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#Brexit: EU wants to agree formula for Britain's exit bill, not final amount

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Barnier_edited-1The European Union wants to agree with Britain on a formula for calculating how much it will owe the bloc after it leaves, rather than defining a concrete sum in advance, EU officials have said, writes Jan Strupczewski and Gabrela Baczynska.

The European Commission's chief negotiator for Brexit, Michel Barnier, briefed the 27 remaining countries on Monday (6 February) on the methodology the EU executive was considering.

At the seminar, closed to the press, he said some key components of the bill were still undecided or unavailable, making it impossible to fix a precise sum now, people familiar with the content of the meeting said.

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"A possible approach ... was that we negotiate a methodology, we take a snapshot of EU accounts at the moment of Britain's exit, we do a quick audit and we agree on how to calculate the British share of the accounts," one official said.

"If we agree on that, the final number will come out after the audit: we would throw all the numbers into a formula on which we have all agreed, and the formula would produce an exit bill."

EU officials said the possible bill of 55 to 60 billion euros that has been mentioned in Brussels since last year was only a very rough estimate.

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"I would expect a number quite close to that, but it should be treated more as an order of magnitude than a precise number, the EU official said.

The key variable would be Britain's share of all EU assets and liabilities at the moment of leaving.

"The thing is, nobody knows what that share is and the Commission has no definitive answer to that," a second EU official said.

"It could be 12, 13, 14 or 15 percent, or something else. And we need an exact figure because one percentage point is several billion euros."

The starting point for calculating Britain's share of EU assets and liabilities is its annual contribution to the EU budget.

But this can vary dramatically. In 2014, Britain paid 11.34 billion euros and, in 2015, 18.21 billion. This was after a rebate, originally secured by prime minister Margaret Thatcher, that has fluctuated between 6.25 billion euros and 3.56 billion over the past decade.

The Commission is considering basing the calculations on an average of several years - but the question is which ones, and how to reflect fluctuations in the pound's exchange rate.

Moreover, national contributions are calculated on the basis of Gross National Income (GNI), which can be revised even four years later.

In 2014, prime minister David Cameron challenged an EU demand for an additional 2.1 billion euro contribution following an upward revision of Britain's past GNI numbers.

EU governments are likely to agree on the formula they want the Commission to employ by the time they issue a detailed negotiating mandate for the EU executive, possibly around May, the first official said.

Whatever final exit bill is agreed would be paid by Britain in instalments rather than a lump sum.

Britain will also probably have to contribute to pensions of EU officials, British or otherwise, and address the issue of longer-term guarantees provided by the EU budget for institutions such as the European Investment Bank.

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Brexit impact ‘will get worse’ with supermarket shop to cost more and some EU products vanishing from shelves

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The full impact of Brexit on both businesses and consumers will not be felt until next year with shortages set to worsen in sectors ranging from food to building materials, a leading customs expert has claimed, writes David Parsley.

Simon Sutcliffe, a partner at tax and advisory firm Blick Rothenberg, believes Government delays in implementing post-Brexit customs laws have “softened the impact” of the UK’s exit from the European Union, and that “things will get worse” when they are finally brought in from January 2022.

Despite leaving the EU on 1 January 2020, the Government has delayed many of the customs laws that were due to come into force last year.

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The requirement for pre-notification of arrival in the UK of agri-food imports will be introduced on 1 January 2022 as opposed to the already delayed date of 1 October this year.

The new requirements for Export Health Certificates will now be introduced even later, on 1 July next year.

Controls to protect animals and plants from diseases, pests, or contaminants will also be delayed until 1 July 2022, as will the requirement for Safety and Security declarations on imports.

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When these laws, which also include the customs declaration system, are brought in Mr Sutcliffe believes the food and raw material shortages already experienced to some extent – especially in Northern Ireland – will worsen on the mainland with some products disappearing from supermarket shelves for the foreseeable future.

Sutcliffe, who was among the first to predict the truck driver shortage and border issues in Northern Ireland, said: “Once these extra extensions come to an end we’re going to be in a whole world of pain until importers get to grips with it just like the exporters from the UK to the EU have had to already.

