Friday, 12 January 2018

What if "no deal" Brexit? Getting hold of fog.

Getting hold of fog
Prior to the recent government "reshuffle" there was some talk that the Prime Minister was to appoint a Cabinet Minister for No Deal Brexit - The Telegraph 7th January.   No such specific appointment was made but the Ministerial team at the Department for Exiting the EU has a Parliamentary Under Secretary of State (Mr Steve Baker MP) with responsibility for "contingency planning" though we are not enlightened further as to what exactly those plans entail. 

The reluctance of the UK government to share information is, at least in my view, a lamentable state of affairs.  Even the "Sectoral Analyses" were only shared with MPs after the 7th November Humble Address and even then they were issued with "Sectoral Views" removed and MPs were allowed to see them only in a private room - BBC News 14th December 2017.  On 21st December, the House of Commons Exiting the EU Committee published 39 reports - Parliament 21st December.

The European Commission has issued a number of Notices to Stakeholders, explaining in detail how things would change in terms of UK trading and legal arrangements in the event of no deal. The full list of Notices may be seen via European Law Monitor -  HERE - and companies are advised to read those that affect their industry and sector.  Transport is one sector that will impact on almost every other sector.

It was reported that David Davis MP consulted lawyers over the EU's preparations for a no deal Brexit claiming that such planning is harming British business.  In a latter to the Prime Minister seen by the Financial Times, Mr Davis pointed to EU "measures" that could jeopardise existing contracts or force British companies to decamp to the continent if the UK leaves the EU without a deal.  Mr Davis said in the letter that he would ask the European Commission to revise its guidance to business so it highlights the potential for a future transition and trade deal but this demand drew accusations of hypocrisy from some MPs given that UK Ministers have emphasised the extent of their own no-deal planning - see Financial Times (£).

Work on "no deal" was undertaken by the House of Lords EU Select Committee - Report - Brexit: Deal or No Deal - December 2017.   The Summary of Conclusions and Recommendations (page 44) notes:

1.  A complete ‘no deal’ outcome would be deeply damaging for the UK. It would bring UK-EU cooperation on matters vital to the national interest, such as counter-terrorism, police, justice and security matters, nuclear safeguards, data exchange and aviation, to a sudden halt. It would place the
status of UK nationals in the EU, and EU nationals in the UK, in jeopardy, and would necessarily lead to the imposition of controls at the Irish land border. (Paragraph 48)

2.  The wider economic impact of an abrupt departure from the EU single market and customs union, and the adoption of WTO conditions for trade, would be felt across a range of sectors, including financial services, the agri-food sector, and aviation. It would have a particularly disruptive impact on
cross-border supply chains. The short-term impact on trade in goods would also be grave: the UK’s ports would be overwhelmed by the requirement for customs and other checks. There is simply not enough time to provide the necessary capacity, IT systems, human resource and expertise to deal with
such an outcome. (Paragraph 49)

3.  While the evidence we received focused on the impact on the UK, no deal would also have a damaging impact on the EU. It too would feel the negative effects of a loss of trade with a major trading partner, and restrictions on the movement of goods and services, new customs checks and the breakdown of aviation arrangements would be mirrored on the EU side. In addition, the EU would feel the loss of police and security cooperation, scientific and research collaboration, and of access to the City of London as a motor of the EU’s financial services industry, and to the City’s capital markets.

Brexit will take place at midnight (CET) on 30th March 2019 and, at that moment, all EU primary and secondary law will cease to apply to the UK which will become a "third country."  With just over 14 months to go, British business needs to plan for this situation and this exercise is rather like trying to get hold of fog!  The one clear things is that a "no deal" Brexit would be, as the House of Lords Committee concluded, deeply damaging for the UK.   At least the EU Commission has taken the trouble to set out its view as to the position for a number of sectors.  It is to be hoped that forthcoming negotiations will result in a more positive outcome but, short of not going ahead with Brexit, the UK will never again enjoy terms as favourable as those it enjoys in its present day full membership.

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