Deal or no deal? An Autumn update on Brexit

Friday, September 7, 2018

All things Brexit have dominated the news for over a couple of years and, as we head into the final six months ahead of the UK leaving the European Union, the proposals and debates have gathered pace significantly. This summer we learned of the Chequers blueprint, as well as contingency plans for a potential no deal with the EU, and this autumn the negotiations start in earnest.

With so many possible permutations of what may or may not happen, the whole topic of Brexit seems is as complex and uncertain as ever – and understandably tricky to keep track of for those not following the Government’s every move. Here, the CPAA provides some clarity on the biggest recent and forthcoming Brexit developments.

Rewind to July, Prime Minister Theresa May and her cabinet holed up in country retreat Chequers and drew up a statement on what they considered the UK’s relationship with Europe should look like, post-Brexit. This vision is “a precise and responsible approach to the final stage of the negotiations”, says the Government. 

The Chequers plan largely concerns the bigger picture topics of trade and borders; giving the UK an independent trade policy that would allow non-EU tariffs to be set and individual trade deals reached. It would end the role of the European Court of Justice in UK affairs, although EU case law would still be given due regard. Payments to the EU budget would cease, but for “appropriate contributions” to areas that require joint action.

Far from being a final plan from the Government on the future of Brexit, it is intended to be a preferred position for negotiations. Never plain sailing in politics, not all MPs and Brexit supports have shared the Prime Minister’s enthusiasm for the Chequers plan. Some want to see a far more detailed strategy for action, others dislike it enough to prefer the UK to leave without a deal than sign up to Theresa May’s proposals.

Fast forward to September, and Brexit Secretary Dominic Raab published information on what might happen if there is no deal brokered with the EU. This first tranche of information – covering 28 topics – will soon be added to, presumably to show that the Government is ramping up efforts to handle all outcomes. Critics point out that the Government is far from prepared, with no extra resources, personnel or new processes in place to genuinely cope with a no deal scenario.

The published papers examine what could happen to specific issues and sectors – from using mobile phone abroad, to shipping and space programmes – in the absence of a deal with the EU. It could be seen as a ‘heads up’ to the private sector; suggesting businesses look at what no deal might mean for them, and what aspects may impact on how they operate and trade, so that they too might prepare.

This is a simplified summary of the detail coming from the technical papers, in the event no agreement is reached with the EU:

  • Driving: Some EU states may require an international driving permit to be purchased to be legal on their roads. If you move to another country, you may also need to take a driving test in that country.
  • Mobile phones: Mobile phone roaming charges may be reintroduced, and the Government will need to bring in legislation to include a cap on data costs.
  • Irish citizens: The Common Travel Area would be maintained, meaning “no practical changes” with no routine immigration controls. The UK may need to introduce new legislation to underpin the CTA, including considering whether driving permits are required.
  • Grants: EU funded transport, broadband, farming or skills programmes, to mention but a few, may be cut off early. The Government has pledged to support some programmes until 2020 – but any EU collaborative programmes will be axed.
  • Business: EU rules on competition will go, but the Government says the UK Competition and Markets Authority will acquire responsibility to handle this, and no longer bound by EU law.
  • Passports: You will need at least six months left on your passport in order to travel to the EU, so ensure they are up to date. Blue passports will not be issued until late 2019.
  • Firearms: European Firearms Passes will no longer be valid, so those wishing to travel with a firearm will have to check the rules for the country they are travelling to.
  • Safety standards for goods: The EU common strict quality regulations for goods will go, so businesses wishing to export to the EU will have to check on legislation for each country before sending products. Goods that require testing will require additional checks.
  • Cars: Where cars or parts are UK-made, firms will have to apply for ‘type approval’ from the EU to comply with safety and environmental standards. There may be a grace period for EU vehicles coming to the UK, but Europe may not reciprocate in a no deal situation.
  • Broadcasting: Broadcasters will have to adhere to regulations in each individual country they want to show their content in.
  • GDPR: The UK is going to retain the same standard, so there will be no immediate impact. However, UK companies may struggle to get data from EU states.
  • Environment: The UK has promised to keep standards on air, water and land pollution as set by the EU, but new rules would have to go through parliament. Companies producing products with harmful chemicals will have to get both UK and EU permits.
  • Drugs: Making and selling drugs – whether for medication, perfumes, plastics – will require permits both the UK and EU.
  • Space: UK academics and researchers will no longer be part of joint European space programmes, nor UK firms be able to bid for contracts. The Government has pledged funds for a UK Global Navigation Satellite System.
  • Shipping: UK ships may need to submit information and get an exemption before docking in an EU port, and crew members may see their certificates to work on EU vessels invalidated.

