UK's Hammond: talk of warship deployment complicates China ties

LONDON (Reuters) – Britain’s talk of deploying a warship in the Pacific has complicated its relationship with China, finance minister Philip Hammond said on Thursday.

As Britain prepares to leave the European Union at the end of next month, its biggest foreign and trade policy shift in more than 40 years, it is seeking to strengthen diplomatic relationships and trade ties with countries around the world.

Earlier this month defense minister Gavin Williamson said Britain would use military force to support its interests after Brexit and outlined plans to deploy a new aircraft carrier to the Pacific, where London has been seeking to demonstrate its influence in relation to China.

British media reported that China had canceled trade talks with Hammond because it was upset about Williamson’s speech.

When asked directly on BBC radio if the relationship had been damaged by Williamson’s threat, Hammond said: “It is a complex relationship and it hasn’t been made simpler by Chinese concerns about royal navy deployments in the South China Sea.”

A Ministry of Defense official said the speech had been cleared in advance by both Hammond’s department and Prime Minister Theresa May’s office.

“STRONG AND CONSTRUCTIVE”

Asked whether the prime minister agreed with Hammond that the comments had complicated ties, May’s spokesman said Britain’s relationship with China was important.

“We have strong and constructive ties on a range of issues and we will continue to do so,” he said.

UK exports to and imports from China hit a record high in 2017. China was the UK’s sixth largest export market that year, worth 22.3 billion pounds ($29.15 billion) and its fourth largest source of imports, worth 45.2 billion pounds, according to the House of Commons Library.

In his speech, Williamson announced that the first mission of the HMS Queen Elizabeth aircraft carrier would include work in the Mediterranean, Middle East and Pacific regions.

In August a different British warship sailed close to the Paracel Islands claimed by China in the South China Sea, prompting fury in Beijing.

Hammond said he was disappointed that the Chinese had reacted in the way they had to Williamson’s comments.

“This is entirely premature, the aircraft carrier isn’t going to be at full operational readiness for another couple of years, no decisions have been made or even discussed about where its early deployments might be,” Hammond said.

Asked if Williamson should be reined in, he said: “I think that it’s very important that we manage this relationship with China very carefully.”

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UK government source: It does not feel like we will have a Brexit deal by next week

LONDON (Reuters) – It does not feel like Britain will have secured the changes it needs to its exit deal with Brussels by next week, a British government source said on Thursday.

Prime Minister Theresa May will hold bilateral meetings with European Union leaders at an EU-League of Arab States summit in Egypt at the weekend, but the source said she was not expected to return from that with a “piece of paper” on a revised deal.

If May does not bring a revised deal back to parliament for a vote by Feb. 27, lawmakers will be given the opportunity to debate and vote on the next steps, and some have said they will seek to wrestle control of the process from the government.

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Ministers warn British PM May of rebellion in the event of no-deal Brexit: media report

LONDON (REUTERS) – Some senior British ministers have warned Prime Minister Theresa May that she must agree to delay Brexit if there is no European Union divorce deal or face a rebellion in Parliament next week, The Sun newspaper reported.

Work and Pensions Secretary Amber Rudd, Justice Secretary David Gauke, Business Secretary Greg Clark and Scotland Secretary David Mundell said she must take no-deal off the table by extending Article 50, the newspaper said.

If Mrs May refuses, the senior ministers said they and 20 other members of the government would back Labour lawmaker Yvette Cooper’s plan for Parliament to seize control of the Brexit process.

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UK attorney general plans for unilateral exit mechanism to Irish backstop: Telegraph

(Reuters) – UK Attorney General Geoffrey Cox is considering plans for a unilateral exit mechanism to the Irish backstop with a notice period of 12 months, the Telegraph newspaper reported bit.ly/2E0XHql late on Wednesday.

The “backstop” provision in Britain’s European Union divorce deal aims at avoiding a hard border on the island of Ireland. Earlier on Wednesday, European Commission President Jean-Claude Juncker and British Prime Minister Theresa May said that the backstop provision is temporary.

