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REUTERS/Neil Hall BREXIT

May's Brexit plan likely to survive parliamentary assault

By William James "The bottom line is that there is very, Five separate amendments designed rime Minister 's very, very little appetite for to halt the bill before it can become plan to leave the European Conservative MPs (Members of law have been submitted by Union is expected to survive Parliament) to back any lawmakers from different opposition weeks of intense amendments," the source said. parties. One of these motions, written P by the pro-EU , parliamentary scrutiny, which started on Tuesday, despite pro-EU "HARD BREXIT"? will be put to a vote on Wednesday. lawmakers' attempts to force the The second largest party, Labour, "Today’s debate falls shamefully short government to rethink its strategy. called for more parliamentary in time and in detail and that is why May's government is seeking approval scrutiny of the Brexit process, but has SNP MPs will be voting against the for a new law giving her the right to said it will not ultimately try to thwart bill proceeding," SNP lawmaker trigger Article 50 - the legal process it. Several Labour MPs disagree with Stephen Gethins said in a statement for leaving the bloc - after the this stance and will oppose the law. before the debate. Supreme Court ruled last week that Lawmakers who disagree with the In addition, 85 pages of proposed she could not take that decision government's plan to leave the EU's amendments to the short two-clause unilaterally. single market and negotiate a free bill have been submitted for debate at "This bill simply seeks to deliver the trade deal with the bloc - a strategy later stages in the parliamentary outcome of the referendum - a described by some as a 'hard Brexit' - process, seeking to change the law for decision the people of the UK have are gearing up for a fight. a wide range of reasons. already made. They will view any attempt to halt its progress dimly," Brexit minister David Davis told lawmakers at the start of a two day debate on the bill - the first stage in the lawmaking process. Some lawmakers will try to use the legislative process to press May to reveal closely-guarded details of her negotiating strategy, give parliament and devolved governments more say over the exit talks, or even block Brexit entirely. But Conservative leader May's majority in parliament means her plan to start Brexit negotiations by the end of March is currently expected to pass through parliament's legislative process relatively unchanged and on time. " suspect at the moment there isn't going to be enough for a majority for any amendment," a source close to cross-party discussions on the legislation told . Disquiet among Conservative lawmakers, many of whom campaigned for Britain to remain in the EU, has so far been contained after May last week bowed to pressure A journalist poses with a copy of the Brexit Article 50 bill, introduced by the government to to set out her Brexit plan in a formal seek parliamentary approval to start the process of leaving the European Union, in front of policy document. the Houses of Parliament in , Britain, January 26. REUTERS/Toby Melville

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FACTBOX Could parliament change Britain's Brexit legislation?

ritish lawmakers have submitted 60 pages of proposed changes to B legislation published last week which will give Prime Minister Theresa May the authority to start Britain's exit from the European Union. The bill, consisting of only two clauses and less than 150 words in total, was drawn up after the Supreme Court ruled May could not trigger the legal 'Article 50' exit process without the approval of parliament. May wants to start the exit process by the end of March. Below are the details of amendments submitted so far and how they will be discussed in parliament in a debate beginning on Tuesday. A bus and taxi pass Big Ben on Westminster Bridge in London March 10, 2012. REUTERS/ Kieran Doherty

KEY POINTS - Amendments seek to change the stage. discussed and voted upon at the meaning of the legislation, or attach - Not all proposed amendments will committee stage of legislation under additional conditions to it. These be debated, or will make it to a vote. broad subject groupings. If MPs vote range from changing the purpose of - There is currently a fixed timetable in favour of a particular set of the bill significantly to minor technical for the debate in the House of amendments, they are carried forward alterations. Commons. Amendments are not to the 'Report Stage' where they will - Any amendments will need to win expected to slow this down. If there is be debated in more detail. approval in both houses of insufficient time to debate Similar amendments are likely to be parliament, and as such are unlikely amendments, they will be voted upon consolidated and redrafted at this to pass unless a substantial number without debate. stage and new amendments can also of the ruling Conservative party rebel - There is no fixed timetable yet in the be introduced. against their leader. There has so far House of Lords, but Labour and Amendments passed at this stage will been no indication such a rebellion is Conservative Party sources have said be incorporated into the bill and likely. there is a willingness to ensure the subject to a final vote, after which it is - May's Conservatives have an overall legislation can be passed in time to then passed to the House of Lords, majority in the elected lower chamber trigger Article 50 by March 31. where it will undergo a similar of parliament, the House of process. Commons. PROCESS Both houses must agree on the final - The Conservatives do not have a Any Member of Parliament (MP) can draft, and the bill can be passed back majority in the unelected House of submit a proposal to change the bill and forth until they do. Lords. which is formally known as the - A 'Reasoned Amendment' seeking to 'European Union (Notification of PROPOSED AMENDMENTS scupper the legislation will likely be Withdrawal) Bill'. These amendments The amendments submitted so far voted upon on Wednesday. It is not are then grouped according to their have been grouped into the following expected to win sufficient support to aims by parliamentary officials ahead categories: derail the government's plans. of the committee debate. Some are - The first batch of substantial rejected on technical grounds such as 1. PARLIAMENTARY SCRUTINY amendments will then be debated in being outside the scope of the Currently proposals include changes the House of Commons next week original bill. The final say on which to ensure that the government reports during a three day 'Bill Committee' amendments are selected for debate regularly to parliament on its progress debate due to start on Feb. 6. Votes will rest with deputy speaker Lindsay in exit negotiations with the EU, and are expected to be held during this Hoyle. These amendments are first calls for a debate prior to triggering

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Article 50 on whether Britain should on whether to accept the deal she has finances. remain a member of the EU's single negotiated for Britain with the EU. market. Amendments to the bill include calls 5. NEGOTIATING PRIORITIES for more negotiating time if Several amendments in this large 2. DEVOLVED ADMINISTRATIONS lawmakers reject her deal and even a category seek to legislate to define These include creating a duty to second public referendum on the what the government can and cannot consult the Scottish parliament and terms of the exit package. negotiate with the EU. Some seek to demands for devolved administrations ensure the rights of EU nationals in , Northern Ireland and 4. IMPACT ASSESSMENTS living in the UK are protected, others Wales to be given a greater say in Some lawmakers want to change the look to guarantee visa-free travel agreeing Britain's negotiating aims. bill to make the government publish between Britain and the EU. their assessment of how different 3. VOTING ON BRITAIN'S FINAL EU aspects of Britain's exit will affect Some amendments call for the EXIT DEAL various sectors such as climate government to publish a clear plan of May has promised to give MPs a vote change, equality and the public its negotiating strategies.

