Wishful thinking dominates Brexit debate as the UK heads towards No Deal on 31 October

One of the best things I learned at school was the simple mnemonic:

“To ASSUME can make an ASS of U and ME”

Unfortunately, most of those involved in the UK’s Brexit debate have failed to remember it.  As a result, it seems likely that the UK will end up leaving the European Union on 31 October with No Deal.

The problem comes down to the set of false assumptions summarised in the slide above:

  • Don’t worry, history shows the UK won both the Battle of Waterloo and World War 2 by small margins – the Prussians arrived just in time to help win the Battle of Waterloo in 1815, and Hitler called off the Battle of Britain just before the RAF ran out of aircraft and pilots in 1940
  • The terms of the Withdrawal Agreement were only a bluff. German auto manufacturers will never allow their UK sales to be jeopardised.  And countries such as France, Italy and Spain will soon reverse course once they realise they might lose their UK tourist income
  • Everybody knows that Parliament would never allow a No Deal Brexit to take place, and so there’s no need to actually make the case for why it might be a disaster. After all, the Speaker said last week that he would probably allow an emergency debate if it ever looked likely
  • Company chiefs in favour of Leave have been prominent in the Brexit debate, but bosses who favour Remain would risk upsetting Leave customers if they did the same.  And anyway, everybody knows that in the end, someone will appear with a magic wand to make everything end happily

These are all arguments that have been heard everyday for the past 3 years.  The problem is that they are simply wishful thinking, and yet are never challenged.

The success of the Brexit Party in the European elections makes it almost certain that the next Tory leader will be a hard-line Brexiter.  As the chart shows from YouGov polling, most Conservative Party members (who will make the final decision) actually voted for the Brexit Party rather than the Conservatives in the election.

Similarly, it seems highly likely that No Deal will be the base case for most Tory leadership hopefuls.  And the position of Boris Johnson as front-runner is very clear, as the Leave.UK poster confirms.

Given that the leadership election is already underway, we also know how events will likely play out:

  • The new Tory leader will be elected in July, ahead of everyone’s summer holidays in August
  • Brussels will quickly refuse their demand to renegotiate the Withdrawal Agreement
  • The new premier will dismiss this as bluff during September and at the Party Conference
  • The UK will then leave the EU without a deal on 31 October

After that, either the new EU Commission will make a hurried phone call, saying it is all a terrible mistake.  Or the UK will find that 31 October was just “the end of the beginning”, and will instead start the lengthy process of negotiating a free trade agreement – whilst the EU implements their Preparations for a No Deal Brexit..

THE TIMETABLE FOR AVOIDING NO DEAL IS VERY SHORT
The key issue, as the independent Institute for Government (IfG) has noted, is that:

“A new prime minister intent on No Deal Brexit can’t be stopped by MPs.”

It is also clear from recent statements from Labour leader, Jeremy Corbyn, that he continues to regard a second referendum as very much a last resort, as The Guardian reported last week:

“Speaking in Dublin, the Labour leader said the only way to break the deadlock would be a general election or a second referendum after negotiating a softer Brexit deal with Brussels.”

Corbyn knows very well that a new Tory premier is most unlikely to seek a “softer Brexit deal”, and he also knows that it would be impossible to negotiate a new deal before 31 October.  It would be almost impossible even to organise a General Election before 31 October, as the IfG have also explained:

  • The election would have to be held by 24 October, as  the UK will otherwise leave by default on 31 October under the terms of the extension agreed under last June’s Withdrawal Act
  • The Fixed Term Parliament Act (FTPA) means the government would have to lose a second vote of confidence by 16 September to allow 25 days for campaigning, and 2 days for “wash-up” (deciding which bills can become law before dissolution)
  • The FTPA also mandates 2 separate votes of confidence, with a 14 day gap – so the 1st vote has to be held by 2 September ie the day that Parliament probably returns from its summer holidays

This tight timetable also raises an unanswered question as to when the vote of confidence would actually be tabled, if parliament is in recess?

Wishful thinking and wrong assumptions have dominated the Brexit debate. So there is little reason to assume anything will now stop the UK leaving on 31 October, in time for Halloween celebrations.

Afterwards, of course, everyone will be free to blame everyone else for “not making it clear what would happen”.  But that is always the result when wishful thinking is involved.

