Deal done on phase one of the UK’s departure from the EU

Author

David Roberts, Invest NI Economist
Dec 12, 2017

After a fraught few days of final negotiations and redrafting, an initial agreement was reached on Friday on the ‘divorce’ aspects of the UK’s departure from the EU.

Nine months after Article 50 was triggered, this is an important step forward.

Citizens’ rights

On citizens’ rights, the deal largely maintains the existing rights of EU nationals in the UK (and UK nationals living in the EU). In addition, Northern Ireland citizens will retain the right to hold a UK passport as well as an Irish one and thus retain rights as EU citizens to live and work across the EU. Whilst there are some details to be thrashed out, this agreement should go a long way to eliminating the uncertainty which has faced many EU nationals since the referendum vote in June 2016.

UK’s financial obligations to the EU

Progress was also made on the thorny subject of the UK’s financial obligations to the EU. A set of principles has now been established which will enable a final sum to be determined, although it will be a number of years before the precise number is confirmed (officials estimate between £35bn and £39bn at current exchange rates). Positively, the UK will continue to participate in EU programmes up to 2020 and, as the UK Government has already signalled, the option has been retained for the UK to engage in EU R&D and other programmes post-withdrawal.

Northern Ireland/UK/Ireland relationship

The Northern Ireland/UK/Ireland relationship has been the most complex issue of the first phase of the negotiations. The text in the agreement goes into quite a bit of detail. A number of existing commitments are re-affirmed, such as upholding the Good Friday agreement and continuing to support both North-South and East-West co-operation. Looking ahead, there is a guarantee that there will be no hard border after the UK leaves the EU Single Market and the Customs Union.

The guarantee of no hard border between Ireland and Northern Ireland is welcome, although there is no detail yet on how this will work in practice. Whilst there was much speculation in the media over the weekend on what the agreement meant for the ultimate outcome of the Brexit negotiations, inevitably, perhaps, the ambiguity of the initial deal means that greater clarity on the border issues will only be secured as part of the next phase of negotiations.

So, what happens next? The UK Government is clearly keen to accelerate the talks on future relations and a transition phase, although as the Chancellor Philip Hammond admitted last week, the Cabinet is still to discuss and agree the ‘end state’ it is seeking for the UK. For its part, the EU27 will also now begin to debate negotiating tactics and priorities.

On transition, the position should hopefully become clearer in the coming months. The UK Government has signalled a willingness to largely sign up to EU terms for a two-year Brexit transition — including the continuation of EU law, budget contributions and free movement. If all of the terms are accepted, then a deal on this aspect could be concluded quite quickly – potentially in the spring of 2018. A prompt transition agreement would provide certainty to Northern Ireland business that a ‘cliff edge’ scenario will not transpire in March 2019.

The parameters of the future trading relationship with the EU should start to emerge in the first part of 2018 too. The UK Government has indicated an aspiration to reach agreement on a ‘model’ for trade relations by March 2018. Whether rapid progress can be achieved is impossible to say at this point. Donald Tusk, the EU Council President, said last week: “We all know that breaking up is hard but breaking up and building a new relation is harder.”

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