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Brussels fires warning shot at UK over N Ireland protocol

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Brussels has sent a warning shot to the UK to address “shortcomings” in its application of post-Brexit customs rules for Northern Ireland and rejected key demands for flexibility from the British government on the eve of a crunch meeting tomorrow.

Maros Sefcovic, EU vice-president in charge of relations with the UK, on Wednesday night wrote to his counterpart Michael Gove laying out a series of complaints over the UK’s compliance with border arrangements in Northern Ireland, escalating tensions over a protocol signed by the two sides as part of the Brexit agreement. 

Sefcovic and Gove meet in London on Thursday to address mounting concerns over the implementation of the protocol, which requires all goods flowing from Great Britain to Northern Ireland to comply with onerous regulations under the EU customs code. The creation of a trade barrier down the Irish Sea that divides the UK internal market has riled pro-Brexit Tories and leading Unionists. 

The UK government has demanded the EU extend grace periods designed to ease the implementation of the protocol which end in April. Gove, the Cabinet Office minister responsible for the protocol’s implementation, has also demanded an “urgent reset” of the other parts of the deal, including permanently reducing bureaucratic barriers hampering the movement of pets, plants and food products to Northern Ireland.

In his letter, Sefcovic laid out areas where the UK has failed to meet promises made last December under the protocol, including the establishment of fully operational border posts to carry out checks at Northern Irish ports, and failure to provide EU customs officials with real time access to key customs IT systems. 

He said addressing such “teething problems” were a “prerequisite to assess whether further” flexibility demanded by the UK was “necessary and justified”. The issues will be raised at Thursday’s meeting, said the letter.

Sefcovic also rebuffed demands for a relaxation of trade barriers in areas like pet passports, food products and seeds travelling from mainland Britain to Northern Ireland. The letter says such demands would require the UK to first fully align with EU regulations in these areas.

The Cabinet Office said: “We will continue to work constructively and pragmatically with the European Commission to restore confidence in the operation of the Northern Ireland protocol.”

The war of words comes as a £355m government-funded support service designed to help British businesses deal with post-Brexit trading arrangements for Northern Ireland is failing to provide traders with basic answers to questions, MPs were told on Wednesday. 

Port and logistics operators told the Commons’ Northern Ireland Affairs Committee that the protocol had caused market distortions, lower trade volumes and service disruptions as traders struggled to deal with the additional red tape.

The complaints about the Trader Support Service (TSS) — a consortium of customs clearance operators led by IT company Fujitsu formed to provide free assistance to traders — came a month after trade groups warned it was “simply not good enough”.

Stephen McAneney, managing director of logistics group Allied Fleet Services, said there was “no consistency” in the information coming from the service and advice was confusing and conflicting.

“You can phone in and speak to one person and they can give you an answer, and then you’d go away, think about it, then phone back in and get completely the reverse answer,” he told the committee.

Sarah Hards, business development manager at AM Nexday, a retail distributor in Larne, said there was an apparent lack of training among staff who were “pleasant” but often appeared to have “no previous experience” in customs and logistics. 

“They really sometimes fail to grasp what you’re talking about even after a long conversation,” she added.

Witnesses from the shipping and logistics industries backed Gove’s demands for more time, including extensions to grace periods, to adapt to rules which are due to come into full force on April 1.

“What I see is huge market distortion currently taking place on a big, big scale,” said Ian Davies, the head of UK port authorities for Stena Line, adding that freight flows had halved from Holyhead to Dublin as supermarkets switched to Scottish routes. 

Nick McCullough, the managing director at DFDS Northern Ireland, a shipping line, said turnover for January was 23 per cent down on last year, adding that flows were improving but more slowly than expected. “In a low-margin business that cannot go on for too much longer,” he warned.

The Cabinet Office said: “All of our 700 contact centre advisers have received a comprehensive and detailed training package; many advisers also joined with substantial experience of the customs sector.”

For the rest of the UK, further evidence emerged on Thursday that business, particularly smaller and medium-sized companies, were struggling to adapt to the Canada-style terms of the EU-UK Trade and Co-operation Agreement (TCA).

The British Chambers of Commerce’s survey of 1,000 members found 49 per cent of exporters that responded were experiencing “difficulties” in adapting to the TCA. 

As a result, the BCC called for an extension to government plans to introduce full border controls in EU imports to the UK from July 1, tax credits to offset costs of adapting and urgent efforts to minimise burdens of VAT and customs processes on business. 

Adam Marshall, the BCC’s director-general, said the UK’s chances of a strong economic recovery after the Covid-19 crisis were being “hit hard” by the impact of the new border with the EU.

“For some firms these concerns are existential, and go well beyond mere ‘teething problems’,” he said, adding ministers should increase outreach to EU counterparts to solve the issues that are “stifling trade in both directions”.



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Numis sets out EU ambitions after record results

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Numis has picked Dublin for its new EU office to target European clients cut off by Brexit rules after the London-based broker posted record results for the first half of its financial year.

