Deal or No Deal? The Forgotten Issue of Brexit
As Coronavirus continues to dominate the headlines as well as the thinking of many business leaders, the issue of Brexit seems to have fallen by the wayside. Yet the impact of a potential Brexit trade deal, or the lack of one, will still be very real for all. Prime Minister Boris Johnson has stated that the deadline to conclude talks is the 15th of October – though as with all Brexit deadlines, whether this will in fact be the final date or not remains to be seen. Nevertheless, this is clearly intended to expedite talks with the EU, as the UK takes a hard-line stance with plans in place to partially override the previously agreed withdrawal agreement with domestic legislation. Boris Johnson firmly claims that a no deal Brexit will be a good thing for the UK, granting full control over “laws, rules and fishing waters.” Is this the reality?
Since Britain withdrew from the EU officially on the 31st of January this year, in practical terms there has been little difference as the country continues to operate on a transitional set of rules and arrangements. Yet as of the 1st of January 2021, these will no longer be in place. A year to untangle and negotiate a very complex set of legal arrangements was already ambitious, but with Coronavirus taking precedence the time pressure has been even more severe. Major sticking points include ensuring that there is a level playfield between the two countries, fishing rights, and the governance of the deal, including the role of the European Court of Justice.
On top of this, the Northern Irish border remains a huge bone of contention, with the government’s most senior lawyer Sir Jonathan Jones resigning reportedly over plans to override the withdrawal agreement’s sections relating to Northern Ireland – stating this would violate international law. The row continues and intensifies as the newly proposed Internal Markets Bill is defended by Boris Johnson. The Bill in essence gives the UK government unilateral power to disregard or ‘disapply’ EU laws where no trade deal alternative is in place. Emergency talks between the EU and the UK have been called, while government ministers confess it was signed in a rush. The bill also may be subject to legal challenges from devolved governments in Scotland and Wales.
What does this all mean for consumers and businesses?
Without a new trade deal, the UK will be leaving both the customs union and single market. The customs union ensures that countries within the EU cannot charge tariffs on each other’s goods, while the single market ensures that the same product regulations are applied across the EU. If the UK does not secure a deal, this means that UK goods heading into the EU, and EU goods heading into the UK could be subject to border checks and/or tariffs. This in turn could mean potential delays at ports and crossings, as well as an overall price increase for goods. To prepare for this, the government has allocated £350 million to overcome potential red tape and is creating lorry parks and checkpoints, as well as aiming to increase the number of customs agents to as many as 50,000.
The government’s preferred option is a tariff free trade deal, or a simple deal which will keep many of the existing agreements in place. However, there is no guarantee this will be secured, and the loss of assured access to the European market will cause difficulties for a huge range of professions from musicians to lawyers. From chief UK negotiator David Frost’s increasingly stark tone, the probability of a no deal exit seems to be rising. The cost of this remains unknown – there are no recent economic forecasts for this eventuality. Previous figures from 2018 suggest the UK would lose 7.7% of future income compared to staying in the trading bloc, as reported by the Financial Times. Yet without knowing what possible trade deals the UK could strike, or how it could adapt regulations to reduce red tape and increase competitiveness, this all remains highly speculative. The EU is adamant that a no deal scenario will hurt the UK more than the EU in terms of jobs and trade, yet it remains in the interest of both parties to make economic activity as easy and profitable as possible.
At this stage it is difficult to firmly predict the nature of any potential deal, if there is to be one at all. As with so many issues in 2020 the landscape is ever shifting and the facts such as they are, remain on shaky ground. The economic fallout at least in the short term is likely to be significant, and businesses can only approach the future by mitigating risk and diversifying. One way is to ensure that your business takes both card and online payments, to find out more take a look at our great range of payment solutions.