Brexit – A Huge Change Coming
Having formally left the EU on 31 January, we are now into the home straight of the next lap of the Brexit process: defining the new relationship with the EU.
Things are getting heated. Both sides are accusing the other of bad faith, and the UK Government is threatening to pass controversial legislation which would give it power to over-ride elements of the deal already done – the Withdrawal Agreement (an international treaty entered into by the Government less than a year ago).
Negotiations resumed on 28 September. Many issues remain to be resolved, but two key stumbling blocks remain: how far the UK’s state aid policy might diverge from the EU, and the extent to which the UK will allow the EU fishing fleet access to UK waters.
A lot of the media commentary suggests that the chances of no deal being reached are getting higher. This would mean the UK defaulting to a basic trading relationship with the EU Single Market on WTO terms, with tariffs and quotas. There are however some more encouraging indications – the EU did not break off negotiations when faced with the UK Government tabling the legislation which would give it the power to over-ride the Withdrawal Agreement; and the UK Government has slowed down the passage through Parliament of that legislation, indicating that it would be open to amending the offending parts of it if suitable deals are reached. And progress has been made in the negotiations, including on two major items which were previously stumbling blocks: the role of the European Court of Justice in the future relationship (on which the EU offered concessions), and the format of the agreement (on which the UK offered concessions).
What does it all mean in practice? Deal or no-deal, there is a huge change coming.
Indeed, the difference between the current position (participation in the EU Single Market and Customs Union) and either deal or no-deal is bigger than the difference between deal and no-deal. Going from being a fully integrated part of the Single Market and Customs Union to an external market will bring about many changes in how business is carried on.
But there is also a significant difference between no-deal and having a deal. No-deal would of course involve tariffs and quotas, but it would also risk poisoning the atmosphere between the EU and the UK, making steps either side could take to ease some of the impact for business harder to achieve. And some of the complementary steps, such as customs facilitation, regulatory recognition, data adequacy, and financial regulatory equivalence could also be harder to achieve.