Sector: Government Relations and Public Affairs

2,440 days since the UK voted to leave the European Union, Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen announced the much anticipated “Windsor Framework” – an agreement which looks to reset the UK/EU trading relationship, underpin the integrity of the European Single Market and crucially, answer the concerns of unionists around a border in the Irish Sea which held back the resumption of power-sharing at Stormont.

Today’s announcement will be hailed in the UK as a political victory for a Prime Minister under pressure. Rishi Sunak has accomplished something which eluded his immediate predecessors – reaching a new agreement without the need to unilaterally break international law, whilst resetting UK/EU relations in the process.

The framework has already received praise from various quarters, with Irish Tánaiste and Foreign Minister Micheál Martin TD calling it “very welcome”, while Northern Ireland Minister and staunch Brexiteer Steve Baker MP said the agreement is “great news.» Downing Street will be hoping that détente with the EU on the Northern Ireland Protocol will unlock progress in other areas, including scientific research funding, co-operation with France on cross-Channel migration and further action to support Ukraine.

The prospect of agreement is also likely to significantly improve the UK’s relationship with the United States at a critical time for trade negotiations, with President Joe Biden having repeatedly stressed that any efforts from the UK Government to unilaterally amend the Northern Ireland Protocol would not create a conducive environment for a trade deal. The long-rumored state visit of the President to the UK and Ireland in early April, timed to coincide with the 25th anniversary of the Belfast-Good Friday Agreement, is now more possible.

While a political victory is in sight for the Prime Minister, the deal must pass through both the UK and European Parliaments. All eyes now are focused on the Democratic Unionist Party’s (DUP) assessment of the deal, and whether the new framework does enough to assuage its concerns around Northern Ireland’s place within the UK. The DUP has publicly set out seven tests against which it will measure any deal, and its decision making may be affected by issues closer to home, including the potential of it being outflanked to the right by smaller unionist parties in upcoming council elections and the prospect of a DUP Deputy First Minister serving with a Sinn Féin First Minister in Stormont for the first time if power-sharing is restored.

Ultimately, a new framework which unites Brussels, London and Dublin is central to the Prime Minister’s attempt to be seen as the details-driven leader his predecessors failed to be. And with business leaders uniting in praise over his efforts to usher in a new era of stability and certainty, Rishi Sunak may look back on the Windsor Framework as the moment which cemented his place as the leader who finally put to bed the recurring nightmare which haunted Cameron, May, Johnson and Truss – by getting Brexit done.

Executive Summary of Key Announcements

Red Lanes & Green Lanes
Goods entering Northern Ireland from Great Britain, that are destined to stay within Northern Ireland, can use a “Green Lane” that requires minimal customs checks. Goods moving through Northern Ireland to enter the EU Single Market will still be required to use a “Red Lane” involving significant checks.

Governance & The ECG
Large amounts of EU law have been removed from applying in Northern Ireland, reducing the role of the European Courts of Justice (ECJ). Rules in significant areas will therefore be interpreted primarily by Northern Irish and British courts.

VAT, State Aid & Excise
These taxation and spending powers were limited in the original Protocol, but the new Agreement gives the UK full authority to use them in Northern Ireland without being limited by EU law.

The Stormont Brake
The Agreement described a new mechanism for the Northern Ireland Assembly to prevent EU laws from being applied in Northern Ireland – this “Stormont Brake” will allow MLAs to suspend a piece of legislation if 30 MLAs from two or more parties agree to do so, with EU-UK agreement required to enforce it once the brake has been applied.

New EU-UK Institutions & Structures
The EU and UK have committed to further consultations on areas of law before they are applied to Northern Ireland, with the UK Government committing to consult further with Northern Irish political parties on amendments to the Northern Ireland Act 1998 in order to achieve this.

Medicines
Northern Ireland has been exempted from EU requirements for new medicines to be approved by the European Medicines Agency (EMA), ensuring an uninterrupted flow of medicines between Great Britain and Northern Ireland. Veterinary medicines have also been safeguarded until the end of 2025.

To discuss how we can help your organisation navigate the complexities of the new agreement, contact our Alan Boyd-Hall, Head of Public Affairs, at alan.boyd-hall@grayling.com.

The story so far…

In April 2022, the then Economic Secretary to the Treasury, John Glen MP, set out plans for the UK to become a global hub for cryptoasset technology. Since then, rapid developments in the sector – climaxing in the collapse of FTX – have resulted in a significant stock take on the direction of UK crypto regulation. The upshot of recent market turbulence has seen the UK Government dialling up efforts to regulate the industry, supported by an eagerness to strike the right balance between facilitating technological innovation, upholding consumer protection and ensuring market integrity. The link between cryptocurreny and economic growth has also been severed following recent turbulence.