Most businesses were nowhere near Ready for Brexit last Friday – we mustn’t make the same mistake again

Thank goodness for backbench MPs and the European Union. Without their efforts, the UK would by now have left the EU without any trade deals, or ongoing relationship with it’s biggest export market.  And as the Duke of Wellington said in another context, “It was a damn close-run thing”:

  • In a historic vote, MPs decided by just 1 vote to force the government to ask for a longer extension
  • The EU Council argued into the night on its response, but decided to give the UK “a second chance”

The problem was well expressed in a tweet by former Brexit Secretary, David Davis, on Friday morning:

His tweet completely ignored the views of all the main business organisations and trade unions, who had spent weeks trying to point out that issuing government statements and Guidance Notes was not the same as actually being prepared, as The Guardian noted:

“Frances O’Grady, the general secretary of the TUC, and Carolyn Fairbairn, the CBI’s director-general, wrote last month before the crunch EU summit in Brussels: “Our country is facing a national emergency. Decisions of recent days have caused the risk of No Deal to soar. Firms and communities across the UK are not ready for this outcome. The shock to our economy would be felt by generations to come.””

On Friday, confirming their lack of understanding of business needs – and against the advice of senior civil servants – ministers decided to completely stand down No Deal preparations.  Yet as the independent Institute for Government have warned:

“Despite the delay, a No Deal exit is still very much on the table, either on 31 May or 31 October… Businesses and the public should not be left to read between the lines of individual departmental press notices.”

It is therefore critical that UK and EU27 businesses now take the opportunity of the extension to understand and prepare for the changes that will affect them if the UK does leave the EU.  For all the talk of a new referendum, this is still the law of the land.

Our surveys at Ready for Brexit have consistently shown that 80% of small businesses weren’t ready for Brexit. Some had stockpiled some essential goods, but only around one fifth had actually thought through a detailed plan.  As a result, many people have had sleepless nights in recent weeks as they realised the UK might well be leaving with No Deal.

Now that the UK has an extension, it is time to stop panicking and start preparing. None of us can afford to be complacent – No Deal remains the default position and businesses need to know how Brexit will affect them in key areas for their future:

  • Customs, Tariffs and Regulations.  No one has needed to fill out Customs Declarations for EU trade for 25 years. HMRC has warned that following Brexit, businesses may need to make 400 million Customs Declarations at an expected cost of £32.50 each. Compliance with Rules of Origin could easily cost more, if legal advice is needed. Companies need to identify how Customs and Regulatory requirements could impact their business and plan to put the correct procedures in place
  • Supply Chains.  Will your business be affected by interruptions in supply chains following Brexit? You need to audit your supply chain partners to identify potential weak links. It only takes one missing item to shut down a production line. And think about what may happen to your cash flow if forecast delays take place at the ports
  • Sales Agreements.  Do you have Material Change clauses in your commercial contracts?  You need to check out key areas such as your ability to pass on the costs of tariffs, customs delays and exchange rate movements, as well as the impact of possible regulatory changes. Governing contract law also needs checking as the UK will no longer be a member of the EU
  • Employment. You need to understand how the status of UK-employed EU citizens may change and check out the position of UK staff working temporarily or permanently in EU countries. Don’t forget basic areas such as whether professional qualifications obtained in the UK will still be valid in the EU after Brexit, and the possible need for international driving licences

We have all had a lucky escape in the past few days. But we can’t rely on our luck holding.  Planning now for whatever may happen in the next few months may well save you months of heartache later on.

This is why, with some highly experienced colleagues, I helped set up Ready for Brexit.  As I wrote here in June:

“We are particularly concerned that many small and medium-sized businesses (SMEs) – the backbone of the European economy – are failing to plan ahead for Brexit’s potential impact.”

We can all hope that politicians now step back, and work together to avoid the disaster of a No Deal at the end of May or October.

But hope is not a strategy – particularly when the future of your business may be at stake.  If you need detailed help in the form of Brexit Checklists and planning tools, they are all there on the Ready for Brexit site.

 

BASF prepares its UK supply chain for Brexit

BASF has been working with Ready for Brexit (the online platform I co-founded last year) as part of its programme to prepare its UK supply chain for Brexit.  Here, Ready for Brexit’s editor, Anna Tobin,  reports on the workshops that BASF has been running this month for SMEs.

The world’s largest chemical business, BASF, has a large network of companies in the UK. Over the last few weeks, it has run a series of workshops for those working in its supply chain to ensure that its UK infrastructure is as ready as possible for Brexit.