"Show me the money": divorce first, then trade deal, EU tells UK

By Alastair Macdonald and Jan future relationship without first Brussels -- continentals think they can Strupczewski regulating the issue of an orderly hold her hostage with the threat of separation." trade tariffs from 2019 unless she ince Prime Minister Theresa EU negotiators reckon Britain has a settles British debts. May set out her Brexit goals weak hand to play; May must accept Many discount as bluster May's last week, interest in Britain a two-year guillotine on talks that warning that she would rather have no has focused on the future S she hopes will end with a deal to deal than a bad deal, walking away trade deals she may one day strike keep "maximum" British access to EU without free trade and daring with the United States and other markets while pulling Britain out of continentals to take a hit to their own powers, as well as with the European the single market and its obligations. exports. But some diplomats voice Union. Put simply, if May wants to draft an concern that London may be tempted In Brussels and European capitals, FTA in only two years as she says -- a to flounce out without paying EU bills that looks like putting the cart before goal that prompts head-shaking in worth tens of billions. the horse. "They're talking about their future relationships," said one EU official preparing for talks with London. "But first we need to get divorced. This is not going to be easy. Frankly, it's going to be very, very messy." In diplomatic language, the European Commission's spokesman Margaritis Schinas told a news conference this week: "First, one needs to agree on the terms for an orderly separation and then, on the basis of this, build a future new, good relationship." As with other divorces, the bitterest battle may be over money. And there is no certainty that any settlement can be agreed at all. "Britain’s payments to the EU budget and the issue of the EU quickly starting talks on an FTA (free trade agreement) with Britain will be linked," said a second senior EU European Commission Chief spokesperson Margaritis Schinas is seen during a plenary official. session at the European Parliament in Brussels February 24, 2016. REUTERS/Yves Her- "There cannot be discussions of a man

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YOUR BILL: 60 BILLION EUROS money," said a person who has had planning. May insists Britain wants to remain a preliminary contact with negotiators German leaders see a grim prospect friend and constructive partner for the on both sides. EU officials have of picking up the biggest tab, while EU. It would hardly enhance Britain's prepared arguments to counter the ex-communist eastern states, who reputation among future global trade suggestions that Britain should be are the major net beneficiaries of EU partners to flee with bills unpaid. credited with a share of EU assets - spending, fear they will lose out. The other EU member states want it buildings, say - to offset what it will British officials say they can use the to pay its share of the spending owe Brussels on leaving. The bloc's money card to divide the 27. On the commitments that were agreed when negotiators will argue that Britain EU side, diplomats are saying that if it was a member, stretching out some was not asked to pay extra for a share London tries that, it will find its hopes years, as well as possibly funds to of existing EU assets when it joined in of a quick free trade deal put on hold. cover the pensions of British EU staff. 1973, so it has no right to demand Other knotty issues to be settled in There will, however, be differences repayment of any share now. Filling the withdrawal treaty include border over the size of the bill, estimated the hole left by the bloc's second arrangements, notably in Ireland, and informally by EU officials at very biggest economy in the EU budget is the rights of EU and British roughly 60 billion euros -- more than already causing jitters as the expatriates. Brussels has accused May Britain spends on defence each year. remaining 27 brace for the seven- of underestimating the problem by "I can see this turning very bloody over yearly blood ritual of financial calling for a deal on that right now.

INTERVIEW UK lawyer plots legal bid to make Brexit reversible

By Michael Holden s British lawmakers gather to debate whether to trigger the formal exit from A the European Union, London lawyer Jolyon Maugham is building a case which he hopes will ensure that British voters can still reverse it. The 45-year-old tax specialist, an opponent of leaving the EU, said it was right for Prime Minister Theresa May to start the exit process, but voters should also have a right to change their minds if parliament rejects the terms she negotiates. He filed a case in Ireland last week that he hopes will go to the European Court of Justice (ECJ) in Luxembourg, to establish that Britain can reverse the exit process without requiring British lawyer, Jolyon Maugham poses for a portrait near his law firm chambers in London, Britain, January 30. REUTERS/Toby Melville permission from the other 27 EU members. Maugham told Reuters at his offices in climate. The world is changing fast, that voters can change their minds, central London he believed last year's we cannot know what the world will Maugham said he hopes to keep the referendum meant parliament should look like in two-years time," he said. debate over the wisdom of Brexit alive vote to give May the authority to "We cannot know that what we as a political issue. invoke Article 50 of the EU's Lisbon regarded as being in our national "If revocability is established, people treaty, which would pull Britain out of interest in June of last year will will continue to ask the question the bloc in two years. continue to be in our national interest whether in this fast changing and "But we have a very uncertain political in two years from now." uncertain world Brexit is in the climate, economic climate, defence By establishing the legal principle national interest," he said.