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'Time of the essence,' says May on latest Brussels shuttle

BRUSSELS (Reuters) – British Prime Minister Theresa May held “constructive” talks in Brussels on Wednesday as she sought concessions on Brexit from a sceptical European Union, her strategy under strain after the defection of three lawmakers.

Emerging from an hour or so of discussions with European Commission President Jean-Claude Juncker, the second in as many weeks, May told a British television channel that she again pressed for “legally binding changes” to a deal she agreed with the EU in November so that a “backstop” policy on the Irish border would not bind Britain indefinitely to keeping EU rules.

It is this part of the treaty, intended to avoid new trouble in Northern Ireland, which the British parliament rejected last month. That pitched the country toward the exit on March 29 without a safety net — and left May scrambling to secure concessions both in Brussels and from lawmakers in her own party and others.

“I’ve underlined the need for us to see legally binding changes to the backstop which ensure it cannot be indefinite,” May said. “That’s what is required if a deal is going to pass the House of Commons … Time is of the essence.”

She said there had been progress and her Brexit minister would be back in Brussels on Thursday, along with the attorney general Geoffrey Cox. It is he whom the EU must find a way to persuade to change his view that the backstop might never end.

People close to the negotiations say discussions have been focusing on what May and Juncker in a joint statement called “appropriate legal assurance to both sides”.

The EU has refused to reopen the treaty or to add new text that would anger Ireland by putting a time limit on the backstop or giving London a unilateral right to quit an arrangement that would see Britain obliged to follow EU trade and industry rules until a better way is found, probably using technology, to keep the border open while letting the UK diverge from EU standards.

Various kinds of text, focusing on how a future trading relationship may work after a status quo transition period, have been discussed, officials say. But EU leaders, many of whom will meet May during a weekend summit with Arab governments in Egypt, want assurances she can deliver parliamentary ratification for any new deal before they will nail down their concessions.

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BREXIT DELAYED?

That kind of brinkmanship could, many officials say, lead to a delay in Brexit as the only option for May to avoid running out of time to pass the necessary laws in the next month.

EU summit chair Donald Tusk said on Wednesday: “If Britain fails to prepare some sensible option on time, then there is always a possibility to extend these negotiations in time. This would be better than a divorce without agreement.”

May’s ability to get any deal through parliament suffered a new blow earlier in the day when three of her Conservative lawmakers quit, condemning her “disastrous handling of Brexit”, which they, like she, had opposed during the 2016 referendum.

Despite some support for a new vote, EU leaders no longer hold out hope of Brexit being halted and, with governments and the Commission saying they are ready if need be for a no-deal departure, many diplomats fear political deadlock in London has made such an outcome as likely as May securing ratification.

In their joint statement, May and Juncker said talks were “constructive” and their teams would press on to “explore the options in a positive spirit”. The two plan to meet again before the end of February, when May faces a new test in parliament.

She has less than a month to crack the puzzle, EU diplomats say, arguing that a compromise must be in place a week or so before a summit on March 21-22 that could seal any accord.

“They have until March 10, maybe March 15 at the latest,” one said. “Otherwise they will be forced into a delay of Brexit, or crash out.”

Despite that, few in Brussels expect a quick breakthrough: “It’s too early,” another EU diplomat said. “The second half of March is the make-or-break moment.”

(This story was refiled to fix typo and add comma in headline.)

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EU blasts Hungary ‘fake news’ on migrants

A Hungarian government campaign accusing the European Commission of supporting illegal immigration is “fake news”, a Commission spokesman has said.

Margaritis Schinas said the campaign, launched on the government’s Facebook site, “beggars belief”.

Campaign posters feature Commission President Jean-Claude Juncker and the Hungarian-born billionaire George Soros, a vocal critic of Hungary’s right-wing Prime Minister Viktor Orban.

