ANALYSIS: The general election delivered a mandate for Brexit, but not an end to uncertainty
8 min read
Boris Johnson's convincing majority put an end to the parliamentary drama, but can he "Get Brexit Done" by the end of the year? Laura Hutchinson explores the possibilities ahead
“Get Brexit Done”. This simple slogan delivered Boris Johnson the largest Conservative majority since 1987, and a clear mandate. Now, nine months and three delays post the original exit day, the UK will be leaving the EU at the end of the month and entering into a transition phase.
This will be where the real work starts.
In 11 months, the UK intends to negotiate an ambitious, dynamic Free Trade Agreement with the EU and an agreement on the future relationship. The EU currently accounts for 50% of the UK’s trade – whatever the outcome on 31 December 2020, the UK economy will fundamentally change. This year will be one in which our trading relationships and international standing will shift, and there will be almost no opportunity for Parliament to steer the process.
The electorate have given the Government a blank cheque for Brexit, but without firm detail on how Johnson intends to cash it, businesses cannot hope for certainty in 2020.
While the UK will cease to be a member of the European Union at 23:00 GMT on 31 January 2020, the majority of people in the UK will notice very little change as we enter the transition period. The UK will still abide by EU laws and standards and make a financial contribution – although we will no longer have any influence over these laws, standards or key decisions. For this period, the country will become a ‘rule taker’.
The prime minister’s assertion that Brexit will be done this month is inaccurate – the need to hastily negotiate and ratify an arrangement on the UK and EU’s future relationship by the end of the transition period will dominate government, if not parliamentary, time. For such an extensive and complex agreement, covering trade, security, data, environment, financial services, aviation and immigration, it would not be unreasonable to expect negotiations to take several years. However, emboldened by a new majority and constrained by a manifesto pledge, this Government intends to complete these negotiations in less than 11 months.
The negotiating frameworks may offer some clarity on what these future arrangements could look like. While the UK government is yet to publish its framework, the 2019 manifesto and the UK/EU political declaration suggested the general direction and goals.
The prime minister has consistently stated that his Government will seek an ambitious and dynamic close trading relationship with the EU, but one which sees the UK leaving the customs union, single market and jurisdiction of the European Court of Justice in totality. Throughout the campaign, Johnson spoke of a “Canada style trade agreement” – a commitment critical to Nigel Farage’s decision to stand down Brexit Party candidates in 317 seats. However, it is far from certain whether such an ambitious arrangement can be completed within such a narrow, self-imposed timeframe.
The EU/Canada deal took five years to negotiate and two years to ratify. A similar one with UK/EU will be more complex due to the geographical closeness of the two sides, the scale of trade (UK exports to the EU account for almost 50% of our trade, Canada’s is closer to 10%) and the dominance of the services sector in the UK.
The EU will publish a negotiating framework in the coming weeks. It is no secret, however, that it would prefer close alignment and robust level playing field arrangements on state aid, environmental standards, labour and competition if it is to grant the UK tariff free, frictionless trade. The integrity of the Single Market will again be a red line for the EU – this will prove significant for the UK and our main industry, financial services.
The scale of the Conservative gains on the 12 December means that Parliament’s role and influence has been significantly reduced when it comes to Brexit. There is now no doubt that the Withdrawal Agreement Bill will pass unamended by 31 January 2020. The size of his majority has emboldened Johnson to remove key elements relating to Parliamentary scrutiny from the Bill. Parliament will no longer have a say over an extension to the transition period, or the opportunity to give its approval for the terms of the UK’s negotiating mandate or future relationship treaty.
However, a common misconception is to assume that the Government’s majority gives the UK a stronger hand in negotiations during the transition phase. The EU’s red lines and objectives will remain the same, regardless of whether it is negotiating with a minority or majority UK government. The reality may in fact be that, due to Johnson’s domestic strength, the EU is cautiously optimistic that he is more likely to agree to further concessions around level playing field arrangements and closer alignment, as the prime minister is no longer beholden to the European Research Group. As the final protocol on Northern Ireland showed, the prime minister is capable of forsaking small but influential groups in Parliament and adopting positions which he had previously declared unpalatable.
If the UK Government is serious about leaving with an agreement in place by the end of 2020, then the EU will expect significant concessions in return for expediency.
Unfettered access to the Single Market and free and frictionless trade will require close alignment on a wide range of areas, and the EU will expect the UK to give significant concessions in return for such access. For example, in return for access to the Single Market, the EU requires Switzerland to relinquish some sovereignty and adopt various provisions of EU law. In return for access to EU security and policing databases, the UK may have to subscribe to the jurisdiction of the European Court of Justice in places. Fisheries is also an area the EU is likely to expect the UK to concede on, pushing for continued access to UK waters.
There have been suggestions that the time pressure could be alleviated by offering a staggered approach to negotiations. A number of EU countries reportedly would agree to a ‘step 1’ trade agreement by 31 December, in which an ‘off the shelf’ deal was signed off – before fleshing out further details pertaining to other sectors from 2021. However, the EU would still expect binding concessions on alignment before agreeing to such an approach.
Regardless, uncertainty will prevail throughout 2020, with next 12 months dominated by intense and complex negotiations. Unfortunately for Brexit-watchers, it is unlikely that the UK Government will offer a running commentary on progress.
Without clarification on what the UK and EU are both willing to concede on, businesses will again be forced to prepare for a multitude of opposing scenarios simultaneously. Without clarification on immigration and visas, the skills crisis will likely worsen in key sectors. Without clarification on tariffs and checks then businesses will be unable to prepare effectively for any interruption or change to their operating model and supply chain.
There will be those in Government who will seek to gain certainty by prioritising a deal with the United States, but this should be treated with extreme caution. 2020 is an election year in the US – a UK trade deal will not be a priority for US President Donald Trump. Even if a US/UK trade deal is expedited then this will present further confusion and change for UK businesses as barriers and standards will have to be lowered significantly in order to compensate for the loss of trade with the EU that such an agreement would guarantee.
The threat of no deal will also remain high on the agenda for business. The 11-month timetable the UK has locked itself into is extremely ambitious and increases the possibility of the UK leaving without a deal, resulting in severe disruption and adjustment across every sector. If a shallow and basic deal is agreed by the end of 2020, then uncertainty will remain for a number of sectors not covered in such an agreement. It is unclear whether they would revert to WTO rules in the interim and the staggered approach would undoubtedly impact their ability to engage in anything other than short term or crisis planning.
It is unclear at what point the UK Government will begin issuing advice to businesses on what steps they should be taking, but it is very likely that most businesses will only be able to afford to make such significant preparations or mitigating overhauls to their working practice and operating models once.
After four years of uncertainty, the Government needs to give businesses the confidence to begin strategically planning for the long term again. This can only be accomplished by the Government being upfront, transparent and open to compromise throughout the transition period, in order to secure a comprehensive agreement which offers stability and certainty to UK business. Boris Johnson has secured his mandate for Brexit. With it comes responsibility: to restore confidence in our damaged political system by governing with pragmatism, not ideology.
Laura Hutchinson is Dods Principal Political Consultant specialising in Brexit and international development
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