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Firms warned transitional deal will mean TWO rounds of business chaos

BRITISH businesses are in fear that they will have to transition twice as the UK leaves the EU, an economist has claimed.

The Prime Minister has said the UK will leave the single market and customs union during the implementation period after March 29 2019.

The EU, however, remains firm that the UK will stay in the institutions until Britain has fully cut ties with the bloc.

Speaking on Bloomberg, Simon French, chief economist at Panmure Gordon warned that businesses in the UK could face having to transition twice during the Brexit process.

He said: “You say a lot has been discussed, I guess one of the surprises of this week is that Theresa May is going to discuss with her cabinet for the first time what they actually see in terms of the end state.

“That’s extraordinary that we are almost 18 months after the referendum and that discussion hasn’t been had at the top of UK politics.

“In terms of your economic question, I think the last few weeks have confirmed my view which is really that the UK will try and replicate as much as it can, the system with regulation with the European Union.

“It will effectively be a rule taker in that regard come the end state.

“The question this week is really on how much during that transition the UK will be able to benefit from a status quo and businesses don’t have to transition twice, and that is the real risk of businesses we are talking to.”

Business has called for certainty to help them prepare for when the UK leaves the European Union.

Speaking in the House of Commons on Monday, the Prime Minister set out what the UK was seeking during the implantation period.

She said: “As I proposed in Florence, during this strictly time-limited implementation period which we will now begin to negotiate, we would not be in the single market or the customs union, as we will have left the European Union.

“But we would propose that our access to one another’s markets would continue as now, while we prepare and implement the new processes and new systems that will underpin our future partnership.

“During this period we intend to register new arrivals from the EU in preparation for our new immigration system.

“And we will prepare for our future independent trade policy, by negotiating and where possible signing trade deals with third countries, which could come into force after the conclusion of the implementation period.”

Theresa May secures Brexit deal with EU after all-night talks

The EU and UK are ready to move to trade negotiations after the PM made a pre-dawn trip to Brussels to secure a divorce deal.

The Prime Minister has secured a deal with the EU to push Brexit negotiations to their next phase following an all-night diplomatic scramble.

In an early morning news conference in Brussels – after sharing breakfast with Theresa May – European Commission President Jean-Claude Juncker declared “sufficient progress” had now been achieved on initial divorce matters.

Hailing the agreement as the product of “compromise” from all sides, the EU boss paved the way for Brexit talks to now advance onto details of a transition period and the final post-Brexit EU-UK relationship.

Mr Juncker expressed confidence leaders of the 27 other EU member states would accept the agreement and therefore move to the second phase of negotiations at a Brussels summit next week.

The Prime Minister described the deal as “a hard-won agreement in all our interests”.

Standing alongside Mr Juncker at the news conference, Mrs May told reporters the agreement would guarantee the rights of three million EU citizens living in the UK.

These would be “enshrined in UK law and enforced by British courts”, the Prime Minister said.

She added the so-called Brexit bill, which could be as much as £50bn, would be “fair to the British taxpayer” and also insisted the agreement offered a guarantee there would be “no hard border” between Northern Ireland and the Republic of Ireland.

Moving on to the second phase of Brexit talks, which will include discussions on a transition period, will be welcomed by businesses.

They have warned the Prime Minister a lack of clarity about such a period before the end of the year might lead to them taking decisions that would see investment and jobs moving out of the UK.

There was no immediate backlash from Conservative Brexiteers on the terms of the deal.

Environment Secretary and Vote Leave architect Michael Gove said: “This is a significant achievement because it means the rights of EU citizens are protected in the UK, the rights of UK citizens are protected in the EU.

“We have an agreement that no EU country will be out of pocket as a result of our departure.

“But there will be more money for the NHS and for schools and for housing in this country as a result of our leaving the EU.

“And also we can now get on to talking about that free-trade deal.

“It’s a significant step forward and it’s one I think the overwhelming majority of people in Parliament and in the country will welcome.”

His fellow Cabinet Brexiteer and Vote Leave figurehead, Boris Johnson, praised Mrs May’s “determination in getting today’s deal”.

But, in an apparent warning to the Prime Minister, he insisted a future trade deal must remain “true to the referendum result” by “taking back control of our laws, money and borders for the whole of the UK”.

