Brexit update following EU Council meeting on 20 October 2017

Author

David Roberts, Invest NI Economist
Oct 23, 2017

When the UK Government triggered Article 50, one of the 24 hour news channels started displaying a Brexit countdown clock across the screen.

Fast forward almost seven months – where has the process got to and what do we know?

Five rounds of negotiations have been held between the UK and EU but progress has been uneven. Lots of papers have been produced on both sides but much of the content relates to high level principles and objectives rather than the specific details which are needed to fully answer the myriad of Brexit-related questions.

The EU has stuck to a phased approach to the negotiations – first secure agreement on the terms of separation (including how the border between Northern Ireland and Ireland will work) before moving on to trade and future relationships.

At the EU Council meeting on 20 October, the other 27 EU Member States agreed unanimously that progress had been made in the three key areas for Phase 1 of the negotiations:

  • Citizens rights – the UK Government has committed that EU citizens living lawfully in the UK will be allowed to stay and will continue to have access to healthcare, pensions and other benefits as they do currently. There are a number of important points to finalise but agreement here appears close. This agreement will provide the certainty that individuals and employers are looking for.
  • Northern Ireland and Ireland – there is a consensus on the need to maintain the Common Travel Area and to avoid a hard border. The UK Government has committed to no physical infrastructure at the border but there is no agreement yet on the technicalities. The EU has invited the UK to provide more detailed proposals on how the arrangements will work in practice.
  • Financial obligations – the UK Government’s commitment to honour its financial obligations was seen as a positive step by the EU although the other Member States are still looking for clarity on how issues like funding commitments made for projects beyond March 2019 will be addressed. In contrast to a lot of the coverage in the UK media, this is less about a specific figure that the UK will pay at this stage and more about agreeing the scope of what the UK’s payments will cover.

It was concluded, however, that sufficient progress had not yet been made to move the negotiations to Phase 2. With both sides seeking to accelerate the negotiations in the coming weeks, the next assessment of whether the talks can move to Phase 2 will be made at the next EU Council meeting in mid-December. In the interim, the EU agreed to kick off preparatory work on new trading arrangements.

The other key recent development is the UK’s request for a time limited transition period post March 2019. It is now widely accepted that it won’t be possible to finalise a post Brexit trade deal in the next 18 months – there are too many rules, regulations and agreements still to be worked through. The UK Government’s position is that any transition period should mirror EU existing rules and regulations in effect, a continuation of the status quo for, in all likelihood, two years until 2021.

Securing a transition deal with the EU will be a very positive step for NI businesses giving them more time to prepare for life outside the EU and ensuring that they don’t have to make two sets of changes. This will be a key aspect of Brexit to keep an eye on in the coming months.

It is important that businesses don’t hold off on looking at how Brexit may affect them. Firms should identify areas of potential impact/opportunity and develop suitable scenario plans, whether these relate to customers/markets, suppliers, employees or the host of other issues which Brexit may impact on. Our Think Ahead section has a range of advice and support for businesses to help them navigate the post Brexit landscape

Looking ahead, it will only be once the terms of the separation, and any transition period, are agreed between the UK and the EU that the detail of a future economic relationship can be fully discussed and concluded. Theresa May’s speech in Florence on 22 September highlighted that the UK was not looking for an ‘off the shelf’ model such as the trading arrangements used by Norway or Canada. It is hoped that the parameters of this new UK-EU economic partnership will start to emerge in early 2018, providing some certainty to businesses as they look to make key investments and other decisions.

Clearly, delivering Brexit is a hugely complex task. Whilst the clock is ticking down to March 2019, with goodwill on both sides and a greater momentum, there is the potential for much greater progress to be made in the coming months.

We will continue to work closely with officials in the Department for the Economy and other stakeholders to ensure that the voice of Northern Ireland business is heard in the negotiations and the development of new agreements and policies.

So far, Brexit has not resulted in sudden changes for NI businesses, although the potential range of final destinations or outcomes remains broad. As the number of scenarios reduces, businesses will be better able to plan and make more fully informed decisions. We will continue to enhance our advice and support as the Brexit picture emerges so that businesses are well-equipped for the challenges ahead.

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