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A bill authorising May to invoke article European Council President Donald One obstacle is that the ECJ does not 50 starts its route through parliament Tusk has said he believed Britain rule on hypothetical questions. on Tuesday, expected to pass could unilaterally withdrew its However Maugham said he did not overwhelmingly. request to leave. One of Article 50's view the question of whether Britain Although most members of authors, John Kerr, a former British could reverse Article 50 as parliament campaigned to stay in the ambassador to the EU, has also said hypothetical. EU, most, including the leader of the Britain could change its mind. Brexit supporters have accused those centre-left opposition Labour Party, like Maugham of usurping democracy say they will vote to uphold the result POSITIVE EUROPEAN VIEW by using the law to thwart the will of of the referendum, which "leave" won Maugham said his warm feelings for the people. , the with 52 percent of the vote. Europe were shaped by a year investment manager who fronted the May has said that she will put the final studying in Belgium on an EU- successful court challenge requiring deal she reaches at the end of sponsored programme. lawmakers to approve the triggering negotiations to parliament for a vote, "It gives you a very fixed, positive view of Article 50, became a hate figure in but that if parliament rejects it, Britain on the desirability of an open and Britain's right-wing press and received would have no choice but to leave the progressive Europe," he said. death threats. EU anyway, without any trade He advised former Labour leader Ed Maugham said there was nothing anti agreement with the bloc. Maugham Miliband on tax issues ahead of an -democratic about establishing the said that all-or-nothing stance means election in 2015, and has set up the principle that voters can change their parliament cannot hold the Good Law Project which aims to use minds. government to account. "It dawned on legal challenges to "advance a "I do think the people were misled. me without a viable alternative to progressive, responsive and forward- What happens if the promises that rejecting the deal the government looking society". Brexiteers made about sunlit uplands, negotiated, parliament had no ability The day after the June referendum, as extra money for the NHS (state- to control the government," he said. he attended a festival at his funded health service), no VAT (value- The legal question of whether Britain daughters' school, he began added sales tax) on domestic fuel, could change its mind and revoke formulating ways to hold a second wonderful trade deals with the rest of article 50 is still open. Government vote. Within a week he was working the world -- what happens if those lawyers have said the process cannot on a crowdfunding project for what come to nought?" be reversed, but even David Davis, the would become a successful legal "What if the economy turns sour? If cabinet minister in charge of leaving, challenge that forced May to seek the people come to agree with me, I said he was unsure. parliament's approval to trigger think it would profoundly "We don't intend to revoke it. It may Article 50. damaging to democracy and not be revocable. We don't know," he He has since raised 70,000 pounds profoundly bad for a country we all told parliament's Brexit committee in through crowdfunding for his Dublin love if we were forced to Brexit December. challenge. anyway."

Tens of thousands protest in cities against Trump's travel ban

By Alistair Smout Some chanted "Shame on May" for ens of thousands of people her offer to Trump of a visit to Britain protested in London and while 1.5 million people signed a other British cities against petition calling for Trump's planned President Donald Trump's trip - which will involve lavish T displays of royal pageantry and a ban on entry to the United States by refugees and people from seven banquet hosted by Queen Elizabeth - predominantly Muslim countries. to be cancelled. Thousands of people, some holding "It's a lot worse under Trump than I placards reading "No to Racism, No was expecting, because it's only been to Trump", "Dump Trump" and "I 10 days but he's changed so much stand with Muslims", joined a protest already," Rawnak Jassm, a 23-year- on Monday outside the Downing old British-Iraqi, who joined the Street residence of Prime Minister protest, told Reuters. "It's pretty Theresa May, the first leader to visit scary." President Trump. REUTERS/Stefan Wermuth Trump's immigration order, which

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was signed just hours after his "THERESA THE APPEASER"? different approach to immigration but meeting with the British prime Jassm, on the protest outside that the United States was a close ally minister in Washington, has soured Downing Street, expressed anger at and that the invitation to Trump May's attempt to show that post- May's lack of criticism of Trump and stood. Brexit vote Britain can have a "special urged the prime minister to stand up "The United States is a close ally of relationship" with the world's for the rights of all people. the United Kingdom, we work superpower. "We have to campaign and make sure together across many areas of mutual Some British voters, including May stands up for the rights of interest and we have that special thousands on protests across Britain, everyone everywhere," said Jassm, relationship between us," May said. have expressed concern that May has who is a project manager in local "I have formally issued that invitation failed to criticise Trump sufficiently for government. to President Trump and that invitation his temporary ban on travel to the May's attempt to court Trump, who stands." United States by people from Iran, hailed Britain's June 23 vote to leave Iraq, Syria, Libya, Somalia, Sudan and the European Union as a "wonderful REUTERS/Dylan Martinez Yemen. thing", came in for particular criticism While the protests in Britain were with some saying Britain was now in a smaller than those in the United weaker position after the Brexit vote. States, they illustrate how Trump's "With Brexit, they have to go around first days in office have had a the world, cap in hand," said Rhys sometimes unexpected impact on Edwards, a 29-year-old art politics across the world, even in some consultant who attended the London close allies such as Britain. protest. Trump said the new controls were One picture of May at the protest was aimed at securing the United States adorned with the words: "The lady by keeping out radical Islamic don't protest enough". Another read: terrorists, but protesters in Britain "Theresa the Appeaser". said the measures were racist and anti May, who wants to control -Muslim. Trump has denied the immigration from the EU after Brexit, measures are anti-Muslim. said on Monday that Britain has a

France to hold London roadshow to lure finance jobs to Paris

By Maya Nikolaeva, Jean-Baptiste Vey and but have set out few details since on finance ministry said. Michel Rose how many will go or where to. Also in Paris's favour is its status as "The battle narrows down to Paris Europe's only other "world city" rench authorities will head to and Frankfurt," a spokesman for alongside London, with some of the London next week for a Pecresse told Reuters. most-visited cultural attractions in the roadshow to try to lure HSBC, Europe's biggest bank, has world and the headquarters of many F financial jobs to Paris which said it could move a part of its multinational companies, French will show off the French capital's operations to Paris. HSBC already authorities say. advantages versus Frankfurt as an has a large subsidiary in Paris that Germany is also on a charm offensive alternative to Britain's financial holds most of the licences needed by to attract finance jobs from Britain. centre. an investment bank. The country's senior regulators met Valerie Pecresse, the head of the "There will be others," one French about 50 envoys from foreign banks wider Paris region and Gerard minister, who declined to be named, on Monday to explain how they could Mestrallet, president of France's told Reuters. move business to Europe's biggest finance industry lobby Europlace, will Paris has a network of international economy after Britain leaves the next Monday meet executives from law firms and asset managers and European Union, German financial BlackRock, Bank of America Merrill the city is also home to the European watchdog Bafin said. Lynch and others to present a study markets authority, ESMA and has its Beyond the financial sector, Paris's by McKinsey, aimed at highlighting own financial supervisor, which looks allure has recently been boosted by an the attractions of Paris. after some of the largest banks in the influx of investment in its tech sector, In the run up to Britain's June vote on eurozone, French officials say. with Facebook choosing the French Brexit, leading financial firms said "We have a very good supervisor and capital to open its first ever start-up they would move jobs out of the that's important for American incubator. country if there was a vote to leave banks," a source at the French But French officials have