The deal was also welcomed by prominent Remain supporters on the Tory benches.

In a late night tweet, the Government’s Chief Whip, Julian Smith, made a pledge to Conservative MPs that he would ensure their opinions were listened to during the next phase of negotiations.

Former UKIP leader Nigel Farage said the deal would allow Mrs May to move on to “the next stage of humiliation” in Brexit talks.

Labour’s shadow Brexit secretary, Sir Keir Starmer, cautiously welcomed the agreement as “encouraging” but urged the Prime Minister to adopt a different approach to Brexit.

He said: “As the talks now move on to a discussion about Britain’s future relationship with the EU, Theresa May must seriously reflect on her approach to the negotiations so far.

“We cannot have another year of chaos and confusion or the farcical scenes we saw earlier on in the week that put jobs and the economy at risk.”

The Prime Minister and Brexit Secretary David Davis arrived in Brussels shortly before 6am on Friday, where they held a breakfast meeting with Mr Juncker and the EU’s chief Brexit negotiator, Michel Barnier.

It followed an agreement being reached by Mrs May with Democratic Unionist Party leader Arlene Foster, who had rejected an initial draft agreement the Prime Minister had hoped to seal on Monday.

Mrs Foster told Sky News “substantial changes” to the text had been made to ensure Northern Ireland would leave the EU on the same terms as the rest of the UK.

UK and EU ‘appear close to Brexit breakthrough’

There are increasing indications that an agreement on the first phase of Brexit talks is about to be struck.

EU Council president Donald Tusk said he was “encouraged by progress” and a deal on Ireland, the “divorce bill” and citizens’ rights was “getting closer”.

Theresa May is meeting EU figures in an attempt to finalise the deal ahead of a summit in 10 days’ time.

Belgian MEP Philippe Lamberts told the BBC’s Laura Kuenssberg that the UK had made a concession on the Irish border.

The BBC’s political editor said Mr Lamberts had said the UK was prepared to accept that Northern Ireland may remain in the EU’s customs union and single market in all but name. But, she stressed, the BBC has not seen the draft document nor has it been signed off.

Downing Street sources also told her they were cautious as to whether a deal would be done in Brussels on Monday, with one source saying: “There are still moving parts”.

Mrs May is meeting European Commission president Jean-Claude Juncker and Donald Tusk, the president of the European Council.

Scottish First Minister Nicola Sturgeon reacted to reports that Northern Ireland could retain “regulatory alignment” with the EU by saying there was “surely no good practical reason” why other parts of the UK could not do the same.

And Mayor of London Sadiq Khan tweeted that there could be “huge ramifications” for the capital if the country was given this deal, suggesting he would seek something similar.

While the Republic of Ireland’s prime minister, Leo Varadkar, is expected to make a statement later, DUP leader Arlene Foster has said her party “will not accept any form of regulatory divergence” that separates Northern Ireland from the rest of the UK.

She went on to accuse the Republic of Ireland of “seeking to unilaterally change” the Good Friday Agreement – the peace deal that brought an end to the Troubles – without the DUP’s “input or our consent”.

“Of course we will not stand for that,” she added.

Mr Tusk represents the leaders of the other 27 EU members, who all need to agree for there to be a move to the next phase of talks.

The UK voted for Brexit last year and is due to leave in March 2019, but negotiations have been deadlocked over three so-called separation issues.

Where are the talks at?

The EU says it will only recommend the start of talks about future trade arrangements when it deems “sufficient progress” has been made on three issues – the status of expat citizens, the “divorce” bill and the Northern Ireland border.

The UK has been set a deadline of this week to come forward with an improved offer on them, and hopes that the go ahead for future talks will then be given at an EU leaders’ summit on 14-15 December.

On the “divorce bill”, the UK is understood to have recently increased its offer, which could be worth up to 50bn euros (£44bn).

On the issue of rights for the three million EU citizens in Britain, the UK has agreed that those who already have permanent residence will not have to pay to apply for settled status. Those making a first time application for the right to stay after Brexit, however, will face a charge – reportedly similar to the cost of applying for a passport.