Of all the UK’s industrial sectors, the chemical industry is likely to be one of the worst hit by a no-deal Brexit. It contributes £15bn annually to the UK economy and it is the UK’s largest manufacturing exporter, with 60% of its exports going to the EU. As the lynchpin of this industry, BASF is doing everything it can to prepare the UK’s chemical industry for Brexit. Working with the Government and in collaboration with every link in its supply chain has been the focus of BASF’s Brexit preparations.

BASF has worked closely with Ready for Brexit to highlight key areas for attention to its SME partners. Over the last month, it has run a series of workshops for SMEs in its supply chain involving presentations and question and answer sessions with Government advisors, senior figures at BASF, logistics and customs experts.

Logistics
Bill Bowker, director of transport and warehousing company Bowker Group, which has been working with BASF since 1986, headed one workshop. He explained to his audience that as part of his Brexit contingency planning he has increased his storage space and staffing, obtained ECMT permits and ensured that his drivers have international driving licences and green cards; while he is advising his customers to increase their stock levels and ensure that all shipping information is correct to minimise delays.

Abram Op de Beeck, BASF’s customs and foreign trade manager, advised attendees to get an EORI number as soon as possible, to sign up for Transitional Simplified Procedures for customs and to consider appointing a customs agent to simplify the management of their customs declarations.

DEFRA
Alun Williams, who is working on EU exit for chemicals and pesticides at the Department for Environment Food and Rural Affairs (DEFRA), explained that the Government is working to ensure that any new UK regulatory systems will mirror the existing EU systems as far as possible to minimise costs to industry. He also said that they were endeavoring to minimise disruption to integrated supply chains for chemicals, will continue to monitor and evaluate chemicals in the UK to reduce the risk posed to human health and the environment; and that they would be maintaining existing standards of protection for human health and the environment.

He conceded that businesses looking to operate in the UK and EU markets will have to work with two regulatory systems. To maintain access to the EEA market, UK REACH registration holders will need to transfer their registrations to an EEA-based organisation. And to maintain UK market access to existing UK-based REACH, registrants must sign up to the new UK IT system in the first 120 days of the UK leaving the EU. The other alternative is to ask your EU/EEA supplier to appoint a UK-based Only Representative to ensure UK REACH compliance.

Williams explained that to register a new chemical for the EEA market, UK companies must register with ECHA via an EEA-based customer or Only Representative. To register a new chemical for the UK market, UK companies must set up an account on UK REACH IT and register the new chemical.

BEIS
Fiona Hitchiner, senior policy advisor chemicals at the Department for Business Energy and Industrial Strategy (BEIS), pointed people towards the Government’s tariff checker and advised them to review their contracts and International Terms and Conditions of Service to show that they are now an importer/exporter and to establish responsibilities with their suppliers and customers. She also reminded attendees to check whether they could save money and help cash flow by using a duty relief or deferment scheme and reiterated the need to obtain an EORI number and to register for Transitional Simplified Procedures.

The day-long workshops were full on, but that is why BASF has put on these events. It wants to get the message across that there is a lot to do to prepare for a no-deal Brexit, and that preparation is vital to minimise the expected ill-effects.

Companies and investors have just 30 working days left to prepare for a No Deal Brexit

Companies across the UK and EU27 are suddenly realising there are now just 30 working days until the UK will likely abandon its 45-year trading relationship with the EU, and start to trade on WTO terms.

If this happens, every supply chain involving a movement between the UK and EU27 will change. And all those supply chains governed by EU deals outside the EU will also change. A large number of industries are already being impacted:

  • Scotch whisky exports to Korea worth £71m ($90m) a year, risk a 20% tariff after 29 March if the EU’s Free Trade Agreement is replaced by WTO rules. It is now too late to export by boat, causing some exporters to use expensive air freight to beat the deadline. But capacity is already almost full.
  • Many banks, insurance companies and asset managers have already moved staff from London into the EU27.  They cannot risk waking up on 30 March to find they can no longer serve customers from London, because they have lost the essential EU “passport”.
  • “CE Marks” issued in the UK will no longer be valid in the EU27 after No Deal  – making it difficult to sell any goods that need safety, health or environmental approval.
  • And last week, BASF’s UK MD, Richard Carter, told Ready for Brexit that for the world’s largest chemical company: “The thought of having to re-register with a UK REACH equivalent if there is no deal and if there is no recognition equivalence is a huge concern”.

