and to give in on this could be seen as betrayal.
Furthermore, from what we have seen thus far, we expect that fishing and finance may be amongst the most awkward issues to settle. 64% of fish landed in the UK is in the Scottish ports, and the Scottish Nationalists want to split from the UK and re-join the European Union. If this were to happen, then Scottish waters would be under European control once more.
Former Prime Minister, Theresa May, promised that no UK Prime Minister would allow for a border in the North Sea; however, this is effectively what has been built into the Brexit agreement. Boris Johnson may negotiate away some of our fishing rights to get a deal on trade and financial services to benefit the country as a whole. The Brexit trade negotiations will hang over the UK equity market in the months to come but government spending may provide a boost that outweighs the drag from continued Brexit uncertainty. We have already seen the confirmation of HS2 infrastructure spending and we will be watching the new Chancellor Rishi Sunak's budget statement next month for more changes on tax and spending.
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