Settled status will grant those who have spent five years in the UK equal rights on healthcare, education, benefits and pensions to British citizens.

Ministers have already suggested people legally resident in the UK before an as yet unspecified cut-off date will be allowed to stay and they want to make the process “as easy as renewing a driving licence”.

Is Ireland now the sticking point?

Progress in other areas has led to attention being focused on the Ireland question in recent days.

The Irish government is seeking guarantees from the UK that there will be no customs checks on the border with Northern Ireland after Brexit and movements of goods and people will remain seamless.

Mr Tusk has stated Dublin must be satisfied there will be no return to a “hard border” and as Irish ministers met on Monday, it seemed there was yet to be a resolution.

“We are certainly not looking to veto anything,” its Europe minister Helen McEntee told BBC Radio 4’s Today.

“Ireland wants to move on to phase two but it would be absolutely impossible to allow that when we don’t have an absolutely concrete commitment there won’t be a hard border.”

But according to RTE’s Europe editor Tony Connelly, a draft text being circulated suggests the UK is set to agree to a key Irish demand – that there would be “continued regulatory alignment” for businesses in the Republic of Ireland and Northern Ireland after Brexit.

And Irish prime minister Leo Varadkar, who talked to Mr Tusk and Mr Juncker on Monday morning, says he will be making a statement later:

Although the wording of any proposed deal on the Northern Ireland border is yet to be confirmed, the Democratic Unionist Party MP Sammy Wilson, was unhappy with what had been reported so far.

“We’ve made it quite clear that we will do nothing that would separate us from our main market , which is the United Kingdom – so how could they even deliver on such a promise,” he said.

What’s the view from Brussels?

A spokesman for the European Parliament has hinted that an agreement is close suggesting only a “few words” are missing from a text that both sides can sign off.

Leading MEP Guy Verhofstadt said there was a 50-50 chance of an agreement on Monday.

“I am optimistic that it is possible,” he said. “If there are still outstanding issues on citizens rights, I want to solve them now.”

The BBC’s Europe editor Katya Adler says Brussels is in an upbeat mood, with talk of movement, traction and an absence of negativity in last-minute negotiations before the prime minister’s visit.

Mrs May, she added, will be expected to give personal assurances and iron out outstanding disagreements. If all goes smoothly, a joint UK-EU report will then be published locking in all understandings to date.

Trouble for May back at home?

Mrs May’s meetings comes as the EU withdrawal bill returns to the Commons for a fourth day of debate and leading Tories, including Jacob Rees-Mogg, John Redwood and former chancellor Lord Lawson, signed a letter calling on the PM to refuse to settle the UK’s “divorce bill” unless Brussels agrees to a series of demands.

These included ending the European Court of Justice’s jurisdiction the moment the UK leaves in March 2019, rather than allowing it to continue during an “implementation” phase as the PM has suggested.

Tory MP and pro-Brexit campaigner Owen Paterson claimed he was “right behind” the prime minister, despite signing the letter.

“It is very important that the EU understands that many of us are getting fed up with the fact that they are treating [Mrs May], in some ways, pretty rudely and churlishly and not getting on to the absolute key negotiation, which is the economic relationship we have with the EU once we leave.”

Latest Brexit News: Both sides need to ‘step forward’ says May

Theresa May has insisted it is for both sides, not just the UK, to move the Brexit process forward so discussions on future trade relations can begin.

She will meet the EU’s Donald Tusk, who has told the UK it has until the start of December to offer further guarantees on money and the Irish border.

Ministers have given her their backing to increase the UK’s “divorce bill” but only if the EU shows movement on trade.

Arriving in Brussels, the PM said both sides “must step forward together”.

Environment Secretary Michael Gove refused to confirm or deny reports that the government had agreed to pay about £40bn to pave the way for EU leaders to approve the next phase of talks at a summit on 14 December.

The UK voted to leave the EU in June 2016, and served the EU with formal notice of Brexit in March 2017. This began a two-year countdown to the UK’s departure day which will be in March 2019.

The British prime minister will later meet Mr Tusk, who as European Council president represents the 27 other member states, on the margins of a summit on security threats in Eastern Europe.

