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Allie's Brexit blog: January update

29 Jan 2018

Brexit paper cogs

With a new year comes new challenges, and it is unsurprising then that the relief which accompanied the December EU summit feels like a distant memory already. 

Moving onto phase two of the Brexit negotiations was always going to mean getting serious about the thorniest of issues – how to approach the future economic relationship between the UK and the EU. Putting  flesh on the bones of “a deep and special partnership”, and moving from aspirational principles to practical details is the IoD’s focus, alongside getting the transition period agreement nailed down by the end of Q1.

With this in mind, our Director-General wrote an open letter to the Prime Minister following the December summit - posing 12 key questions about the Government’s negotiating objectives for that end-state relationship. While businesses are only too well aware of the need not to reveal one’s negotiating strategy, we have long argued that this is a distinct issue from being clear about basic fundamental objectives. There are some black and white differences we feel need to be clarified about the UK’s starting approach to what it wants for this new relationship.

For example, companies need to know whether a new customs union is on the table or not - the absence of one clearly means rules of origin will apply to UK-EU trade. Rules of origin can end up making a tariff-free deal worthless for some businesses, as the cost of proving or adjusting supply chains to conform to origin threshold requirements in a free trade agreement will be the same if not more than the cost of just paying the EU’s standard import tariffs for a particular product. So far there has been virtually no guidance from Government to business about preparing for rules of origin between the UK and its largest trading partner.

A new customs union arrangement would remove the need for worrying about the introducing of rules origin as well as customs declarations for trade with the EU –and the potential for checks and hold ups at the border. But it would likely mean that the UK continues to follow EU trade policy when it comes to tariffs – having access to EU trade agreements which cut and remove tariffs, but not having full control to do so itself.

 Companies also need to know whether the UK wishes to be outside EU’s VAT area or not, and whether it wants to move to a work permit style system for EU nationals in the UK. If so, the details may be up for negotiation, but the basic differences that moving towards these new systems entails are so stark for businesses that a simple yes or no answer can make a big difference in terms of planning.

We at the IoD are pushing to hard to get this basic clarity for members, as it is essential not only for firms to be able to be prepared for any and all eventualities, but also crucial to our own work making the case to governments and counterparts across Europe about getting a good deal for all sides. We expect the real crunch period to come at the March EU summit – when the EU-27 will lay down its own clear and detailed guidelines for the phase two negotiations. It’s clear that 2018 is the year when warm words will give way to hard talks – but that is in itself a blessing for tackling business certainty about the road ahead.  

Much of my focus therefore at the moment is on working with the Government to input the views of members as phase two priorities start to take shape. I sit for the IoD on the joint HMRC-industry body the Joint Customs Consultative Committee, which is of particular importance in discussing the new customs bill going through Parliament. Discussing the potential impact of new rules of origin on UK-EU goods trade and the different sectoral needs relating to our future relationship with the EU around alignment pertaining to standards and regulations is taking place with the a number of departments, particularly the Department for Business, Energy and Industrial Strategy. This is also why the Policy Voice survey mechanism is so crucially important for IoD members to be signed up to – it’s one of the key ways we are drawing on member opinions to inform these discussions.

The New Year also means my Brexit webinars are back up and running – we’ve just had our latest one looking at the developments around citizens rights in the negotiations and what it means for businesses with EU nationals currently employed. Forthcoming ‘Navigating Brexit’ events in February and March will be looking at the Irish question and the importance to companies of how data flows between the UK and EU in Brexit negotiations.

And my travel to IoD local and regional branches  to provide detailed updates on the negotiations as well as tips for business planning continues apace – Cambridge, Jersey,  Cardiff, Norwich, Yorkshire, the Isle of Man, and Belfast have all been on the agenda since my last blog. We are also upping the ante on reaching out to business group counterparts across Europe as negotiations start to focus on our future relationship with the EU. This will be a vital part of ensuring that “the best possible deal” is equally prioritised and informed by business leaders on the other side of the Channel as well – as the saying goes, there Is far more that unites us than divides us..even –and especially- after Brexit!


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