A week in the life of Brexit

Author

David Roberts, Invest NI Economist
Jul 19, 2018

On 12 July 2018, the UK Government published its long-awaited White Paper on The Future Relationship between the UK and European Union.

Weighing in at almost 100 pages, the White Paper is the most detailed set of proposals tabled so far by the UK Government. It covers the economy, security, data protection and other areas of co-operation.

The Economy

 
  • A free trade area for goods, including agri-food trade, which will avoid the need for customs and regulatory checks at the border.
  • The elimination of tariffs, quotas and routine requirements for ‘rules of origin’ (i.e. proving that goods being traded originate in the UK and are not merely transiting through the UK to the EU in order to benefit from zero tariffs.)
  • A common rule book for goods, harmonised with relevant EU rules. The UK will also seek continued participation in bodies that provide essential approvals e.g European Medicines Agency and the European Chemicals Agency.
  • The phased introduction of a new Facilitated Customs Arrangement involving a dual system where the UK mirrors the EU’s customs approach at its external border.
  • New arrangements for service sectors, providing regulatory flexibility and mutual recognition of qualifications. Barriers to cross border selling and setting up operations in other parts of the EU will be minimised.

The Facilitated Customs Arrangement is a novel and complex proposal which, if accepted by the EU27, will take a number of years to implement. Until then, it is likely that the UK will remain in a Customs Union with the EU.

And the proposals for the service sectors will not be able to replicate the current advantages of being in the EU Single Market. The UK Government recognises that the UK and the EU will not have current levels of access to each other’s markets.

Movement of People

The White Paper gives few clues on the future rules for EU citizens coming to work in the UK. Freedom of movement will end, although not until December 2020 assuming a transition deal is agreed.

A new UK migration policy is due to be set out in the coming months and it will be interesting to see whether preferential arrangements are agreed for EU citizens or specific sectors as part of the overall economic partnership with the EU.

Becoming UK Law

In the days following the publication of the White Paper, attention switched to Westminster and the process of translating various aspects of Brexit into UK law. Four amendments to the Customs Bill were accepted by the Government including provisions to ensure that:

  • there should be no border in the Irish sea;
  • the UK could not collect tariffs on behalf of the EU; and
  • the UK was outside of the EU’s VAT regime.

A heated debate has ensued subsequently as to whether these changes undermine the White Paper proposals or not. Full clarity is unlikely in the near future with a lot more detailed negotiation still to come.

For NI businesses, the VAT provision in particular is one where the ultimate outcome will be very important, given the potential for additional costs and paperwork if the UK moves outside of the EU regime.

 

Withdrawal Agreement

The spotlight on the future UK/EU relationship over the last fortnight has partly obscured the most pressing Brexit issue - agreeing the remaining aspects of the Withdrawal Agreement, particularly the ‘backstop’ provision to prevent a hard border between Northern Ireland and Ireland.

Significant progress is needed on the backstop and the other outstanding issues in the coming months to enable the Withdrawal Agreement to be finalised before the UK’s official departure from the EU in March 2019. This is the area to keep an eye on – only once the Agreement is finalised can a transition phase commence and the real detail of the future relationship between the UK and the EU be negotiated.

 

What should you do?

So, whatever the direction the Brexit process takes in the months ahead, our advice remains the same – look at the key aspects of your business, such as your supply chain and your markets, and take action now to Brexit proof them as fully as possible.

As we get more clarity and certainty on the nature and type of Brexit that will take place, we will provide more guidance and information on Think Ahead to ensure you are equipped to address the challenges and exploit the opportunities ahead.

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