Numis said initial public offering volumes over the six months to the end of March were at their strongest level “for many years”, helping to more than double revenues in its investment banking division to £82m. The company advised on flotations including Moonpig and Auction Technology Group during the period. 

Overall revenue rose almost two-thirds to £115.4m, while pre-tax profit increased more than fivefold to £39.3m. 

Numis said mergers and acquisitions had also started to recover, driven by domestic and international buyers identifying attractive investment opportunities as the economic impact of the pandemic on the UK market eased. The broker is advising property group St Modwen on a £1.2bn takeover approach from Blackstone announced on Friday morning.

Alex Ham, co-chief executive, said activity for the rest of the year looked strong, with a number of IPOs and deals expected.

Some of these are likely to be European IPOs, despite the fact Numis has been unable to market to EU clients since the UK left the trading bloc. 

Numis has relied on so-called reverse solicitation — in effect, requiring EU clients to approach the broker for help — but plans to open a Dublin office next year to ramp up growth across Europe. Brexit had caused a reduction in institutional income from EU-based clients over the six-month period, it said.

“This is a departure for us in expanding beyond the traditional UK market,” said Ross Mitchinson, co-chief executive. “Dublin is a real focus for us to much better attack the European market.”

Mitchinson said EU regulators were being “tough but fair” about requirements on opening the office. “They want to see a well-capitalised business.”

The UK government and regulators have launched a series of consultations and proposals to deregulate and streamline rules to help British financial services groups after losing easy access to EU markets and clients.

But Mitchinson said these had not made much difference so far to Numis, adding that he did not “see the point” of a recent push to reduce the impact of Mifid II rules on research for small companies. “Institutions will not take a different approach,” he said. 

Numis will move to a new London office in September, which has been reconfigured with additional “Zoom rooms” to reflect the push for more flexible working in a future split between the office and home. 

Ham said he expected Numis staff to aim for two to three days a week in the office, with less need for international travel. But he added that many at Numis would be led by the needs of their clients, rather than any prescriptive working arrangement.

The average market capitalisation of its clients has almost doubled, in part owing to the rebound in the FTSE and a focus on “growth stock” clients such as Asos and Ocado. Numis also stopped working for businesses in the natural resources sector last year — partly owing to environmental, social and governance concerns about mining and oil — but these also tended to be smaller clients.



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Angela Merkel rejects US move to waive patents on vaccines

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Angela Merkel has expressed opposition to the Biden administration’s proposal to suspend intellectual property rights for Covid-19 vaccines, saying it would have “serious implications” for vaccine production worldwide.

The German chancellor said the limiting factors in vaccine supply were “production capacities and the high quality standards, not the patents”.

“The protection of intellectual property is a source of innovation and it must remain so in the future,” she added.

Merkel was responding to President Joe Biden’s top trade adviser Katherine Tai who said that while the US “believes strongly” in IP protections, it would support a waiver of those rules for Covid-19 vaccines.

A waiver would allow any pharmaceutical manufacturer in the world to make “copycat” vaccines without fear of being sued for infringing intellectual property rights.

“This is a global health crisis, and the extraordinary circumstances of the Covid-19 pandemic call for extraordinary measures,” Tai said in a statement on Wednesday.

The US would “actively participate” in negotiations at the World Trade Organization to hammer out the text of a waiver, she added, noting that those discussions would take time given the complexity of the issues involved.

Washington’s proposal has put the EU on the back foot. In recent months the bloc has resisted a push led by India and South Africa within the WTO for a vaccine patent waiver.

The US move received a cool response from Ursula von der Leyen, European Commission president. She said the EU was “ready to discuss” how the proposal could help address the current crisis “in an effective and pragmatic manner”.

But she also insisted the priority was for vaccine-producing countries to lift barriers to exports and address supply chain interruptions.

Von der Leyen contrasted the EU’s approach with that of some allies: “Europe is the only democratic region in the world that exports vaccines on a large scale.” The US, a large vaccine-producing country, has reserved most of its homegrown jabs for domestic use.

The US proposal received a more positive response from Vladimir Putin, who said Russia, which manufactures the Sputnik V vaccine, would support the move. “A pandemic is an emergency situation . . . No doubt, Russia would support such an approach,” the Russian president said.

China’s foreign ministry said it looked “forward to having active and constructive discussions with all parties under the WTO framework in order to reach an effective and equitable agreement”.

Emmanuel Macron, the French president, said he was open to the idea of a waiver of IP rights, but “the reality is that the bottlenecks today are not price, or the patents”.

“You can transfer the intellectual property to pharma companies in Africa but they have no platform to make mRNA vaccines,” he said.

The idea of a waiver is also opposed by BioNTech, the German start-up whose joint venture with Pfizer brought the first messenger RNA-based vaccine to the market. The company said it would not ease current supply shortfalls and warned of the risks of opening up manufacturing to producers with no mRNA experience.