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France-based property developer and builder, is optimistic about Paris's attractions but expects any actual moves to take time. "We should be realistic, no-one is going to rush to settle in Paris," Hachemi told Reuters, adding that he saw no impact from Brexit on the property market with regards to companies considering relocation plans. "This will take time ... There is competition with other European cities, there is no impact at this stage," he said. Behind the scenes though, companies and employees are already making enquiries with French institutions The financial district of La Defense is seen at dusk near Paris, France, January 5. about practical matters. REUTERS/Christian Hartmann Ecole Internationale Bilingue, one of Paris' most prestigious bilingual acknowledged France's strict labour 50 people or so more easily, but this schools, told Reuters they received laws can put off businesses. could not be implemented before the quite a lot of registration requests The finance ministry source said the presidential election this spring. from British-based families who were French administration was working on Nordine Hachemi, chairman and chief concerned about the consequences of ways to allow firms to lay off teams of executive of Kaufman & Broad, a Brexit.

Germany talks to banks about Frankfurt move after Brexit

By John O'Donnell rules would apply. "It's not enough to willingness to consider alternatives to have a letter box here," he said, London, after Prime Minister Theresa ermany's top regulators adding that senior managers must May said that Britain would leave the met about 50 envoys from also be based in Germany. EU's single market, a move that would foreign banks on Monday The meeting underscores a growing isolate the City of London from many G to explain how they could move business to Europe's biggest economy after Britain leaves the European Union, German financial watchdog Bafin said. Bafin, which has been approached by numerous banks in recent weeks, said it answered questions from the banks such as how to get a banking license in Germany. One official said representatives of about 25 banks had attended. Peter Lutz, a Bafin official in charge of bank oversight, said the authorities wanted to help banks considering a move to understand the rules in Germany. "Foreign banks are welcome," Lutz said, adding that U.S. banks, "real UK banks", as well as lenders from Japan and Australia had attended the meeting. A sign for Bank Street and high rise offices are pictured in the financial district Canary He said he had made clear that strict Wharf in London October 21, 2010. REUTERS/Luke MacGregor

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European clients. Union to continue selling in the bloc among the early movers. Executives, chiefly those in charge of once Britain leaves. Lutz said that no bank had yet signed regulatory issues, from banks May has said her government will up to move and that he expected including Morgan Stanley, Goldman invoke Article 50 of the EU treaty, decisions to be made around the end Sachs and Citigroup were to attend starting two years of negotiations to of March. the meeting in Bafin's Frankfurt arrange Britain's departure, by the Germany's economic strength and the offices, people familiar with the end of March. fact that Frankfurt is home to the matter have said. Those banks Frankfurt looks set to be one of the European Central Bank makes it declined to comment. biggest winners from any exodus attractive for banks. Many Germans are sceptical of the from London. But it faces hurdles. There is a aggressive practices of largely U.S. Hubertus Vaeth, head of Frankfurt shortage of housing, while the and British investment banks. Main Finance, a group backed by region's 13 international schools are Nonetheless, the country's politicians local government to promote the city, already well subscribed. Nightlife in are seeking to show a friendly face to has predicted that 10,000 jobs will the city - where many bars are largely banks in London searching for move from London to Frankfurt over empty for much of the week - is also alternative locations in the European five years, with investment banks seen as a turn-off.

GRAPHIC Despite Brexit trauma, sterling is no more volatile than euro, yen

By Jamie McGeever and Vikram Subhedar 1992 (sterling's ejection from the The first graphic shows how often Exchange Rate Mechanism), 2008- sterling, the euro and yen have moved ne narrative that has 09 (global financial crisis) and 2016 against the dollar beyond the normal emerged from the fog (Brexit vote). range in any given month - measured surrounding Britain's exit But aside from that, its volatility by 'standard deviations' - over the past from the European Union O against the dollar has broadly been 30 years. is that sterling has gone from being a in line with that of the euro and yen The data shows that a normal move long-established global reserve over the past three decades. for all three currencies over a rolling currency to one of the most fragile "This doesn't look like an emerging one-month period is around 3 percent. and volatile currencies in the world. market currency. This is the sterling Sterling/dollar has broken out of that The line is a good one, made more we know and love," said Simon range 91 times since 1987, euro/dollar compelling by the plunge of as much Derrick, global head of FX strategy at 105 times and dollar/yen 95 times. as 20 percent against the dollar Bank of New York Mellon in London. By this measure, sterling is less following June's Brexit referendum that made the pound one of the worst -performing currencies last year, ahead only of devalued ones like the Egyptian pound and Nigerian naira. Extending the emerging market analogy, Britain's current account deficit means sterling needs huge foreign capital inflows just to stay stable, and is being buffeted as much by unpredictable political developments as traditional economic fundamentals. But is it accurate? A Reuters analysis of foreign exchange market volatility and positioning over the last 30 years shows that sterling may be more vulnerable to periodic one-off shocks than its peers, but is no more volatile over time. Sterling suffered severe bouts of volatility and sharp depreciation in

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volatile than the euro and yen over the dollar/yen have moved beyond that Brazilian real. These currencies move long run. The second graphic shows level 20 times since 1987, and euro/ beyond their normal trading the same three currencies' 'two dollar 18 times. parameters less than their major standard deviation' moves against the The third and fourth graphics show counterparts, but as would be dollar, where gains or losses are twice one- and two-standard deviation expected of higher risk emerging the monthly norm. The two-standard moves in the world's most liquid market assets, their standard deviation is just over 5 percent for all emerging market currencies, the deviation ranges are wider to begin three currencies. Sterling/dollar and Mexican peso, Turkish lira and with.