A no deal Brexit essentially mans that the UK falls back on World Trade Organisation rules to trade with countries that we do not already have an existing trade relationship with. It is likely to prompt an increase in taxes – for instance on dairy products and cars parts – as goods travel across borders in a different way, as well as a rise in mobile phone and credit card rates.

More pressing are concerns about the interim period after Brexit; re-writing international agreements from scratch will be onerous, it increases the likelihood of instability, and could also lead to shortages of goods and products – including medicines – from across the channel. In the event of a no deal, Bank of England Governor, Mark Carney, has told the cabinet that rising inflation, emigration and a fall in house prices would cost the UK dearly.

Brexit has been contentious from its outset, and as the pivotal decisions get closer, the debate is heating up. Labour has said it will block any Brexit deal based on the Chequers plan. Shadow foreign secretary, Emily Thornberry, claimed the withdrawal strategy was “nonsense” and the party would also not accept the prospect of a no deal departure.

Labour seem convinced that the UK is heading for another general election, and Theresa May is under mounting pressure from her backbenchers. It is entirely possible there will be a vote of no confidence and leadership challenge – with Boris Johnson waiting, ever hopeful, in the wings – in the coming months, which casts an air of uncertainty over what came out of Chequers.

There are also calls for a second referendum, with the People’s Vote gaining in popularity and financial backing. Recent polls conducted for the People’s Vote campaign imply that if the public is made aware of the ramifications of a no deal and projections for the UK economy, ahead of 29th March 2019, there would be widespread support for another referendum on the fate of the UK and EU.

Meanwhile, the news coming from Europe seems reasonably positive. The EU’s chief negotiator, Michel Barnier, has let slip that it is “realistic” to expect a deal to be reached in the coming months – he is especially keen for an agreement to be reached during the first stage of negotiations in November. Currently it is expected that EU leaders will give Mr Barnier permission to work with the best of the Government’s Chequers plans, and November’s meeting will hopefully allow agreements to be reached on a host of topics including trade, security, fisheries, and more.

It will be an interesting and intense few months ahead, as we see whether Britain’s divorce from Europe is amicable or acrimonious. Time will tell whether the Government’s plans survive the negotiation process, whether the Prime Minister can fend off her dissenters and challengers, and whether the opposing voices – including the 16 million Remainers – can influence the path of Brexit. The CPAA will keep on top of the announcements and keep you informed.

Brexit timeline – dates for your diary:

  • 19th-20th September: Informal European Council meeting in Salzburg, where EU leaders will hopefully enable Michel Barnier to close a deal.
  • 23rd-26th September: Labour party conference may see pressure to bow to the trade unions and People’s Vote.
  • 30th September – 3rd October: Conservative party conference, where Theresa May and the Government’s Brexit plans may come under pressure.
  • 18th-19th October: EU summit, with the opportunity for a final agreement and a statement on future relations.
  • November: potential emergency EU Summit. If a deadlock on Ireland continues, September’s Salzburg meeting may set a November date to finalise.
  • 13th-14th December: Last European Council of 2018, considered to be the last date for an Article 50 deal to be signed off by the UK and EU.
  • January/February 2019: Commons approval of the final Brexit deal and an Implementation and Withdrawal Bill that puts the exit treaty into law.
  • January/February 2019: Withdrawal agreement needs to be backed at an EU summit by a majority of states and approved by the European Parliament in a vote.
  • 29th March 2019: As things stand, Brexit is due to take place at 11pm.
  • 30th March onwards: Trade talks and transition phase.
  • 31st December 2020: An end to transition.