THE UK REMAINS ON COURSE TO LEAVE THE EU WITH NO DEAL ON 29 MARCH
But surely, you say, “this cannot happen”.  After all the UK’s main business organisation, the Confederation of British Industry, has already warned that No Deal would create “a situation of national emergency“.

But the leading Tory Brexiters don’t believe this.  Their 111 votes, combined with the 10 votes from the Democratic Unionist Party, meant premier May’s Withdrawal Agreement was defeated by 230 votes last month.  It would have provided a Transition Agreement until the end of 2020.

However, their votes then swung behind her to defeat the motion of No Confidence in the government, which would have led to a general election.  Why did they do this, you might ask, given they had just voted against her key policy?

The answer is that the Brexiters have a completely different view of the Brexit negotiations, as I noted in The pH Report last year.

They simply don’t accept the CBI argument. Instead they believe the EU27 will be the main losers from No Deal as they argue the financial outcome will be:

“Plus £651 billion ($875bn) for the UK versus minus £507bn for the EU: it could not be more open and shut who least wants a breakdown.“

In their view, the best way to force the EU27 to offer a better deal is simply to leave on 29 March.

They also, as I noted here in December, will be quite happy to see the end of key industries such as autos, as the leading Brexiter economist Prof Patrick Minford told the Treasury Committee in October:

You are going to have to run it down … in the same way we ran down the coal industry and steel industry. These things happen.”

The alternatives to No Deal are now also extremely limited.  The Caroline Spelman/Jack Dromey resolution to block No Deal was passed last month by 8 votes. But it was only a resolution and has no legal force.

Of course, Parliament might change its mind and decide to vote for May’s Agreement.  Or the government might revoke its Article 50 notification before the UK leaves on 29 March. But both would split the Tory and Labour Parties and are unlikely to happen.

The government could also decide to hold a second referendum. But again, this would split both parties and is unlikely.

It is therefore hard to disagree with the independent Institute for Government, who concluded: “Britain’s politicians are unwilling to put jobs and the economy above party politics.

The only other option is for MPs to effectively take over the government by demanding that it stops No Deal.  It is not clear how this could happen, but presumably they could pass legislation demanding that May asks Brussels for a lengthy extension to Article 50.

But such a move by Parliament has never happened before. It would need key Ministers such as Chancellor Philip Hammond to vote against their own government. It would also need support from enough Opposition MPs to overcome Brexiter resistance.

It would also risk a constitutional crisis, as it would replace an elected government.  And in terms of practicalities, it would presumably also mean that the UK would take part in the EU Parliament elections, as it would still be a full EU member in May. The whole process would take the UK into completely uncharted water.

THERE ARE JUST 30 WORKING DAYS LEFT TO PREPARE FOR A NO DEAL BREXIT

Anticipating this risk led me to co-found Ready for Brexit last year, to help businesses navigate the challenges and opportunities created by Brexit.

It is effectively the one-stop shop requested recently by the CBI.  It provides curated links to all the areas where you may need to urgently prepare for Brexit.

The video explains what WTO rules could mean for your business. Please watch it now, and then decide if you need to start planning today for whatever may happen on 29 March.

No Deal Brexit remains UK law unless MPs reverse their previous votes

That couldn’t happen” are probably the 3 most dangerous words in the English language. They mean “I don’t want to think about something that might be painful“. So if you hear MPs saying a “No Deal Brexit can’t happen“, ignore them. They are wrong.

‘NO DEAL’ BREXIT IS THE LAW OF THE LAND
The issue is simple, yet seemingly too painful for most MPs and commentators to accept.

The EU Withdrawal Act (2018) became law on 26 June last year.  It set 29 March 2019 as Brexit Day.  It allowed for a Transition Agreement if a Withdrawal Agreement was agreed. Without a Withdrawal Agreement, the UK simply leaves with No Deal.

The law is the law, and the Act is primary legislation, which means it has since been incorporated in a whole range of laws and regulations as part of the UK’s exit preparations.  It cannot, therefore, be overturned by statements that claim “There is no majority for No Deal”.

In fact, during the Committee stage, the House of Commons voted 320-114 in Committee Stage against staying in the Customs Union.  It also voted 319-23 against a second referendum. And last week, MPs voted 432-202 against the proposed Withdrawal Agreement.

So if MPs say “No Deal can’t happen”, they are wrong. They have already voted for ‘No Deal’.