UK finance hails new opportunities despite Brexit uncertainty

By Huw Jones and Andrew MacAskill continued full passporting rights not just focusing solely on negotiating ritain's finance industry can were not possible. new trading terms with the EU. benefit from new global Top officials reflected this new reality "It's important that we look creatively opportunities allowing it to on Tuesday in a hearing in at new deals and new arrangements. I remain a world leading parliament. don't think it's a question of saying B Anthony Browne, chief executive of financial centre after Brexit, top which is more important, it's a industry officials said on Tuesday, in a the British Bankers' Association, question of looking at it in the round," softening of their tone towards Chris Cummings, chief executive of Campkin said. leaving the trading bloc. the Investment Association, and Gary Browne said there will be new After Britain's vote last June to leave Campkin, director of policy at opportunities to strike new free trade the European Union, banks warned TheCityUK told lawmakers they deals and negotiate new market that London's future as a top global wanted a "mutual market access" access for financial service companies. financial centre was in doubt without trading deal with the EU in future. He said the most lucrative continued full "passporting" rights to "There are huge opportunities here opportunities may be in more the bloc's single market. absolutely," Browne told the advanced nations rather than faster Passporting is the ability under EU International Trade Committee. growing emerging markets that tend rules for any financial firm to serve This would stop short of passporting, to have restricted economies. the whole region from a single base, but still allow financial firms in the "You may find some of the more cutting costs and red tape. UK and EU based customers to do established markets are lower But this month Britain's Prime business with each other. hanging fruit in terms of removing Minister Theresa May said the UK The CityUK was also upbeat on the obstacles to trade," he said. would not be part of the single "once-in-a-generation opportunity" When asked by a lawmaker if he was market after Brexit, meaning to reframe Britain's trade policy and now bullish on Brexit, he replied the exit from the trading bloc presented challenges and reasons for optimism. "It does present opportunities and one thing I have learnt in life, particularly in this job, is we should embrace the inevitable," Browne said. Browne said it was important that the government prioritises negotiating market access first and then decides what EU laws it can dispense with. Banks may be able to secure market access by so-called equivalence, whereby banks in Britain would have access if they abide by rules similar to those in force in the bloc. "What I don't think would be in our national interest is to tear up some bit of local regulation we don't live and say ha we have done this and then Canary Wharf and the city are seen at sunset in London, December 14, 2016. REUTERS/ find no one wants to trade with us," Eddie Keogh Browne said.

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EU's Verhofstadt sees Trump as one of a trio of threats to bloc

.S. President Donald Union." He again expressed his regret at Trump is part of a three- Verhofstadt served for nine years as Britain's decision, and said that the pronged attempt to prime minister of Belgium, and has Europe would not accept "cherry- U undermine the European served in the European Parliament picking" of EU policies without Britain Union, Guy Verhofstadt, one of the since 2009. accepting the liabilities and EU's top officials and its chief Brexit He said that the European Union had obligations that came with them. negotiator, said on Monday. severe problems, saying it was in a However, he said that security issues, The other two threats were from "poly-crisis", but nevertheless argued which have come under scrutiny after radicalised Islam and from Russian that the solution was for greater co- a spate of attacks in European cities in President Vladimir Putin, who operation between states. the past 18 months, should be Verhofstadt said was also working "A disintegration of the Union would negotiated separately to economic against the progress of the EU project. be a disaster ... not only for Europe issues such as the European single "We have a third front, for the but also I think for our allies and for market or trade. moment, undermining the European the world." "What we are saying is that you have Union, and it is Donald Trump," Some Britons criticised the the whole economic membership Verhofstadt said in a speech at the appointment of Verhofstadt as the withdrawal agreement, that's one Chatham House think-tank. negotiator on behalf of the EU thing," he said. "Trump spoke very favourably of the Parliament in Britain's forthcoming "Separately from this, there is the fact that also other countries will want talks to leave the bloc, with those whole internal and external security to break away from the European who campaigned to leave the EU issue. And I don't think it is a wise Union, and that he hoped for a describing him as a "fanatical" thing for there to be a trade-off disintegration of the European federalist. between the one and the other."

BREAKINGVIEWS Britain's global trade dream is second-best option

By Olaf Storbeck less important, there is little evidence percent, or more than double its ho needs Europe when for this in trade data. Membership of exports to China. That looks hopeful. the world is available? Europe’s single market has also given Based on the impact on historic British Prime Minister cross-border commerce an extra agreements, deals with China and the Theresa May seems to boost. UK trade with the 27 other EU United States would lift UK exports to W members is 55 percent bigger than those countries by up to 5 and 8 be hoping that free trade agreements with the United States, China and can be explained by its geographic percent respectively, according to others can offset the effects of leaving proximity and size, a study by the Monique Ebell, an economist at Europe’s single market. Center for European Reform shows. London-based economic think tank May’s meeting with Donald Trump Assume that British exports to the EU NIESR. These effects usually take a could pave the way for a deal with the fall by 10 percent after Brexit. decade to fully materialise. world’s largest economy. The U.S. To make up this shortfall, Britain Services, which account for 35 percent president has already said he would would need to increase sales to the of UK exports to the EU, are be welcome a swift agreement. But United States by more than 25 particularly troublesome. Lowering any uptick is unlikely to be big enough trade barriers requires agreement on REUTERS/Paul Hackett to outweigh the trade Britain might complex regulatory rules like the lose by leaving the European Union. mutual recognition of professional Geography is one factor: when two licenses. Hence British bankers, countries are closer trade flows tend lawyers and architects might struggle to be larger, as transport costs as well to replace lost EU business with new as cultural barriers are lower. customers in China, the United States China’s economy is 15 times larger or elsewhere. than the Netherlands but the UK Theresa May wants Britain “to get out exports almost twice as much to its into the world and rediscover its role neighbour across the English Channel as a great, global, trading nation”. as to the People’s Republic. While the However, this is a second-best option digital age should make geography to retaining its links with the EU.

