In the last two weeks the UK Government has published seven papers on its approach to leaving the EU, whilst the rest of the country was on holiday, returning from holiday or preparing to go. These look at customs, trade in goods, Northern Ireland, data and judicial issues (including contract law). You can find them all here. So are they essential reading if you are planning how your organisation should prepare for Brexit?
The short answer is ‘no’. They don’t really change things. They are part of a complex negotiation with the EU and therefore the final outcome may be very different. In the meantime they don’t change the advice I have been giving for a while (see my video here): that we still face two broad scenarios for March 2019; an orderly Brexit or a chaotic Brexit.
The long answer is ‘yes, maybe’. These papers do reveal the complexity of leaving the EU and establishing new arrangements – confirming that this is the biggest change to the UK economy and society since World War II. They underline the importance of planning for Brexit in your organisation; measuring your exposure, Brexit proofing your business against a range of scenarios, and identifying the opportunities and how you can exploit them. These Government papers and the debate around them provide some insights that may help with your scenario planning.
The government’s paper on Future Customs and Trade Arrangements is the first official confirmation that the UK Government is seeking a ‘transitional’ period or ‘implementation’ period: a period after we leave the EU on 31 March 2019 during which we will maintain some core parts of our current EU membership to allow time for an orderly transition to a new relationship. This paper proposes that the UK should remain in the EU Customs Union for a period of time after the official ‘EU exit day’. This is something businesses and others have bene calling for and it strengthens the likelihood of a more ‘orderly’ Brexit, managed over a period of two or three years.
But don’t relax just yet! Before you make a gradual, orderly Brexit your core planning assumption, bear in mind there are also signs that Government is preparing for a ‘no deal’ chaotic Brexit. A number of the position papers spell out what a no deal scenario would mean and these scenarios may be useful planning tools for your organisation.
More broadly the position papers flesh out some specifics that may help different sectors and organisations plan for Brexit in areas such as customs and borders for import and export, transitional arrangements for goods and services, contract law and insolvency, data, and doing business between and through Ireland and Northern Ireland. In a separate blog (here) I have gone through each of these papers and highlighted some of the points which I think could help an organisation to assess and plan how Brexit will impact your business.
Looking ahead, there are signs that the negotiations between the UK and EU may take longer than planned. The EU has emphasised that they need to reach some agreement on the principles around the ‘divorce settlement’ before they move on to negotiating the future relationship between the UK and EU (which covers the all important issues on trade and access to the single market).
There are four key areas for the ‘divorce’ talks: rights of citizens, avoiding a legal ‘limbo’ for goods already in the market and legal cases already started on ‘exit day’, the financial bill (how much the UK needs to pay the EU to meet costs incurred and liabilities created), and ensuring a continued peace process in Northern Ireland.
The good news is that the UK and EU are pretty much agreed on the principles around avoiding a legal limbo (the UK position is set out in the papers on Continuity in the Availability of Goods and Ongoing Judicial Proceedings). These give organisations involved in cross-border activity some emerging clarity on transitional arrangements for products already in the market and any legal cases in the system: provided the UK and EU reach an overall agreement, it looks like these will be treated as if there is no change when we leave the EU.
On the other divorce questions, there remains some big differences between the EU and UK which may drag on in talks over the autumn. The UK wants to start talks in parallel about our future trading relationship with the EU and the UK position papers deliberately make the point that it is impossible to take decisions on ‘divorce’ without knowing what the future relationship will be. The EU negotiators are having none of this at present and insisting that they will not move onto future relations until they have satisfactorily agreed the terms of leaving the EU.
A crucial date is the German elections on 24 September – depending upon the result (and crucially which parties are in the governing coalition), the Brexit talks could start to speed up again and take a more flexible turn. For the time being, it increasingly looks like the divorce talks could run until the end of the year, leaving less than 12 months in 2018 to negotiate the more complicated terms of the UK’s future relationship with the EU (as any deal will need to be ratified by national Parliaments through the winter 2018/19).
So, it remains possible that the negotiations will simply run out of road, no agreement will be reached in the time available and we will crash out of the EU without an agreement. Alternatively, everyone may be able to agree a transitional period, and the UK will gradually leave the EU over a period of years, allowing new trading arrangements to be agreed. ‘Orderly’ or ‘chaotic’ Brexit – they both remain equally probable and you should plan for both!
This has been an important week in Britain’s approach to the Brexit negotiations. Until a few days ago, Theresa May’s government appeared vague in its stance on the talks, providing little detail about what kind of Brexit it seeks. The publication of seven official papers by Whitehall over the past 10 days marks a shift and suggests the UK is becoming more realistic about what it can achieve.