CHANGING PRIMARY LEGISLATION IS VERY HARD

Of course, MPs could still change their minds. But there are now less than 70 days till Brexit.  And they would also have to agree this with the other EU 27 countries.  These represent nearly 450 million people versus the UK’s 66 million.

Equally important is that the UK has been heading in this direction since negotiations started:

Since then, MPs have voted for the Withdrawal Act; against remaining in a Customs Union; against a new referendum; and against the Withdrawal Agreement. They have also voted for invoking Article 50 and for setting 29 March 2019 (by 498-114 votes) as Brexit Day.

So time is running out for them to change their minds.

THE ALTERNATIVES TO ‘NO DEAL’ ARE CURRENTLY WISHFUL THINKING

The politics of Brexit also make it unlikely that the government will change its mind, or be forced to change its mind:

  • Theresa May knows very well that any move to “soften” Brexit by joining a Customs Union would split her Conservative Party down the middle. And any Tory MP who voted for a softer Brexit knows they would likely be deselected as a candidate and lose their job
  • Labour leader Jeremy Corbyn voted to leave the EU in the 1975 referendum, and against the Maastricht/Lisbon Treaties. Many traditional Labour voters are also strongly pro-Leave. So any Labour MP voting against the Party line also faces the risk of deselection

It is therefore hard to see why simply extending Article 50 beyond 29 March would change anything.

And extending would enormously complicate the European elections in May. At the moment, the UK is not taking part in these, as it is leaving on 29 March. But if it isn’t leaving after all, there is little time left to prepare to vote on 23 May

Of course, the EU27 might agree an extension if the UK decided to hold a second referendum, as long as the vote was held before the new Parliament starts work on 2 July. But they would likely first want to know the question on the ballot paper.

Would the government ask if the voters approved of May’s Withdrawal Agreement? Would it instead ask if they wanted to stay in the EU? Or would it simply ask if they wanted to leave with No Deal?

Any of these questions are possible.  But deciding between them could be very divisive in itself.  And a referendum campaign could be even more divisive.  Plus, its outcome would be very uncertain if voters worried that democracy was being undermined by a refusal to accept the first result.

“A week is a long time in politics” as former premier Harold Wilson famously noted.  So it is possible that Sir Keir Starmer’s call yesterday for a new Labour approach might succeed.  Equally, MPs might decide to support the Nick Boles and/or the Dame Caroline Spelman/Jack Dromey motions next week.

But this would only be the start of a quite complex process, which might well end with a General Election being called – and all the while, the clock is ticking.

So after the government’s defeat on Tuesday, UK businesses and those that trade with the UK must urgently begin to plan on the basis that a No Deal Brexit on 29 March is now UK law. 

Please consider joining Ready for Brexit today (the advisory service I co-founded in June). It is effectively the one-stop shop requested by the CBI, and provides curated links to all the areas where businesses may need to prepare for Brexit.

Your ‘A-Z Guide’ to the Brexit Negotiations

The UK is now facing a national crisis”, according to Margaret Thatcher’s former Defence Secretary, Michael Portillo, speaking to a dinner in London on Thursday night.  Brexit continues to tear the UK apart, and places the economy at greater and greater risk.

On Thursday, premier Theresa May had unveiled her draft Withdrawal Agreement with the EU27.  Within a few hours, another 5 Ministers had resigned including her Brexit Secretary.  Over the summer, she had already lost her previous Brexit Secretary and her Foreign Secretary, plus other Ministers.  And 5 Ministers – including Michael Gove and Trade Secretary Liam Fox – are now planning to produce their own revised deal on the Irish question, in opposition to the draft agreement

Businesses are far too complacent about the risks of a No Deal Brexit, as I told BBC News on Thursday:

“If the deal went through Parliament, then we could be reassured that we had until the end of 2020 before anything happened. But looking at what’s happened this morning, it seems less likely that’s going to happen, and therefore the default position is that we leave without a deal on 29 March.  And that, I think, panics SMEs, small businesses, because if you don’t know what’s happening that’s worse than almost anything else. “

If you, or a colleague, now need to get up to speed with Brexit developments – and what they may mean for your business and your investments, here is my ‘A – Z Guide to the Brexit Negotiations’:

Article 50 of the Lisbon Treaty sets out the rules for leaving the European Union.  As with most negotiations, it assumed the leaving country would present its proposals for the post-withdrawal period – which would then be finalised with the other members.  But the UK Cabinet was split on the key issues, and so the 2 year’s notice was given on 29 March 2017 without any firm proposals being made for the future UK-EU27 relationship beyond 7 “negotiating principles and “the desire for a “close partnership”.