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German carmakers see no way around post-Brexit tariffs

By Edward Taylor and Costas Pitas tariffs of up to 10 percent. in Britain is destined for another EU ermany's auto industry is Ford, Britain's biggest engine maker, market. German-owned brands claim losing hope that trade warned of 2.7 percent duties on more than one-third of UK car sales. tariffs with Britain can be engines ahead of last June's Brexit Think tank Civitas estimates that if avoided, several executives referendum. Britain leaves the EU without a trade G Duties on components such as gear deal, German automotive exporters have told Reuters, despite warnings from British Prime Minister Theresa boxes and brakes shipped from would pay 1.8 billion pounds ($2.3 May that an overly tough stance on Britain would likely vary around the billion) in tariffs, nearly half the total post-Brexit commerce would seriously 3.7 percent average currently levied 3.9 billion pounds faced by EU-based harm the country's EU partners. by the EU on similar imports from firms. "Merkel may force us to walk away third countries, according to the UK-built vehicles and parts, on the from UK profits for the sake of WTO, unless a preferential deal is other hand, would be hit by tariffs of preventing further EU fragmentation," struck. around 1.3 billion pounds, according said a senior executive at a German May recently vowed to take Britain to the group. luxury carmaker. out of the EU single market that But German car bosses are unwilling The executive, who asked not to be allows tariff-free trade in order to to undermine Merkel's position. identified because of the subject's gain more control over immigration. Merkel recently reiterated that EU sensitivity, said Brexit looks At the same time May argued for the governments would not negotiate increasingly likely to be "a disaster" "greatest possible" market access. Brexit terms until London had for trade and for German But German Chancellor Angela triggered the irreversible "article 50" manufacturers. Merkel responded that London leaving process, before adding BMW, along with the Germany-based should not get an attractive Brexit pointedly that business leaders European arms of GM and Ford, which deal that might encourage other should show similar restraint. all have UK plants, know trade departures. That sentiment was quickly echoed by barriers would bring large, currently Matthias Wissmann, head of incalculable costs. GERMANS WORST HIT Germany's influential auto industry Under World Trade Organization Much is at stake for carmakers in lobby, the VDA. (WTO) rules, British exports of general, and the Germans in "Everything must be done to allow the complete vehicles could be subject to particular. About every other car built unfettered flow of goods and services," he told reporters. "But there is one clear priority: we must stand together among the 27 EU member states." Wissmann's counterpart at Britain's SMMT car industry group also warned UK lawmakers that BMW, Daimler and VW may not push too hard for free trade. German carmakers see "Europe as more important than the UK market", SMMT chief Mike Hawes told a parliamentary committee in January. "They will align with what is best for Germany." BMW employs in the region of 8,000 workers in Britain, including at its plants which export roughly 2.4 billion pounds of vehicles and engines, most notably a large majority of the Mini and Rolls-Royce cars assembled there. Ford, which has warned against tariffs, builds engines in Dagenham Volkswagen cars are parked outside a VW dealership in London, Britain November 5, and Bridgend for vehicles assembled 2015. REUTERS/Suzanne Plunkett in mainland Europe. GM builds Opel/

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Vauxhall Astras on Britain's west the SMMT says. Even where cross- EU workers' freedom of movement. coast and expects Brexit to have Channel supply chains stayed viable, "Not only free trade but also cross- wiped $400 million from 2016 border formalities would hurt delivery border employment opportunities ... earnings. timings, raising warehousing costs are of proven benefit to business," "We are worried," said a director at and ultimately consumer prices. BMW said. the German unit of a major global Locally made components would Still, huge unknowns remain, carmaker. "I don't expect there will be become more attractive for British- including French and German special deals for any industry." built cars, but the UK assembly elections this year that could change plants could find it harder to win new the direction of Brexit. TARIFFS UPON TARIFFS vehicle programmes in the first place. Already there are some signs of Trade duties on components, which Investing in an assembly line for the dissent within the governing coalition can cross the Channel several times British market alone - rather than between Merkel's conservative CDU before a vehicle is assembled, would export - becomes viable only above and its Social Democrat SPD junior require costly supply-chain upheaval an annual output of about 150,000 partner. to avoid a compounding of duties. vehicles, industry experts explain. Brexit should be used to spur EU Raw castings from mainland Europe For many models, Exane BNP analyst reform, not deter would-be leavers, are machined into engine blocks at Dominic O'Brien said, "the UK market SPD Economy Minister Sigmar Gabriel BMW's Hams Hall plant near is not necessarily big enough to said last week. Birmingham. Many are then shipped sustain its own dedicated plant." "We should not purely focus on Brexit to Germany and fitted into cars Again, consumer choice and prices as a threat," he said. "Should we destined for the UK. suffer. reach a good result in negotiations In all, UK car plants purchase 59 Some German carmakers have been with the UK, it could serve as an percent of their components overseas, more vocal in urging Britain to give example for a Europe of different and two-thirds of those from the EU, ground, stressing attachment to their speeds."