The publications of the government’s long-awaited proposals to regulate a broad suite of cryptoasset activities marks the latest stage in the development of regulation in the sector. The measures – which build on previous HM Treasury proposals regarding stablecoins and the financial promotions of cryptoassets – are aimed at delivering a framework that will mitigate the most significant risks of cryptoassets, while harnessing their  contribution to economic growth.  This will build on the legislative foundations to bring fiat-backed stablecoins into financial services regulation under the Financial Services and Markets Bill.

Most recently, the Law Commission was asked by the government to make recommendations on legal reform to accommodate crypto tokens, which is expected to significantly shape government thinking on crypto alongside the latest consultation. After months of industry calls on the government to deliver clarity for business and consumers, demands have been met to an extent. But, there remains a long way to go before regulation sets in and many an opportunity to raise concerns with the government’s existing plans before reaching that point.

So what’s new?

Overall, the government has confirmed that regulation of cryptoasset activities will be consistent with the existing regulatory approach to traditional finance. This means rules for crypto regulation will likely be subject to prudential, consumer protection, operational resilience and disclosure requirements, among others. The government will temporarily backtrack on a previous pledge to align crypto regulation with standards applied to stocks, shares and insurance products.

The regulatory parameters will be extended to cover assets including stablecoins, crypto-backed tokens and fan tokens. The plans are designed to target misleading cryptoasset promotions, enhance data-reporting requirements and attempt to stamp out ‘pump and dump’ where an individual intentionally inflate the value of a cryptoasset before selling it.

The clear impetus behind many of the policy levers detailed is safeguarding consumers. Similarly, HM Treasury accepts that there is a need to prioritise operational resilience and market conduct in the wake of recent events and in order to position the UK as a leader in crypto on the global stage.

There is also a marked shift in responsibilities under the proposals. Much of the burden appears to be placed on crypto trading platforms themselves. Under the proposals, crypto traders will need to define the demands that a currency must meet before being admitted for trading and they will also, among other detail, have to keep customers’ assets secure.

The government intends to include the financial services regulation of cryptoassets within the regulatory framework established by the UK’s Financial Services

and Markets Act 2000 (FSMA). This will allow HM Treasury to provide secondary legislation to bring activities within the regulator perimeter.

In terms of issuance and distribution of cryptoassets, the consultation proposes to follow a similar approach to that for securities, and apply regulation when the asset is being admitted to trading on a regulated cryptoasset trading venue.

Separately, in a continued effort to brand itself as the custodian of environmental safety, the government is seeking views on energy intensity information that should be made available to consumers, clearly setting out the environmental impact of their investment.

What comes next?

Ahead of the consultation deadline on 30^th April 2023, implicated firms will need to mull over the expected impact of the proposals before taking a view on whether to submit. Due to the vast scope of the consultation questions, we are expecting to see a number of joint consultation responses put forward. After that point, the government will consider feedback and work to set out its consultation response.

Once legislation is laid, the Financial Conduct Authority (FCA) will consult on its detailed rules for the sector and businesses should consider this upcoming regulatory focus ahead of future engagement.

With seismic regulatory change in the pipeline, Grayling can support clients in getting cut through among key political circles, positioning your business as a trusted partner to policymakers and regulators as you navigate new waters ahead. We offer a range of skills and expertise that enable us to determine the best course of action, develop insightful strategies and orchestrate effective campaigns.

The team at Grayling has a wealth of experience helping financial services companies understand and navigate the regulatory landscape. If you would like to better understand the political landscape and what this means for your business, please contact Alan Boyd-Hall, Head of Public Affairs, at alan.boyd-hall@grayling.com.

What can users and businesses expect from the EU’s bold new legislation that seeks to tackle Big Tech’s dominance in the digital market? Our factsheet provides all the information you need to understand the Digital Markets Act, and how it stands to change the digital world as we know it.

To learn more about the Digital Markets Act, please contact emma.omahony@grayling.com.

Grayling UK was named Consultancy of the Year at the annual PRCA Public Affairs Awards in London last night.

The PRCA Public Affairs Awards celebrate the very best of the UK’s public affairs and lobbying industry, whilst the prestigious Consultancy of the Year category celebrates the overall top consultancy of the year. Judges based their decision on growth in fee income, improvement to bottom line and client and staff satisfaction and retention.

The Grayling UK Public Affairs team have had a fantastic year, adding several exciting new clients to their roster, and seeing growth in both revenue and staff numbers across our UK network.

This accolade is latest in a series of wins in 2021 for Grayling UK and brings our total to 23 for this year alone, in a list which includes PRWeek’s Best Place to Work and 30 Under 30 Star Employer and Large Consultancies of the Year for Grayling North and Scotland at the PRCA DARE Awards.

Grayling Brussels explores the new package of legislation put forward by the European Commission to reduce emissions by 55% by 2030. What are the main challenges ahead? What should businesses prepare for?