Brexit means Brexit“, has been the UK’s core statement since Article 50 was tabled.  But as I noted back in September 2016, Brexit can actually mean a variety of different outcomes – and they have very different implications as the chart shows.  At one extreme, the ‘Norway model’ is very similar to full EU membership, but with no say on EU decisions.  Whereas the ‘Canada model’ is simply a free trade agreement offering some access to the Single Market (qv) for goods, but less access for services (which are 80% of the UK economy).  A ‘No Deal Brexit’ (qv) means working under WTO rules with arbitrary tariffs and regulations.

The European Commission manages the day-to-day business of the European Union (qv) on behalf of the European Council, and is effectively its civil service.  Its president is Jean-Claude Juncker and he appointed Michel Barnier to lead the Brexit negotiations.   Barnier’s first step, as mandated by the Council, was to agree within the EU 27 “the overall positions and principles that the EU will pursue“.  He understood that in any negotiation, the team that writes the drafts and controls the timescale usually has the upper hand. The UK’s failure to finalise its own detailed objectives before tabling Article 50 meant it gave up this critical advantage.

The Default date for Brexit is 29 March 2019.  It has also been agreed that if a Withdrawal Agreement (qv) is finalised, then a Transition Agreement (qv) could operate until 31 December 2020.  Unfortunately, many people have therefore assumed they can wait until 2020 before starting to plan for Brexit.  But as the Commission warned in its ‘Guidelines for Brexit Negotiations on 29 April 2017, “nothing is agreed until everything is agreed“. So No Deal also means no Transition Agreement.

The European Union is a treaty-based organisation of 28 countries.  As its website notes, it was “set up with the aim of ending the frequent and bloody wars between neighbours, which culminated in the Second World War“.  The UK joined the original 6 members (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) in 1973, along with Ireland (qv) and Denmark. Further expansions took place, especially after the end of the Cold War between the West and Russia.  At the suggestion of then UK premier Margaret Thatcher, it was agreed to establish a Single Market (qv) and Customs Union based on 4 key freedoms – free movement of goods, services, people and money – and this transformed trading relationships across the continent.

The Financial Settlement or ‘divorce bill’ covers the costs of the programmes that the UK agreed to support during the period of its EU membership.  Like most organisations, the EU operates on a pay-as-you-go basis and only charges member countries as and when bills actually come due.  The UK calculates this to be between £36bn – £39bn (€40bn – €44bn), depending on the assumptions used.

The Labour Party want a General Election if the government fails to get Parliament’s approval for its proposed Withdrawal Agreement.  But there is considerable uncertainty about what might happen next, if Labour won the election.  Some suggest Labour could renegotiate the deal, others that there could be a second referendum. Either option would mean a new government asking the EU to ‘stop the clock’ on Article 50. As a result, support is rising for the idea of a ‘People’s Vote’, or second referendum, as this might be more able to achieve all-party support. The European Parliament elections in May also complicate the picture as a referendum would apparently take 22 weeks to organise.

A Hostile No-Deal would be the worst of all possible outcomes. But Theresa May has warned Parliament that “without a deal the position changes” on the £39bn Financial Settlement, contradicting her Chancellor, Philip Hammond.  We do not know what would happen if the UK refused to pay, but one fears it could lead to a Hostile No-Deal if the EU then reacted very negatively in terms of future co-operation.

Ireland has proved to be a key sticking-point in the negotiations, as nobody wants to disturb the peace created by the Good Friday Agreement in 1998.  The issue is the potential need to reintroduce a border between Ireland and the North to secure the Single Market.  The draft Withdrawal Agreement devotes a full section to this issue, which remains a potential deal-breaker due to Brexiter concerns about N Ireland remaining in the Single Market and the UK remaining in the Customs Union. This expert Explainer from the impartial Institute for Government highlights the key issues.

June 2016 was the date of the referendum that voted to take the UK out of the EU.

Keeping the UK in “a single customs territory” with the EU after Brexit is a key feature of the so-called “temporary backstop arrangement” designed to avoid a hard border with Ireland.  It is intended to operate until a full free trade agreement is finalised between the UK and EU.  It was the most difficult part of the negotiations, and has provoked the most resistance from Brexiters.