Ford braced for $600 mln Brexit currency hit

By Laurence Frost remains almost one-fifth below its costs. ord's 2017 earnings will be value at the end of 2015, when "We've all built our businesses on an hit by a delayed currency uncertainty over Brexit began to integrated model between the UK and impact of at least $600 weigh. Sterling's slump is the "only the EU," Farley said. "We would million from Britain's vote to major headwind" Ford currently faces expect both entities to work for a free- F in Europe, Farley said. "We think it trade arrangement like (the one) we leave the European Union, the U.S. carmaker told Reuters, putting last could be upwards of $600 million have today." British Prime Minister year's record European profit levels this year." Farley was speaking a day Theresa May has said Britain will leave beyond reach. after Ford published 2016 results the EU single market to increase The company will no longer benefit that included a record $1.2 billion control of immigration, while calling from currency hedges that had been European profit, while reiterating for the "greatest possible" market shielding it from the pound's slump that this year's global earnings would access. But German Chancellor since the June 23 referendum, Ford of be lower. Its shares ended 3.3 Angela Merkel responded earlier this Europe boss Jim Farley said on Friday. percent lower on Thursday. month that London should not get an "When Brexit happened we were fully attractive Brexit deal that might hedged for the first quarter with the TARIFF WARNING encourage other departures. stronger pre-Brexit exchange rate," Ford, which employs 14,000 workers Farley said. "As we enter the rest of in Britain and 25,000 in Germany, the year, especially the second half, also repeated warnings against the we now face the full effects of the introduction of trade tariffs with a weaker sterling." final Brexit settlement. Ford is Britain's biggest engine maker The company builds engines at two as well as its top-ranked car brand by UK sites for vehicles assembled in sales, with a 12 percent market share. mainland Europe, many of which are The UK government has said it will then sold back in Britain. A weaker trigger the two-year process for pound hurts the exchange value of exiting the EU by the end of March. UK revenues and squeezes the The pound hit a seven-year low profitability of vehicles with euro- against the euro in October and denominated parts and production REUTERS/Paul Hackett

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Consumers drive UK economy, defying expected Brexit vote hit

By David Milliken and William Schomberg LEADING THE PACK, FOR NOW Allan Monks, a J.P. Morgan Growth in 2016 as a whole slowed economist, said the BoE would ritain's free-spending only slightly to 2.0 percent from 2.2 probably stick to its neutral stance on consumers again percent in 2015, but this was mostly interest rates next week. confounded warnings that due to weak growth in the first three But if the expected slowdown in the June's Brexit vote would B months of the year, before the economy did not materialise, it could cause an immediate slowdown in the referendum. start to signal a hike later this year. country's economy, driving robust Many economists had expected The Confederation of British Industry growth in the final three months of Britain to flirt with recession after the on Wednesday reported strong orders 2016, data showed on Thursday. Brexit vote. But it was probably one for manufacturers in January, Gross domestic product rose at a of 2016's fastest-growing major rich suggesting a strong start to 2017 for quarterly pace of 0.6 percent between economies. Its year-on-year growth the country's factories. Figures on October and December, keeping up exceeded Germany's 1.9 percent last Thursday showed the number of the same above-average pace seen in year. mortgages approved by banks hit a the initial three months after the The BoE raised its forecast for growth nine-month high in December and referendum decision to leave the in 2017 to 1.4 percent in November consumer credit continued to expand European Union. and it may well raise it again in a robustly. A Reuters poll of economists had quarterly update next Thursday after There was a possible warning sign in forecast a slight slowdown to growth the run of strong economic data. separate data which showed British of 0.5 percent. But the outlook for 2017 remains retail sales fell unexpectedly in Sterling, which lost as much as 20 murky, largely because of Britain's January, hit by weak food sales. percent against the dollar last year reliance on its consumers, which BoE Retailers said they thought the fall after the shock vote, hit a six-week Governor Mark Carney flagged as a was a blip, though they did see high against the dollar and British 10- risk this month. Sterling's fall is tougher time ahead. year government bond yields rose to already pushing up costs for Also on Thursday, a report showed their highest since mid-December as businesses and households are likely British carmakers cut investment by a some investors believed the Bank of to share the pain soon. third last year due to Brexit worries. England might soon start to move towards an interest rate hike. "What the figures today show is that the UK economy continues to be resilient and continues to confound the sceptics," finance minister Philip Hammond said. Though most economists expect higher inflation this year to squeeze consumers - and see longer-term damage to trade from Brexit - Hammond said the economy's resilience meant Britain could be optimistic about the Brexit talks that lie ahead. "Clearly, life goes on, despite the Brexit vote," Scotiabank economist Alan Clarke said. The Office for National Statistics said services, which are most sensitive to consumer spending, were the biggest gainers, growing by 0.8 percent. Industrial output was flat and Shoppers carry bags on Oxford Street in London, Britain December 18, 2016. REUTERS/ construction only edged up slightly. Neil Hall

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Evoking Reagan and Thatcher, May hails UK-U.S. 'special relationship'

By Elizabeth Piper viewed the meeting on Friday when uses words very carefully, while he is a the two leaders held talks and then boisterous former reality TV host voking the closeness of U.S. had a lunch of baby iceberg salad whose comments on have President Ronald Reagan with blue cheese and braised beef often sent shockwaves around the and British Prime Minister shortribs, but the UK delegation saw world. E Margaret Thatcher, Theresa the visit as a triumph. But, according to the two leaders at a May and Donald Trump shared a "They talked a lot about Thatcher and news conference on Friday, they struck "warm conversation" at lunch on Reagan, and both agreed it was one up a rapport. Friday to cement their own "special of the most successful political Describing their conversation over relationship", a source in May's team relationships ever," the source in lunch as "warm, free-flowing and said. May's team said. "Trump went on to unscripted", the source said the two May's visit to the United States, the say that he always looked up to leaders not only discussed their first by a foreign leader since Trump Reagan and said that he wanted their "shared admiration" of Reagan and was inaugurated as president, has relationship to be even better than Thatcher, but also Brexit, Russia and been hailed by her aides as a that one." the NATO military alliance. resounding success, one, they say, Ties between Britain and the United that has strengthened her hand in States struck a highly personal tone TRADE PROMISES divorce negotiations with the EU. under Thatcher and Reagan in the On trade, they discussed ways to A statement from May's office said 1980s, with the image of them prepare for a deal for after Britain Trump pledged to ensure that the dancing at a ball at the White House leaves the European Union, including trade arrangements that Britain epitomising the trans-Atlantic setting up a trade negotiation currently has with the U.S. through its "special relationship" agreement that will involve high-level membership of the European Union On paper, May and Trump seem talks to scope out what can be will continue in place the moment it poles apart. achieved before Brexit. leaves the bloc. The British leader is a cautious "President Trump pledged to ensure It was not clear how Trump's aides politician, a vicar's daughter who that the trade arrangements that the