European elections will be held in May.

Immigration from non-EU countries has become a major issue across the 28-nation bloc.

Mr Orban, with support from neighbouring Poland, the Czech Republic and Slovakia, rejects a Commission scheme to distribute asylum seekers EU-wide, to ease the burden on Italy and Greece, where migrant holding centres remain overcrowded and squalid.

Nationalists – gaining ground in much of Europe – especially object to EU efforts to integrate Muslim migrants. Mr Orban and others argue that mass immigration from outside Europe threatens “Christian” culture.

Besides economic migrants, there are many refugees from wars in Afghanistan, Iraq and Syria. International law grants refugees a right to asylum.

‘Ludicrous conspiracy theory’

Mr Orban’s spokesman Zoltan Kovacs said “Brussels continues to want to support illegal immigration, which is something the Hungarian people must know about.

“The plans aimed at supporting migration are still there in the ‘Brussels drawers’, and decisions are being made in the background that are aimed at realising these plans,” he said.

The EU wants to bring in mandatory migrant settlement quotas and a migrant visa, and weaken members’ rights to border defence, he alleged. However, the Commission spokesman denied each of those claims.

“It’s shocking that such a ludicrous conspiracy theory has reached the mainstream to the extent it has,” Mr Schinas said in Brussels.

The Orban government has targeted Mr Soros in previous campaigns, condemning his funding of civil society groups that help migrants or defend human rights.

Mr Soros, a Jew who narrowly escaped the Holocaust in his youth, was attacked by the government previously with the campaign slogan “Don’t let Soros have the last laugh”. Critics accuse the Orban government of anti-Semitism in its vilification of Mr Soros.

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UK likely to delay Brexit, former EU chief Barroso says

LONDON (Reuters) – Britain is likely to delay Brexit and not leave the European Union in March, former EU Commission President Jose Manuel Barroso said on Tuesday, adding the bloc would likely accept a request to extension to sort out the details of departure.

“I think the most likely scenario is not to do that in March of this year. We need more… preparations,” Barroso, who now serves as a non-executive chairman at Goldman Sachs, told Sky News when asked when if he thought Brexit would happen as currently scheduled on March 29.

“Even if there was a positive deal now, from a practical point of view, it’s obvious that everything is not ready. So I think the right thing to do is to have some extension, and I believe that if the UK demands an extension of Article 50, European Union countries will naturally accept it.”

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Ireland urges people not to stockpile medicines ahead of Brexit

DUBLIN (Reuters) – Ireland’s deputy prime minister on Tuesday called on people not to stockpile medicine before Britain quits the European Union, saying the country had at least eight weeks of supply and was moving to source medicines from other EU countries.

Despite its large pharmaceutical industry, Ireland relies on Britain for many medicines. Some of them may not be approved for use in the EU if Britain leaves on March 29 without a deal, Simon Coveney told RTE radio.

Ireland has eight to 12 weeks’ supply of virtually all medicines in Ireland, Coveney said.

“There aren’t any medicines that are on any kind of risk list in terms of not being supplied after the end of March, but we will continue to monitor that very closely to make sure there is no delay in supply,” he said.

“Pharmacists and people in general should not be stockpiling medicines because actually stockpiling in itself sometimes causes problems with supply,” he added.

Britain has told its residents the same thing. Stockpiling “risks shortages … if everyone does what they are supposed to, we are confident the supply of medicines will continue uninterrupted,” said Stephen Hammond, the health minister responsible for Brexit.

Coveney was speaking before a meeting of the Irish cabinet to approve legislation preparing for the possibility Britain will be forced to leave the EU with no agreement on the terms of its departure, even though the Irish government has said repeatedly that it does not expect this outcome.

“While we have a huge amount of contingency planning in place … I wouldn’t like to give the impression that we could easily manage a no-deal Brexit,” Coveney said. “It would put huge strain on the Irish economy.”