The BBC’s Europe reporter Adam Fleming said he did not expect a “massive step forward” on Brexit but the meeting was an important “small step in the diplomatic dance” between the sides.

Asked whether she was prepared to offer a “blank cheque” to the EU to get what the UK wants, Mrs May signalled the onus was on the EU as well as the UK to make progress.

“These negotiations are continuing but what I am clear about is that we must step forward together,” she said. “This is for both the UK and the EU to move onto the next stage.”

Last week Mr Tusk said the EU was “ready” to move onto the next phase of Brexit talks but the UK must first show more progress on the outstanding issues.

‘Exemplary’

Mr Gove, who was one of those ministers reported to have sanctioned the higher offer at a meeting of a key Brexit committee earlier this week, hit out at the “assumptions” and “assertions” reported in the media.

“I am not going to reveal what happened in a cabinet sub-committee,” he told BBC Radio 4’s Today.

“I am not going to provide a commentary on the negotiating stance because the PM and David Davis should be free to get the best deal for Britain.”

The PM, he added, was handling the negotiations in an “exemplary fashion”, saying he was confident that she would “put the national interest first” at all times.

During Friday’s meeting, Mrs May will also warn EU leaders to be wary of “hostile states like Russia” and pledge the UK will stay committed to European security after Brexit.

“We must be open-eyed about the actions of hostile states like Russia who threaten the potential growth of the Eastern neighbourhood and try and tear our collective strength apart,” she said.

She is expected to use the summit to demonstrate that the UK can contribute to European security after Brexit, for example by spending £100m over five years to fight Russian disinformation campaigns.

Budget aim to help UK ‘seize opportunities’ from Brexit

The UK must “seize the opportunities” from Brexit while tackling deep-seated economic challenges “head on”, Philip Hammond is to say in his second Budget.

The chancellor will promise investment to make Britain “fit for the future” as an “outward looking, free-trading nation” once it leaves the EU in 2019.

But he will also commit to supporting hard-pressed families with the cost of living and address housing shortages.

Labour say he should call time on austerity and boost public services.

In his Commons speech, which will begin at about 12:30 GMT, Mr Hammond will set out proposed tax and spending changes.

He will also update MPs on the current state of the economy, future growth projections and the health of the public finances.

He has been under pressure in recent months from sections of his party who argue that he is too pessimistic about the UK’s prospects when it leaves the EU.

In response, he will set out his vision for the UK after Brexit as a “prosperous and inclusive economy” which harnesses the power of technological change and innovation to be a “force for good in the world”.

Unlike past years, few announcements have been briefed out in advance of the big day.

But the chancellor is expected to announce more money for teacher training in England and extra cash to boost the numbers of students taking maths after the age of 16.

He has signalled he wants to speed up permitted housing developments and give more help to small builders.

In a nod to younger voters, discounted rail cards will be extended.

An extra £2.3bn for research and development and £1.7bn for transport links are designed to address the UK’s lagging productivity.

Extra money is also expected to be found for new charge points for electric cars and for the next generation of 5G mobile networks.

Expect the theme of innovation to ring through the speech, with Mr Hammond hailing the UK as being “at the forefront of a technological revolution”.

The image Mr Hammond has cultivated as a safe, unflashy pair of hands in uncertain times – hence his ironic “box office Phil” nickname – was dented in the March Budget when he had to backtrack on plans to hike National Insurance for the self-employed.

Asked on Sunday whether this would be a bold or boring Budget, he settled for describing it as “balanced”.

While some Tory MPs would prefer a safety-first approach with no controversy, others want him to turbo-charge efforts to prepare the UK for life after Brexit.

Most hope he will begin to address issues perceived to have hurt the Tories at the election, such as the financial pressures on public sector workers and young people.

In remarks released ahead of the speech, Mr Hammond strikes an upbeat tone, saying he will use the Budget to “look forwards, embrace change, meet our challenges head on and seize the opportunities for Britain”.

Yes, that’s the way it’s been for the last twenty years. The last one was in March and normally there wouldn’t be another one until Spring 2018.

But Mr Hammond thinks late autumn is a more suitable time for tax and spending changes to be announced and scrutinised before the start of the tax year in April. So from now on, Budgets will take place in November.

But aside from the timing, the choreography of Budget day will remain the same.