“The cost of the bureaucracy involved will mean many retailers will simply not stock some products from the EU any longer.

If you know your fruit delivery is stuck in a UK port for 10 days waiting to be checked, then you’re not going to bother importing it as it’ll go off before it even reaches the store.

“We’re looking at all kinds of products disappearing from supermarkets, from salami to cheeses, because they will just be too expensive to ship in. While a few boutique delicatessens may stock these products, they will become a more expensive and be harder to find.”

He added that the supermarket shop will also face steep price rises as the cost of importing even basic products such as fresh meat, milk, eggs and vegetables will cost retailers more.

“The retailers will not have much choice but to pass on at least some of the increased costs to the consumer,” said Sutcliffe. “In other words, consumers will have less choice and will have to pay more for their weekly shop.”

A spokesman for No 10 said: “We want businesses to focus on their recovery from the pandemic rather than have to deal with new requirements at the border, which is why we’ve set out a pragmatic new timetable for introducing full border controls.

“Businesses will now have more time to prepare for these controls which will be phased in throughout 2022.”

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Europe ministers say trust in the UK at a low ebb

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Commission Vice President Maroš Šefčovič, updating ministers on the latest developments, said that trust needed to be rebuilt and that he hopes to find solutions with the UK before the end of the year. 

European ministers meeting for the General Affairs Council (21 September) were updated on the state of play in EU-UK relations, in particular with regards to the implementation of the protocol on Ireland/Northern Ireland.

Šefčovič updated ministers on the latest developments, including his recent visit to Ireland and Northern Ireland, and ministers reiterated their support for the European Commission's approach: “The EU will continue to engage with the UK to find solutions within the framework of the protocol. We will do our utmost to bring back predictability and stability for the citizens and businesses in Northern Ireland and to ensure they can make the most of the opportunities provided by the protocol, including access to the single market.”

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The vice president said that many ministers had spoken in the debate at the Council meeting with concern over whether the UK was a trustworthy partner. French Europe Minister Clement Beaune said on his way into the meeting that Brexit and the recent dispute with France over the AUKUS submarine deal should not be mixed up. However, he said that there was an issue of trust, saying that the UK was a close ally but that the Brexit agreement was not being fully respected and that trust was needed in order to move on. 

Šefčovič aims to resolve all outstanding issues with the UK by the end of the year. On the UK’s threat to make use of Article 16 in the Protocol which allows the UK to take specific safeguarding actions if the protocol results in serious economic, social or environmental difficulties that are liable to persist or to a diversion of trade, Šefčovič said that the EU would have to react and that ministers had asked the Commission to prepare for any eventuality. Nevertheless, Šefčovič hopes this can be avoided.

Northern Ireland is already experiencing trade diversion, both in its imports and exports. This is due in large part to the very thin trade deal that the UK has chosen to pursue with the EU, despite being offered less damaging options. Any safeguarding measures must be restricted in terms of scope and duration. There is also a complicated procedure for discussing safeguarding measures laid out in annex seven of the protocol, which involves notifying the Joint Committee, waiting a month to apply any safeguards, unless there are extraordinary circumstances (which the UK will no doubt claim there are). The measures will then be reviewed every three months, in the unlikely event that they are found to be well grounded.

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Britain delays implementation of post-Brexit trade controls

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Britain said on Tuesday (14 Sseptember) it was delaying the implementation of some post-Brexit import controls, the second time they have been pushed back, citing pressures on businesses from the pandemic and global supply chain strain.

Britain left the European Union's single market at the end of last year but unlike Brussels which introduced border controls immediately, it staggered the introduction of import checks on goods such as food to give businesses time to adapt.

Having already delayed the introduction of checks by six months from April 1, the government has now pushed the need for full customs declarations and controls back to Jan. 1, 2022. Safety and security declarations will be required from July 1 next year.

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"We want businesses to focus on their recovery from the pandemic rather than have to deal with new requirements at the border, which is why we've set out a pragmatic new timetable for introducing full border controls," Brexit minister David Frost said.

"Businesses will now have more time to prepare for these controls which will be phased in throughout 2022."

Industry sources in the logistics and customs sector have also said the government's infrastructure was not ready to impose full checks.

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