Charlotte Street Partners



De-Frosting UK-EU relations?

Written by Javier Maquieira, senior associate 
Edited by Tom Gillingham, associate partner
20 December 2021

Good morning,

Boris Johnson’s ‘plan B’ Covid restrictions, tax rises, and the UK government’s net zero agenda. Those were the three reasons Lord Frost cited for his resignation as Brexit minister “with immediate effect” on Saturday evening.

Frost’s shock departure, which had been planned for January but was brought forward after the Mail on Sunday broke the news, came at the end of a particularly difficult week for the prime minister, as the sense of frustration among Conservative MPs on the right of the party has heightened.

The ennobled Brexit negotiator had won Brexiteer hearts with his pugnacious tone and stance towards the European Union, becoming one of the most popular members of the cabinet among the Conservative faithful and grassroots members, who, like him, oppose the government’s high-spending regime, “obsession” with hitting environmental targets, and Covid vaccine passports.

Beyond these reasons, however, Lord Frost was also said to be “battle weary” after a year leading the UK negotiating team during talks about post-Brexit trade rules in Northern Ireland, during which he repeatedly threatened his EU counterparts with collapsing the talks and triggering article 16, which allows either side to adopt unilateral measures.

Interestingly, as some Brexit watchers have pointed out, Frost chose to quit only a day after No 10 signalled that it was softening its so-called “red line” on allowing the European Court of Justice to act as the ultimate arbiter of trade rules in Northern Ireland. As Downing Street has sought to prevent the protocol from becoming the main campaign issue during next year’s elections in Northern Ireland, the last month has seen a very visible climbdown by London.

All this may have been uncomfortable for Frost, as Charles Grant, director of the Centre for European Reform, explains in a thread on Twitter. “Frost’s departure is symptomatic of [Boris Johnson’s] weakness – and weakens him further”.

On Sunday, after hours of much speculation about who would succeed Frost, No 10 announced the appointment of the current foreign secretary, Liz Truss, as the peer’s replacement, bolstering an already busy portfolio for the Remainer-turned-Brexit-enthusiast.

The former international trade secretary, who replaced Dominic Raab in the foreign office in September, reportedly also enjoys the admiration of many Brexit supporters, which gives a possible explanation for Johnson’s decision to quickly appoint her and reassure Tory MPs worried about the UK taking a softer line with the EU in the process.

What is undeniable is that across the Channel EU diplomats will be watching Truss’s first days as chief Brexit negotiator very closely, as the jury’s still out on whether she will continue the current direction of travel or toughen the approach to further boost her popularity among party members.


No 10 has defended a photo published by The Guardian that appears to show Boris Johnson and staff relaxing and drinking in the Downing Street garden in May 2020. A government spokesperson insisted that the picture, taken at a time of tough social restrictions in the country, shows a “staff meeting”. 
The health secretary has refused to rule out further Covid restrictions for England, as the Omicron variant spreads around the country. Asked about possible new measures to slow the spread, Sajid Javid said there were “no guarantees in this pandemic” and that the government was keeping measures under review.
Leftist candidate Gabriel Boric has won Chile’s presidential election after a head-to-head run-off with his far-right opponent, Jose Antonio Kast. Set the become the country’s youngest-ever president at 35 years old, Boric has promised to address inequality by reforming Chile’s pension and healthcare systems, reducing the work week from 45 to 40 hours, and boosting green investment.

Business and economy

The Treasury has announced that additional funding to tackle the Covid pandemic in Scotland, Wales, and Northern Ireland has been doubled. Of the total extra money, which amounts to £860m, Scotland is to receive an additional £220m on top of the £220m the devolved administration had already received from the autumn budget. However, Scotland’s first minister, Nicola Sturgeon, said she wanted to check if this was the case.
Figures published by retail intelligence firm Springboard showed that fears over the spread of the Omicron variant have pulled shoppers from British high streets in the final weekend of shopping before Christmas. According to the latest data, visits to retailers around the UK on Saturday and Sunday were up only 0.8% and down 1.8%, respectively, compared with a week earlier, as the retail and hospitality sectors continue to struggle.
Chinese artificial intelligence start-up SenseTime relaunched its $767m Hong Kong listing on Monday, a week after pulling the IPO following the company’s inclusion on a US investment blacklist. SenseTime retained its target of selling 1.5 billion shares for between HK$3.85 and $HK3.99 each, according to regulatory filings, with the final price to be set on Thursday. Washington has accused the group of developing facial recognition software to determine people’s ethnicity.

Columns of note

Writing in the Financial Times, Martin Sandbu looks at the European Commission’s rediscovery of the social market economy after years of championing fiscal consolidation, deregulation, and “competitiveness” in the form of lower unit labour costs. This shift, which can be seen in other economies as a result of the coronavirus pandemic, has allowed the EU to reclaim its social DNA through the launch of proposals to invest in social enterprises, mutual societies, and charities, firm up and clarify gig workers’ rights, and push for an EU directive on adequate minimum wages, Sandbu maintains. (£)
Has our just-in-time society gone too far? The Times’ Libby Purves uses the examples of delivery company Hermes and the NHS to criticise the predominant presumption of instant gratification and supply enabled by online shopping. She denounces its effect not just on congestion and pollution, but also the illusion that just-enough operations aimed at saving warehouse space, inventory costs, and cashflow can provide for emergencies. (£)


The week ahead

As many businesses begin to wind down in the lead-up to Christmas, so has the economics calendar. This week will see the publication of US consumer confidence data, home-sales figures, and a run of surveys in the eurozone and the UK, with a further setback likely next month.
Following last week’s central bank committee meeting excitement, the reporting of cost-of-living figures for France and Japan will add more insight to the inflation debate.
Finally, despite the scarcity of diarised corporate news, Nike reports second-quarter figures today, while Heineken is expected to report full-year earnings on Wednesday, when the Dutch group hopes for better news than last quarter, when it reported a sales fall owing to a decline in Asian sales.

What’s happening today?

Aberdeen Lat

Source: Financial Times

did you know

In Finland, the cost of a speeding ticket is determined by your income. In 2002, a Nokia executive got a ticket for $103,000 for going 45 in a 30 zone. (Source: @UberFacts)

Parliamentary highlights

House of Commons

The House of Commons is in recess. The House will next sit on 5 January 2022.

House of Lords 

The House of Lords is in recess. The House will next sit on 5 January 2022.

Scottish parliament 

No business scheduled.

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