Last week marked the two-year anniversary of the historic Brexit vote and this week’s June European Council will be the culmination of a turbulent month for the UK’s Brexit journey. Below is an overview of the key developments.
Withdrawal Bill Passes Parliament
After much wrangling and Tory-party infighting, the European Union (Withdrawal) Bill was finally passed by both Houses on 20th June and now awaits the final stage of Royal Assent when the Bill will become an Act of Parliament. Royal Assent has yet to be scheduled.
At the heart of the debate was a proposed amendment by Dominic Grieve to guarantee that Parliament would have a ‘meaningful vote’ at the end of the Brexit talks – which the Government was opposed to. At the last minute, Mr. Grieve backed down after receiving assurances that that MPs would be given Parliamentary time for a debate in the event that Mrs May’s exit talks break down. In the end, the Government won by 319 votes to 303, a majority of 16, despite six Conservative MPs voting against the Government.
The Government’s assurances would provide Parliamentary time for MPs to ‘table motions and debate matters of concern’. Whilst this stops well short of the legal assurance Mr Grieve had initially sought, he claims that it is sufficient for MPs to have a say and that the PM could not ignore the will of the Commons. However, like so many of the compromises struck by the Government in recent weeks, there is room for differing interpretations by both sides of the Conservative party. In effect, there has been another fudge and the can has been kicked down the road once more, thus delaying the crunch point which will eventually come.
UK Edging Towards a Softer Brexit?
Some believe that the crunch point could arrive as early as July when the Customs Bill is due before Parliament. Again, there are likely to be Tory rebellions as attempts are made to keep Britain within an EU Customs Union. The Labour Party’s stance is that the UK should form a customs union with the EU and to strike a deal on retaining access to the Single Market but not as part of the European Economic Area (EEA) which requires the free movement of people. There is also emerging evidence that Downing Street is pursuing a similar trajectory, although the PM continues to play a delicate balancing act to keep all wings of her party on-board.
In recent days, several business organisations (e.g. Airbus, BMW, Honda and Society of Motor Manufacturers and Traders) have warned about the damaging implications of a hard Brexit and the potential for plant closures. Some have stated that the UK needs to continue to be part of a customs union with the EU as a minimum and that a deal should be struck to enable the UK to retain Single Market benefits. Mrs May has promised that the Government will ‘always’ listen to the voice of business. Meanwhile, the Chancellor has been warning that there will be no money for defence and other public services if the economy does not grow. Presumably, the promised increase in NHS funding falls outside of this warning.
There are also rumblings that other business groups are privately conveying similar messages to Government including several agri-food organisations. This suggests that the PM is veering towards a softer form of Brexit. It is expected that the Government White Paper scheduled for publication after the Chequers Brexit meeting next week should provide some more clarity. However, based on previous form, another fudge which permits multiple interpretations of what the proposals might mean, remains the likelier outcome.
EU Exerts More Pressure
As the Westminster wranglings continue, the real negotiation between the UK Government and the EU is taking a back-seat based on British media coverage. Brexit is a core focus of the European Council taking place on 27th-28th June. European leaders are likely to issue stark warnings about the possibility of negotiations breaking down meaning that the transition period – considered vital for stability – might be in danger. Whilst the EU is keen for the Withdrawal Agreement to be finalised ahead of the October European Council, some are expecting that this timeline will slip. The possibility of a special November Council has been mooted or similar to the Phase I negotiations last year, it may be December before an agreement is reached.
As part of the Withdrawal Agreement, the UK is pushing for the framework for the future relationship to be set-out in as much detail as possible. In the negotiating time that remains, this is increasingly difficult to achieve, especially given what the UK Government has proposed thus far has been largely rejected by the EU. The more likely outcome is that a general statement on the framework of the future relationship will be outlined in vague terms with the detail to be decided during the transition period.
Given the lack of progress in Phase II of the negotiations, the possibility of the Article 50 process itself being extended by a few months cannot be ruled out. This would require unanimous agreement by both the EU-27 and the UK. That said, the appetite on both sides for a significant extension is limited. This scenario would only come to pass if there was sufficient evidence that the negotiations on a Withdrawal Agreement were nearing a successful conclusion and that there was enough visibility of what the future UK-EU relationship might look like.
What Should a Brexit Landing-Zone Encompass?
As previous articles have mentioned, it is crucial that the UK and the EU gets Brexit right so that any upheaval is minimised. If this requires a short extension to the timelines so be it. It is high-time that the main negotiations with Brussels takes centre stage. Given the UK’s commitments on maintaining a frictionless border between Northern Ireland and Ireland and business needs for stable trading relationship with the EU, a customs-union type arrangement with the EU and a regulatory equivalence agreement that delivers most of the benefits (and obligations) of the Single Market should be the way forward. This could potentially be catered for under an Association Agreement between the UK and the EU as has been suggested by both European and UK Parliamentary Committees in recent months. For UK agriculture, this would be the best means to secure continued access to its largest export market whilst safeguarding British farmers, to a large extent, from cheaper third-country imports.
Admittedly, this will require UK compromises in terms of free-trade agreements with non-EU countries, particularly for goods. However, it must be remembered that the EU has made major progress in agreeing trade deals with Japan and Canada recently whilst talks with Mercosur, Australia and New Zealand are continuing. If UK goods manufacturers could have access to such trade deals as part of a customs-union type arrangement with the EU, this would still enable a ‘global Britain’ to emerge. It could also offer the UK the potential to strike services-focused trade deals separately. However, the UK would still need to offer something in return. This could potentially take the form of limited import quotas, including for agricultural goods, although the EU is likely to be heavily opposed to such a move.
Regarding EU compromises, it is becoming evident that in return for a close association with the UK, some concessions will have to be made on free movement as it currently stands. It is worth recalling that the key issue which tilted the UK towards Brexit was controlling immigration and a way will have to be found to address this (or be seen to address it). The Common Travel Area with Ireland solves most issues relating to a frictionless border on the island of Ireland. The recent UK proposals on the future of EU migrants already resident in the UK (see separate article) provides much needed clarity for both immigrants and employers. Potentially some form of a preference scheme which would allow prospective EU migrants to freely travel to the UK to seek work for up to 90 days, as is the case for EU/EEA migrants in other EU countries might be a way forward.
Implications for Agri-Food Businesses
A softer form of Brexit, as outlined above, would go a long way towards ensuring a level playing field for UK agriculture and its ability to safeguard access to EU markets whilst limiting potentially damaging competition from non-EU countries which are not subject to the same regulatory standards and policy-related costs (e.g. National Living Wage) as UK producers.
Undoubtedly issues would remain but these could be ironed-out during the transition period which needs to be as long as necessary in order to get Brexit right. At the same time this period should be as short as possible so that the UK avoids a purgatory-like existence as a rule-taker with no influence.