Mr Hammond will be photographed in Downing Street holding the famous red ministerial box – used to carry the statement – aloft before making the short journey to the Commons.

While tradition dictates he can take a swig of his chosen tipple during his speech, Mr Hammond is expected to eschew anything too strong and confine himself to water during what is normally an hour-long statement.

Quite a lot. In the last nine months, the UK has triggered Brexit and begun negotiations on the terms of its departure from the EU.

Economic conditions have changed too, although there is fierce debate about how much of this is attributable to uncertainty and negativity over Brexit.

Inflation has risen to 3%, its highest level in five years, while growth has faltered a little.

However, borrowing levels are at a 10-year low, giving Mr Hammond more flexibility, while employment remains at record levels.

The political backdrop has also changed enormously.

The loss of their majority in June’s election sparked fresh Brexit infighting within the Conservatives.

The government has the backing of the DUP, but Mr Hammond – who is distrusted by many on the right of the party – does not have unlimited political capital in the bank.

Brexit: UK ‘ready to pay more to the EU’

Brexit supporters in the cabinet have agreed the UK should offer to pay more money to the EU as it leaves.

But no formal offer will be made until the EU agrees to begin talking about a new trade deal with the UK.

No new figure has been given – but it is thought it could be up to £40bn, which would be double what the UK’s offers so far add up to.

The UK and the EU have yet to agree on the so-called “divorce bill” with the UK due to leave the EU in March 2019.

Some Conservative MPs have reacted angrily to the possibility of the UK agreeing to pay more – yesterday one, Nigel Evans, said it would be like a “ransom payment” to the EU while another, Robert Halfon, said it would make voters “go bananas”.

But despite this, BBC assistant political editor Norman Smith said leading Brexiteers in Theresa May’s cabinet, like Boris Johnson and Michael Gove, had agreed to support her in paying a “much larger sum” – as long as the EU agrees to begin trade talks, which it has refused to do so far.

And no final figure will be agreed until a trade deal is agreed, he added.

The UK voted to leave the EU in June 2016, and served the EU with formal notice of Brexit in March 2017. This began a two-year countdown to the UK’s departure day which will be in March 2019.

Before that the two sides have to agree all sorts of things – including what happens to EU citizens living in the UK and British people living in the EU, and how the Northern Ireland border will work.

So the two teams of negotiators have been meeting in Brussels every month.

But there has not been much of a breakthrough so far, with the “divorce bill” proving to be one of the key sticking points.

Part of the problem for Theresa May is that while the EU wants the UK to offer more money, some of her MPs say this would be unacceptable and that the UK should just walk away and leave.

EU leaders are due to decide at a summit on 14 and 15 December whether to allow talks on a future trade relationship to begin.

It was billed as a key meeting where Theresa May would try to get her ministers on side to support her in negotiating cash with the EU.

Downing Street has been tight-lipped about what was actually discussed at the Cabinet Exit and Trade (Strategy and Negotiations) sub-committee, chaired by Prime Minister Theresa May.

But the BBC understands ministers concluded there is the possibility that talks with the EU will move on to the next phase in December but “we are not going to move on our own”.

There were also tensions over the future role of the European Court of Justice.

Some believe the court will need to supervise the trading rules between the UK and EU during a period of transition after Britain leaves.

Chancellor Philip Hammond has floated the idea of a tribunal, similar to the arrangements in place in European Economic Area countries such as Norway, to settle any disputes.

But the EU may insist on a continued role for the European Court of Justice.

The EU says the UK needs to settle its accounts before it leaves. It says the UK has made financial commitments that have to be settled as part of an overall withdrawal agreement.

The UK accepts that it has some obligations. And it has promised not to leave any other country out of pocket in the current EU budget period from 2014-20.

But the devil is in the detail.

There are also issues like pensions for EU staff, and how the UK’s contribution to these is calculated for years to come, and the question of what happens to building projects – for instance in Spain – that had funding agreed by all EU members including the UK but which will only begin construction after the UK has left.

Large amounts of the EU’s budget are spent in two areas – agriculture and fisheries, and development of poorer areas.

Projects include business start-ups, roads and railways, education and health programmes and many others.