31 January came and went with the tapping of a gong – perhaps fittingly at midnight EU time – and the world has not fallen apart. And why would it? From a business perspective, we have just completed the prelude and much of the real work is yet to be done. The remainder of 2020 will be given over to a negotiation which is designed, we hope, to achieve a new relationship – and notably a new trading agreement – between the EU and the UK.
Initial signs have not been too positive, but neither have they been especially negative. Both sides have set out a view of their requirements from a deal. Much has been made about the differences between the two sets of objectives presented. Issues as various as fishing rights, regulatory alignment and state aid regimes have been identified as particular challenges. The EU has focused on the need to have a level playing field to avoid unfair competitive advantages accruing to either side in a post-Brexit scenario, ensure non-regression on environmental and social standards and to protect worker rights. UK Prime Minister Boris Johnson has said that he sees no need to encumber a simple free trade agreement with links to EU rules on competition policy, subsidies, social protection or the environment. So, the battle lines appear to be drawn.
However, this is all to be expected. What is far more important is whether we see the professional negotiators in the UK and the EU engaging quickly and meaningfully in the detailed and hard work that goes into crafting a formal and comprehensive trading agreement that covers both goods and services. The process needs to include both political feedback and a good mechanism to hear the needs of individual sectors. I believe that we are going to see the discussions recede from front-page news and get into the minutiae of a number of key sectors: financial services, technology, agri-food, pharmaceuticals and medical, and energy to start, with many more to be considered. Getting this right by minimising damage to key sectors, protecting jobs and maintaining continuity in the newly separated markets will be a significant challenge.
Brussels is world-class in managing trade agreement negotiations. The UK Civil Service is also an exceptionally talented team. The challenge they have is to create a comprehensive agreement in a very short period of time. I have two suggestions: first, business leaders need to be advocating now for their sector concerns to make sure that they are on the agreement roadmap. The new Government needs to be very active with our European partners in advocating for these concerns. Second, there is a very real risk that certain sector issues will not be dealt with comprehensively in a truncated negotiation process. For that reason, all businesses need to prepare for a ‘no deal’ style default in their sector and closely monitor developments in the coming months.
This article first appeared in Briefly
a weekly eNewsletter from Accountancy Ireland on the 7th February 2020.