Legal issues are, of course, a critical area in the negotiations as the UK currently operates under the jurisdiction of the European Court of Justice  (ECJ), and the UK wants to “take back control” to its own courts.  However, the Withdrawal Agreement confirms that the ECJ will have a continuing role under the Transition Agreement and potentially afterwards if the “backstop” is activated.

Tariffs on Materials and goods would be introduced between the UK and EU27 if there is a No-Deal Brexit.  Less well understood is that the UK’s trading terms would also change with countries outside the EU27, as the UK currently operates under more than 750 free trade and trade-related agreements negotiated by the EU – and it is unlikely that the UK could continue to benefit from them.

No Deal means that the UK would have to operate under WTO rules after 29 March.  This short Ready for Brexit video explains the complications this would create.  The WTO has also warned that the number of Technical Barriers to Trade “has grown significantly” in recent years, and these can often severely restrict trading opportunities. And EU laws would still have a role under WTO rules for all UK products sold into the EU27 under No Deal.  The EU Preparedness Notices, for example, also suggest there could be a ban on UK banks providing financial services as well as a whole host of other restrictions including on travel.

Preparing for Brexit.  My colleagues and I have set up Ready for Brexit. This is a subscription-based ‘one-stop shop’ and provides a curated Directory to the key areas associated with Brexit – Customs & Tariffs, Finance, Legal, Services & Employment, Supply Chain.  It includes Brexit Checklists; a BrexSure self-audit tool to highlight key risks; a Brexit Negotiation Update section linking to all the key official UK and EU websites; Brexplainer video on WTO Rules; plus news & interviews with companies about their preparations for Brexit.

Regulations can often be a much greater barrier to trade than tariffs, as they set out the rules that apply when products and services are sold in an individual country.  The EU never aimed to harmonise regulations across its member countries, as that would be an impossible task.  Instead it has focused on creating a Single Market via mutual recognition of each other’s standards, along with harmonised rules on cross-border areas such as safety, health and the environment.  Regulations are particularly important in the financial services industry, and many businesses are now relocating relevant parts of their operations into the EU27 so they can remain authorised to trade.

The Single Market seeks to guarantee the free movement of goods, services, people and money across the EU without any internal borders or other regulatory obstacles.  It includes a Customs Union, as this short BBC video explains, which seeks to ensure that there are no Customs checks or charges when goods move across individual country borders.  With a No-Deal Brexit, however, the UK will become a Third Country and no longer benefit from these arrangements.

The Transition Agreement covers the period after 29 March, and would allow the UK to operate as if it were still in the EU until 31 December 2020.  The aim is to give negotiators more time to agree how future EU-UK trade in goods and services will operate, and provide guidance for businesses on how the new deal(s) will operate.  But 21 months isn’t very long, as trade deals are very hard to do and generally take 5 – 7 years. The problem is that they create Winners and Losers whenever a market (large or small) is opened up to new foreign competition – and the incumbents usually complain.  The Transition Agreement will only operate if there is a Withdrawal Agreement and so would not happen with a No-Deal Brexit.

Unblocked, or frictionless trade, is a key aim of the negotiators.  Nobody really wants to go back to the pre-1993 world, before the Single Market arrived, when vast numbers of forms had to be filled in and lorries/ships sometimes stopped for hours for border checks.  As Honda explained in the summer (see chart) it could easily take between 2 – 9 days to move goods between the EU27 and UK without a Customs Union, compared to between 5 – 24 hours today.  The cost in terms of time and money would be enormous given that, as Eurotunnel told the Commons Treasury Committee in June, “Over the past 20 years, warehouses have become trucks rolling on the road“.

The draft 585-page Withdrawal Agreement was published on Thursday and sets out the basis for the future UK – EU relationship after Brexit.  The impartial Institute for Government has produced a expert summary of its key points.  But as the resignations have shown, the deal is contentious, with observers suggesting that MPs may vote it down in Parliament next month.

Zig-zag perhaps best describes the process that has led us to this point.  It began long ago when Margaret Thatcher resigned in 1990, as the catalyst was her position over European monetary union.  Her supporters ignored the key fact that the party needed a new leader if it was to have a chance of winning the next election,  and instead blamed Europe for their loss – soon styling themselves as Eurosceptics in her honour.  Fast forward through many zigs and zags  and as I warned in March 2016, – “Slowly and surely, a Brexit win is becoming more likely“.  We can doubtless expect many more in coming months and years.