Britain is supposed to leave the EU on March 29, but it still has no deal in place on the terms. Last week, the British parliament defeated Prime Minister Theresa May’s latest effort to gain approval for her Brexit strategy.

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British supermarkets battle to secure stocks as chaotic Brexit looms

LONDON (Reuters) – Britons could face shortages of fresh food, price rises and less variety if the country leaves the European Union next month without agreeing trade terms, food industry officials say.

With no deal in sight as Britain’s March 29 exit date approaches, supermarkets are stockpiling, working on alternative supplies and testing new routes to cope with an expected logjam at the borders but say they face insurmountable barriers.

“You can’t stockpile fresh produce, you haven’t got any space and it wouldn’t be fresh,” said Tim Steiner, head of online supermarket pioneer Ocado.

The warnings, including talk of whether rationing would be needed, are part of a chorus of concern from businesses who say they are weighed down by uncertainty in what was once considered a bastion of Western economic and political stability.

The last time Britain’s food supplies were seriously hit was when fuel protests prompted panic buying almost two decades ago, forcing some supermarkets to ration milk and bread and others to warn that stocks would run out in days.

Executives within the food chain said Britain was better prepared than 2000, but disruption may be more widespread and last longer than the few days it took before the fuel dispute was settled.

James Bielby, head of the Federation of Wholesale Distributors, says its members’ retail and catering customers were asking for between one and eight extra weeks’ supply. But storage is limited in an industry that operates on a “just in time basis” to maximize the shelf life of goods.

Intense competition and slim margins in the British supermarket sector have also made contingency planning more complicated. James Walton, chief economist at IGD which works with the industry to improve supply chains, said storage had been reduced over many decades to hold down working capital.

What remains is now full. “So surplus space within stores is being used and containers are in carparks,” he said.

Mike Coupe, the boss of Britain’s second biggest supermarket Sainsbury’s, said supplies would not last long. “We don’t have the capacity and neither does the country to stockpile more than probably a few days’ worth,” he said in January, echoing the supermarket’s warning to then-Prime Minister Tony Blair in 2000 during the fuel crisis.

LET THEM EAT LEEKS

Britain imports around half of its food, and while some is flown in via air freight, most enters on lorries through Dover, Britain’s main gateway to Europe.

At peak times, 130 lorries a day are required to drive through Dover bringing citrus fruit alone, according to the British Retail Consortium. In March, inclement British weather means 90 percent of lettuces come from the EU.

If it leaves without a trade deal, Britain will move on to World Trade Organization rules that require tariffs to be paid, goods to be checked and paperwork to be completed, demands that do not currently exist for goods coming from within the EU.

The English Apples & Pears group said British farms have been asked to provide more apples until the end of April by retailers who usually source more from the southern hemisphere from March.

Other substitutions are more difficult.

“People just say we’ll eat more British produce but … would people be happy to start eating tonnes of British leeks? I’m not sure,” said an executive at one of Britain’s four major supermarket groups, who declined to be named because of the possible business impact.

“We have to plan for the worst,” he said, before adding that he hoped Britain would delay its departure date from the EU.

“BUNKER LINES”

Consultants, suppliers, company sources and trade groups said importers were looking at securing new routes into Britain in case customs checks clog up Dover, but no other port offers that frequency of ferry sailings or trains through the tunnel.

They would also have to compete with companies importing drugs, car parts and chemicals that are also looking to alternative ports on the south and east coast of Britain.

The Spanish wine federation said they had advised members to avoid shipping goods to Britain around the end of March.

Supermarkets could fly in more goods – as they did to bring in lettuces from America in 2018 when bad weather hit European supplies – but it is expensive and capacity is limited.

William Bain, a policy adviser at the British Retail Consortium, said clients and suppliers were having talks now to discuss how costs and risks would be shared if stock is delayed.

Elsewhere in the food chain, suppliers of ready meals are considering changing ingredients to remove those with the shortest shelf life, according to the Fresh Produce Consortium.