The EU’s legislative green makeover is finally here. As the name implies, the Fit for 55 package intends to bring the EU’s regulatory framework in line with the intermediate emissions reduction target of 55% by 2030 on the path to climate neutrality by mid-century. The targets themselves were made binding by the European Climate Law earlier this year.

The first instalment of the legislative behemoth comes with 12 proposals on both new legislation and revisions of existing rules, covering carbon pricing, renewables, and transport infrastructure, among others. These will be further complemented by the second instalment, including proposals on methane emissions and gas markets, this autumn.

How disruptive is the Fit for 55 package?

The legislative package will have far reaching implications for sectors throughout the EU economy – including on energy, transport, and manufacturing.

Energy

The revised Renewable Energy Directive will boost the use of renewables in all sectors by strengthening the targets (from 32% to 40% of renewables in the EU’s energy consumption by 2030) and sustainability criteria for their use and production. The new rules equally support the use of renewables-based hydrogen. With the Energy Efficiency Directive, the Commission will also enshrine the ‘Energy Efficiency First’ principle and set a binding energy efficiency target at the EU level.

Transport

To curb emissions from road transport, the Commission proposes to strengthen emissions standards for cars and vans and ramp up low and zero-emission mobility by rolling out approximately 3.5 million recharging points by 2030 through the Alternative Fuel Infrastructure Directive. To reach substantial emissions reductions in the aviation and maritime sectors, the Commission is setting up new fuel standards. It is also relying on the revised Renewable Energy Directive to support the uptake of renewable fuels and on the Energy Taxation Directive to repeal exemptions on conventional fuels.

Manufacturing

The Commission puts forward a revision of EU’s Emissions Trading System (ETS) to adjust the cap of total emissions and remove tradeable allowances from the market. Apart from increasing the cost of carbon emissions, the revision brings new sectors under the ETS, such as maritime, road transport and buildings. To avoid “carbon leakage”, the Commission is also proposing a Carbon Border Adjustment Mechanism (CBAM) to put a price on carbon for energy-intensive imports of cement, iron and steel, aluminium, fertilisers and electricity from 2023.

Challenges ahead

Three key challenges surround the proposals launched under the Fit for 55 package: level of ambition, regulatory uncertainty, and international reaction.

First, its level of climate ambition. Previous negotiations on the Climate Law and the EU Taxonomy have demonstrated the high level of politicisation associated with climate files, and work around the new proposals will not be any different. An intensely political tug-of-war on the means of climate action from preferred technologies to sustainability thresholds is expected between the member states, European Parliament groups, and even the Commission’s Directorates. As a result, businesses in Europe and beyond need to prepare for a crucial 24 months ahead that will determine the outcomes of the legislative package for their specific industries.

Second, adding to the prospect of political unpredictability is the regulatory uncertainty caused by the full reopening of the energy policy files, most of which were recently revised as a part of the Clean Energy Package in 2016-2019. For example, the full national implementation of the 2018 Renewable Energy Directive recast was finalised only two weeks ago. It is also unclear to what extent the tightened climate rules will be retroactively applied to existing investments and assets in the different policy proposals.

Third, there will also be international ramifications from the regulatory overhaul of the world’s largest trading bloc. This is particularly true when it comes to the extension of the emissions trading system (ETS) and the establishment of a carbon border adjustment mechanism (CBAM). Reactions from the EU’s trading partners are likely to influence and complicate the internal legislative negotiations on the package.

The European Commission will also want to leverage Fit for 55 during the upcoming COP 26. It remains to be seen if the package can effectively become a stepping stone to secure an agreement ensuring global net-zero by mid-century and keeping the 1.5°C target within reach.

Managing stakeholders’ expectations, a balancing act

The ‘Fit for 55’ hype has created huge expectations. The EU institutions will have to find ways to reconcile competing interests without watering down the green transition, amid intense scrutiny from stakeholders. European Commission Executive Vice-President, Frans Timmermans, recognised that “there’s good and bad for everyone in these proposals, so we need to create a balance”.

BusinessEurope Director General Markus Beyrer presented the European Business community’s wish list requesting “that the package support large scale industrial projects, reinforce measures against carbon and investment leakage and give space for all low carbon and transitional energy sources”.

Along the same lines, civil society actors such as CAN Europe have called for a “Fit for 1.5°C package”. The NGO coalition requested that “the revised legislation go for their maximum of ambition when it comes to reducing emissions” to reach 65% emissions reductions by 2030.

Considering the pressure that handling so many key initiatives at the same time puts on the institutions, policymakers will have to rely on the sectoral expertise of industry stakeholders to determine the best way to foster cost-efficient decarbonisation.

Once the threats and opportunities of the package have been accounted for, it is up to businesses to demonstrate credible transition pathways and the necessity of their sector to a European economy that is fit for 55.

Get in touch with us (EU.energy@grayling.com) and follow the conversation on the Fit for 55 package on Twitter @TheEULobby