Landing a UK-EU deal: the curious case of fishing rights

Click here for full report and disclosures

Click here to request a call about this note.

●  UK-EU deal – the final hurdles: Two issues stand in the way of a comprehensive UK-EU agreement in place for the UK’s exit from the EU Single Market 30 days from now. First, the two sides remain at odds over level playing-field rules, specifically in relation to future state aid and governance. As all parts of UK-EU trade – worth £677bn in 2019 – could be potentially affected by such rules, it is easy to see why this has become a make-or-break issue in the push for a final deal. But the significance of the second problem, the narrow and economically trivial issue of fishing rights, is much less obvious. Nevertheless, it remains a key stumbling block.

●  The right to fish: When the UK leaves the EU Single Market on 31 December, it will no longer be part of the EU’s Common Fisheries policy, which gives EU27 fishing fleets access to UK waters (and vice versa) based on quotas set by the EU’s Council of Ministers. Instead, the UK can deny other countries access to its fishing grounds or conclude new treaties spelling out who can fish there and how much they can catch. As part of the future trade deal, the UK and EU hope to strike an agreement that gives both sides privileged access to each other’s waters. But whereas the UK wants to significantly reduce the quotas for EU fleets – to provide more sustainable stock for UK fleets – with regular renegotiations of such limits, the EU wants a more lasting agreement with only modest quota reductions.Â

●  The size of the UK fishing sector: In 2019, fishing and aquaculture contributed £446m to the UK economy – just 0.02% of gross value added (GVA). Brexiteers often argue that the sector would be much bigger if the UK had full control over its waters. Perhaps. To draw a rough comparison, the agriculture sector (ex-fishing) – which utilises 72% of all land in the UK – contributes just 0.6% to UK GVA. Even if UK fisheries was much bigger, it remains unrealistic to think that it could ever be a major driver of national output. Â

●  What the fish represent: For the island peoples of Britain, the idea of not having full control over their seas proved to be persuasive argument in the debate about whether to vote to leave the EU in June 2016. For many Brexiteers, leaving the EU and “taking back control” meant reclaiming fishing rights in British waters. In addition, much like parts of the manufacturing industry, the fishing sector in recent decades has fallen behind the ever-growing and vastly more profitable services sector. With the hollowed out ex-industrial towns sit the once wealthy fishing and port towns. If the UK backs down on fishing rights, it may be viewed as undermining the Conservative government’s commitment to close the income gap between its rich big cities and struggling regional economies.

●  Brexit logic, like fish, rots from the head down: Based on the pure economics of it, it would make no sense for the UK to let a deal with the EU fail on the issue of fishing – even if that meant giving the EU a bit more access to UK waters than currently desired. In the end, it comes down to a question of money. After all, did the Brexit campaign not argue in 2016 that exiting the EU would increase UK’s income once it stopped its annual contributions to the EU budget? Maybe UK Prime Minister Boris Johnson could consider compensating the UK fishing industry with some of these supposed “savings” in order to win the bigger prize of a trade deal with the EU? As our chart shows, fishing output only averaged 4.5% of UK’s gross contribution to the EU over the last 20 years.

●  Base case: We expect the UK and the EU to strike a deal in the end (75% chance). However, it may take an intervention by Johnson and EU leaders including Commission President Ursula von der Leyen to push the talks over the finish line. The challenges over level playing field and fishing rights highlight the risk of a hard exit (25%).

Kallum Pickering

Senior Economist

+44 20 3465 2672

[email protected]

Disclosures

This material is intended as commentary on political, economic or market conditions for institutional investors or market professionals only and does not constitute a financial analysis or a research report as defined by applicable regulation. See the "Disclaimers" section of this report.

The commentary included herein was produced by Joh. Berenberg, Gossler & Co. KG (Berenberg). For sales inquiries, please contact:

Phone: +44 (0)20 3207 7800
Email: [email protected]

BERENBERG
Joh. Berenberg, Gossler & Co. KG
Neuer Jungfernstieg 20
20354 Hamburg
Germany

Registered Office: Hamburg, Germany
Local Court Hamburg HRA 42659

For Berenberg the protection of your data has always been a top priority. Please find information on the processing of personal data here.
Any e-mail message (including any attachment) sent by Berenberg, any of its subsidiaries or any of their employees is strictly confidential and may contain information that is privileged or exempt from disclosure under applicable law. If you have received such message(s) by mistake please notify the sender by return e-mail. We ask you to delete that message (including any attachments) thereafter from your system. Any unauthorised use or dissemination of that message in whole or in part (including any attachment) is strictly prohibited. Please also note that any legally binding representation needs to be signed by two authorised signatories. Therefore we do not send legally binding representations via e-mail. Furthermore we do not accept any legally binding representation and/or instruction(s) via e-mail. In the event of any technical difficulty with any e-mails received from us, please contact the sender or [email protected]. Deutscher disclaimer.

Click here to unsubscribe from these emails.