All of these changes could lead to higher prices however, with changes to recipes requiring changes to labeling.

Dominic Goudie, in charge of exports, trade and supply chains at the Food and Drink Federation, told Reuters prices were likely to rise, regardless of the outcome.

“We know from our members that they are investing staggering sums into getting ready for the worst possible no-deal scenario,” he said. “The sums are so large that manufacturers need to pass it on to their customers, the retailers.”

Another senior executive at a major British food retailer told Reuters they had seen no signs yet of Britons buying so-called ‘bunker lines’ – toilet paper, bottled water and tinned food. But it could happen before March 29.

“If you’ve got a limited amount of food, you want to distribute it fairly across the country,” he told Reuters. “So you almost get to this ridiculous notion of rationing.”

Some of Britain’s deeply-divided politicians who are seeking a complete break with the EU say the economy would soon recover from any short-term hit as it adapts to new trading routes after Brexit.

They argue that talk of food shortages and rationing is scaremongering driven by the government to rally support for Prime Minister Theresa May’s proposed Brexit deal, agreed with the EU but showing little sign of getting sufficient support from her own parliament.

Environment minister Michael Gove, who backed Brexit, has said leaving without a deal could lead to higher prices, but that the government has chartered extra ferries to maintain the movement of goods. “We are meeting weekly with the food industry to support their preparations for leaving the EU,” a spokesman said.

Tesco chairman John Allan said the retailer, Britain’s biggest with 3,400 stores and almost 28 percent of the market, was stockpiling goods with a long shelf life but that its options for fresh produce was more limited.

“So provided we’re all happy to live on Spam and canned peaches all will be well,” he added.

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UK manufacturers warn of 'catastrophic' no-deal Brexit

LONDON (Reuters) – Britain faces the “catastrophic prospect” of a no-deal Brexit next month due to the selfishness of some politicians and chaotic parliamentary proceedings, the head of the country’s main manufacturing association said on Tuesday.

The strong warning from Make UK, previously known as the EEF, comes as Japanese carmaker Honda is expected to say it is preparing to shut its main UK plant with a loss of 3,500 jobs.

Nissan earlier this month canceled plans to build its X-Trail sport utility vehicle in Britain, mostly blaming “business reasons” but also citing Brexit uncertainty.

“Let me be clear … for those hard Brexiteers who accuse us of scaremongering. This is very real and very serious,” Make UK’s chair, Judith Hackitt, said in remarks ahead of the group’s annual conference.

Finance minister Philip Hammond and business minister Greg Clark – who are on the pro-European wing of Prime Minister Theresa May’s Conservative Party – as well as opposition Labour Party leader Jeremy Corbyn, are due to address the conference.

Corbyn intends to call again for May to back his proposal for a permanent customs union with the European Union and full guarantees for existing worker and consumer rights. He plans to meet chief EU negotiator Michel Barnier this week.

Britain’s parliament overwhelmingly rejected the transition deal that May negotiated with the EU and time is running out to avoid a disruptive no-deal Brexit on March 29 which would lead to the re-imposition of customs checks on British exports.

“Some of our politicians have put selfish political ideology ahead of the national interest and people’s livelihoods and left us facing the catastrophic prospect of leaving the EU next month with no deal,” Hackitt said.

British manufacturers are facing a global slowdown as well as Brexit uncertainty. Official data last week showed their output fell by the most in over five years in the final quarter of 2018.

Some 49 percent of 429 manufacturers surveyed for Make UK said a no-deal Brexit would make Britain unattractive, compared with 28 percent who said Britain would still be an attractive location, with bigger companies more likely to express concerns.

Twenty-three percent of manufacturers said they had started stockpiling raw materials ahead of Brexit, when they were surveyed by polling firm YouGov between Jan. 28 and Feb. 5, and another 24 percent said they were considering doing so.

More than half of manufacturers who had started stockpiling said it was proving a financial strain.

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