British Prime Minister Theresa May and U.S. President Donald Trump gesture towards each other during their joint news conference at the White House in Washington, U.S., January 27. REUTERS/Kevin Lamarque

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UK currently has with the U.S. promises for future trade - a charge his despicable comments." through its membership of the EU will repeated when she arrived in Turkey But while questions were asked about continue in place at the moment the on Saturday to strengthen ties with Britain's charm offensive, her aides United Kingdom leaves," May's team President Tayyip Erdogan, who has welcomed Trump's comments, said in a statement. been criticised by rights groups for including his description of May as a May said it was "a step forward that jailing tens of thousands of people "people person". The source said at underlines our commitment to use the after a failed coup in July. the end of Friday's lunch Trump opportunities of Brexit to build a truly "Who knows what Theresa May has announced that he always kept menu global Britain, increase free and fair secured here apart from vague cards to remember significant trade, and improve the special platitudes?" leader of the Liberal moments. "He gave the menu card to relationship between our two great Democrats, Tim Farron, said in a one of his members of staff and said countries". But some critics said May statement. "Theresa May clearly 'keep that safe, I had lunch with the had ducked contentious issues to win spent her time with Trump dodging British prime minister'."

UK's Fox says committed to free trade with U.S., Canada

ritain is committed to free while still part of the European countries could remove some trade and open trade with the Union, though he said discussions barriers to their mutual advantage. United States and Canada, were possible. "Our government has been greatly B UK Trade Minister Liam Fox "The UK is committed to free and encouraged by the attitude of the new said on Friday, though he did not open trade with the United States, as American administration," Fox said. elaborate on whether that would we are with Canada," Fox said. May plans to trigger Britain's exit from mean bilateral trade talks with the Fox was speaking as British Prime the EU by the end of March, which will two countries. Minister Theresa May met with U.S. start two years of divorce Fox, speaking at the Montreal Council President Donald Trump. May said on negotiations. of Foreign Relations, noted that the Thursday that Britain and the United Speaking at the same event in UK cannot negotiate trade deals States could look at areas where both Montreal, Canada Trade Minister Francois-Philippe Champagne said the fact that he has met with Fox two times during the last seven days illustrates Canada's commitment to the UK. "We start with a strong base because we already have CETA," he told reporters on the sidelines of the event, referring to a planned free trade agreement between the EU and Canada. The two countries signed the Comprehensive Economic and Trade Agreement in October, though it still needs approval from the European Parliament. "We may have a CETA-plus down the road," Champagne added, without giving further detail. Canada's finance minister said in November that a post-Brexit trade deal would use a trade deal between Canada and the European Union as a Britain's Secretary of State for International Trade Liam Fox arrives in Downing Street for a template. Britain is Canada's fourth- cabinet meeting, in London, November 15, 2016. REUTERS/Peter Nicholls largest trade partner.

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Scotland, Wales want action from UK PM on Brexit proposals

cotland and Wales want the governments and demonstrate how year's referendum while Britain as a British government to prove they will incorporate our positions – whole voted to leave. Wales also it is taking their proposals and represent our interests – in their voted to leave but the Welsh S seriously after Britain's vote plan to reach a UK-wide agreement government has lobbied for Britain to to leave the European Union put them (over Brexit)," Sturgeon said in a keep its EU single market at loggerheads with Prime Minister statement. membership, something that the Theresa May. Scotland must have a "We must see a clear indication from prime minister recently ruled out. choice over its future if Brexit does not the UK government that there will be In a statement the prime minister's represent its interests, First Minister a major transfer of powers to the office said considerations of the Welsh said following a Scottish parliament once the UK and Scottish proposals for Brexit were meeting between May and the heads leaves the EU," added Sturgeon, an "ongoing process" which needed of Britain's devolved governments in whose party supports independence to be intensified. Welsh First Minister Cardiff. "The UK government must for Scotland. Scotland, one of the Carwyn Jones told the BBC: "The now show they are prepared to do United Kingdom's four nations, voted Prime Minister herself said this isn't a more than just listen to the devolved to keep its EU membership in last talking-shop and I hold her to that."

BREAKINGVIEWS Ireland is the filling in unappealing tax sandwich

By John Foley and Carol Ryan United States or Argentina. Yahoo have set up shop in the country. Sausages, for example, are made in Dublin hasn't yet put the hard sell on rish politicians vigorously argue Britain with Irish beef and then financial companies looking for an that the country's investment shipped back to Irish consumers. That alternative to London, but the ruling appeal goes far beyond its could spell double tariffs. Ireland's Fine Gael party is now starting to get attractive 12.5 percent corporate I best defence - short of leaving the EU its act together. tax rate. They will soon have a chance itself - is attracting investment. The Were Britain to slash its own rate of to prove it. Ireland, whose leader lowest corporate tax rate in the bloc corporation tax, though, Ireland's Enda Kenny meets British Prime helps a lot, and partly offsets less relative appeal would erode. And Minister Theresa May on Monday, than stellar infrastructure, and a that's before any similar moves in the faces a huge challenge on tax and chronic shortage of urban housing. United States, where President trade, coming from both east and Companies like Airbnb, Apple and Donald Trump has vowed to cut west. companies' taxes, as well as slapping The island state is the biggest new taxes on imports. Then there's potential loser from the United Europe. The bloc's tax tsar, Pierre Kingdom's withdrawal from the Moscovici, used a trip to Dublin last European Union. Britain is the week to raise the spectre of a common country's biggest trade partner European tax base. Ireland has outside the EU. One risk is that trade strongly rejected the idea of such flows get snared up with tariffs and meddling. Companies have other onerous bureaucratic checks; another reasons to choose Ireland besides its is that Britain forges new trade deals tax appeal, like access to the single and buys goods elsewhere. Take beef. market, and an English-speaking Ireland sends half of its exports to workforce. The actual value of such Britain. But a United Kingdom freed soft benefits has never been truly from the EU could also strike accords REUTERS/Cathal McNaughton tested. It soon could be. with other huge producers like the

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