“Together with Pfizer, we are also working with various organisations to support the supply of vaccines to populations worldwide. And we will continue to provide low or lower middle-income countries with our vaccine at a not-for-profit price,” BioNTech said in a statement on Thursday.

“However, patents are not the limiting factor for the production or supply of our vaccine . . . The manufacturing process of mRNA is a complex process developed over more than a decade.”

Stéphane Bancel, Moderna’s chief executive, said the vaccine makers would have vastly expanded their capacity before any new players could make a real difference to supply. 

“If you were to start today, you’re going to have to start by hiring people. Those vaccines don’t fall from the sky,” Bancel told the FT US Pharma and Biotech Summit on Thursday. “There is no mRNA industry . . . When we hire people that come from traditional pharma, we have to train them in the art of mRNA.”

Matthias Kromeyer, a general partner at the venture capital firm MIG, one of BioNTech’s earliest investors, said a patent waiver would discourage future investments in the sector.

“If the US/EU/WHO suspend patent protection, they will lose a lot in the long run — namely the willingness of private investors to invest in such companies, many years before it is clear whether their technologies will succeed or not,” he said.

“This would mean the collapse of an entire industry that has just demonstrated it is the only one that can deliver a sustainable solution for this global medical, economic and social crisis. Without private investors, this innovative power will no longer exist in the future — what will we do then?”

The chief executive of Bristol Myers Squibb described the US government’s support for waiver as “very concerning” during an interview at the FT US Pharma and Biotech Summit on Thursday.

“Our industry depends on intellectual property protection in order to invest in R&D and make the investments needed to address crises like Covid,” Giovanni Caforio said. “The developments of the past 24 hours are very concerning and disappointing.”

As well as being important during the coronavirus crisis, Caforio said that IP protection is “critical for some of the areas of higher medical need where BMS invests like cancer care”.

Additional reporting by Leila Abboud in Paris

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UK ends damaging post-Brexit clash over status of EU envoy

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UK foreign secretary Dominic Raab has finally ended a corrosive diplomatic dispute over the status of the EU’s ambassador in London, a stand-off that had added to post-Brexit tensions.

Raab had previously refused to grant João Vale de Almeida full diplomatic status after Brexit took effect on January 1, arguing the EU was an “international organisation” not a state.

Brussels retaliated by shutting Britain’s head of mission to the EU, Lindsay Croisdale-Appleby, out of key meetings with EU officials, adding to Brexit tensions on trade and Northern Ireland.

But on Wednesday the issue was settled after a meeting between Raab and Josep Borrell, the bloc’s foreign policy chief.

Officials briefed on the deal said Vale de Almeida would now receive the same diplomatic recognition as his counterparts in EU missions in all other world capitals, including Washington and Beijing.

In a joint statement, issued at a G7 meeting in London, Raab and Borrell said they had reached an agreement based on “goodwill and pragmatism” on an establishment agreement for the EU delegation to the UK.

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While Vale de Almeida will enjoy full ambassadorial status, British officials said Raab had secured a deal “which gives us some of what we want” regarding the legal situation of EU staff in London.

EU officials will enjoy a largely similar status to other diplomats but with some downgrades: notably, under the agreement, they will not have immunity from prosecution for road traffic accidents.

Raab insisted on this carve-out following the death of Harry Dunn, a British motorcyclist killed in 2019 in a collision with a vehicle driven by Anne Sacoolas, the wife of a US diplomat. She returned to the US claiming diplomatic immunity. 

But many British diplomats were dismayed at how long it had taken to resolve the dispute. “It was a stupid thing to do in the first place and we’ve had to back down,” said one former ambassador.

The diplomatic rapprochement was hailed in Brussels as a sign of a “new cycle” in UK-EU relations following the European parliament’s formal ratification last month of the trade deal between the two sides, which took effect on January 1.

There has also been a thawing in relations over the management of tensions in Northern Ireland, as London and Brussels look for ways to soften border checks on goods coming from the British mainland to the region.

Vale de Almeida will now get to present his diplomatic credentials to the Queen — an honour not available to the heads of international missions.

Boris Johnson has never recognised the EU as equivalent in status to a national government but Number 10 insiders insisted that the Foreign Office — not the prime minister — was responsible for the diplomatic dispute.

Meanwhile, Ireland and the UK announced plans for the first meeting in two years of the British-Irish Intergovernmental Conference, a structure created under the 1998 Good Friday Agreement for the two countries to liaise on issues around Northern Ireland. 

“We are aware that there are sincerely held concerns in different communities in Northern Ireland in relation to a number of issues and firmly agree that the best way forward is through dialogue and engagement,” said Northern Ireland secretary Brandon Lewis and Ireland’s foreign affairs minister Simon Coveney in a joint statement after they met in Dublin on Wednesday afternoon.

The meeting will take place in June, ahead of the July marching season in Northern Ireland, which could inflame tensions between unionists — who feel that their region’s status in the UK is under threat from post-Brexit trading arrangements — and nationalists, who are pushing for a vote on a united Ireland. 

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