Will the UK Government’s “no-deal” guidelines help business prepare for a jump into the unknown?

The European Commission sent out a warning notices to the 27 nations that will comprise the post-Brexit European Union together with their businesses - large and small - and some 450,000 EU citizens.  Having looked at the impact of a no-deal Brexit – they called it a “cliff-edge”.

From tomorrow, we expect the UK Government to publish complementary guidelines for businesses and citizens that will help them to assess and prepare for Brexit.  Said to be “a set of about 84” guides, let us hope that they are as clear and precise as the EC series of 68 guides published earlier this year. 

The EU documents spelled out the consequences of failure of the Brexit negotiations to reach an agreement – or if an agreement coming too late to complete the complex multiple approvals and ratification processes.   In either of these events, the UK crashes out of the EU in exactly 219 days at the time of writing - 29 March 2019.

Press reports today (22 August 2018) have noted that it hasn’t been an easy process - with much discussion about the contents of the guidelines.  And if the reports are to be believed, there are still 15 that are still under discussion and far from ready.

Based on the EU's 68 guides, Brexit Partners have analysed and reported on many of the impacts from both a UK and EU remaining nations perspective under a no-deal scenario.  As such, we can fully appreciate why so many institutions have reached the conclusion that they need to plan for stockpiling and delays at customs frontiers.

A no-deal is the default situation from both sides.  The EU as a statement of the obvious, and the UK as the choice of the Government. 

For the EU, it is a simple matter of striking the UK off the list of nations signed up to the Treaties, Laws and Regulations that comprise the European Union.  There are no changes to the political or operational frameworks needed under a no-deal – the entire set has passed all the constitutional requirements - but will now apply to 27 instead of 28 states.

The 68 EU guides went so far as to include drafts of the reworded Regulations moving the status of the UK to a ‘third country’ – that is with no rights of freedom of movement of people, goods, services and capital – unless there are specific bi-lateral agreements in place.

The UK, on the other hand, has to negotiate a series of bi-lateral agreements to modify the ending of the can and then construct a new framework. 

The fact that guides are to be issued dealing with a no-deal scenario – together with the visit this week of Dominic Raab, UK Brexit Minister, to Brussels to meet Michel Barnier, EU Chief Brexit negotiator - prompted me to look back at the Parliamentary record for the afternoon of 24 July 2018.  This followed the publication of the White Paper on the Withdrawal Agreement earlier that day.  You can find a link to the full text and White Paper, below. 

The White Paper was based on the terms agreed by Cabinet as representing a ‘good deal’ at their Chequers meeting.  Terms which have already been dismissed as unworkable and unacceptable by the EU.

In the 4 weeks since the White Paper was published, the odds of the UK failing to secure an agreement that passes the Prime Minister’s criteria for a ‘good’ deal – based on the oft repeated statement that: “no-deal is better than a bad deal” – have fallen.

Studies from academic, business groups, financial analysts and think-tanks – and endorsed by Government Ministers are now consistently pointing towards a no-deal scenario.

Britain works closely with the EU in a huge number of areas, including those as diverse as medicine testing, broadcasting, consumer protection, recognition of each others’ qualifications such as driving licenses, and the transportation of livestock.

Some of the so-called technical notices are expected to be wide ranging, covering issues as broad as financial services, climate change and company law – whilst others will focus on specific issues such as travelling abroad with pets.  The documents will be written in a ‘civil-service’ neutral tone and style to avoid accusations that the government is fanning the flames of ‘project fear’.

What is evident is that the third of businesses (per our earlier industry analyses) that believed they will be totally unaffected by Brexit need to think again.  One senior Brexit commentator has gone so far as to say that Executives and Boards who have not sufficiently prepared for Brexit and whose organisations are adversely impacted will stand accused of ‘dereliction of duty’.  The publication of the guides removes the last defence they may have had of not being in a position to know the consequences.

Background

Liam Fox, International Trade Secretary put the probability of a no-deal Brexit at “60-40”.  His remarks added to concerns from the Governor of the Bank of England, Mark Carney who rates the chances of a no-deal Brexit “uncomfortably high”.  Sterling has fallen since these statements and Investment Advisors on BBC Radio 4 believe that this is due in some significant measure to the threat of a no-deal.

Meanwhile the EU has reacted to criticism from Fox that European Commission “intransigence” was making it odds on for a no-deal Brexit.  The EC’s rebuttal statement makes its position clear:  negotiators are working “day and night, 24/7, for a deal”.

On balance, when trying to assess relative strengths of negotiating positions right now - it feels like the EU has the strongest hand.

The Withdrawal White paper has little detail of the process by which the Agreement becomes UK law.  There was some additional but still limited clarification in the answers to some searching questions from MP’s.  Whether the eventual scope of the Withdrawal Act is a no-deal - or will be able to include some specific areas of bi-lateral agreement – Scottish Northern Ireland politicians are feeling that they are being swept aside as time runs out to complete the Brexit negotiations and preparations. 

Nicola Sturgeon, Scotland’s First Minister, has said that crashing out of the EU without an agreement as “utterly unacceptable”. She also warned of the growing and equal danger of what she dubbed a “blind Brexit” - an outcome whereby the UK secures a withdrawal agreement - but with only a “vague blueprint” for a future.  “Parliament cannot be asked to make the decision on withdrawal without details on what the future relationship will look like,” said Sturgeon.

Ms. Sturgeon also picks up the EU’s step into the unknown analogy:  “With the Chequers proposals falling flat, even if a withdrawal agreement can be secured, there is a very real risk that we end up with a blind Brexit – which will see the UK step off the cliff edge next March without knowing what landing place will be.”

Talking of jumping into the unknown…

… Another 'no joking' matter.  Last week, former Brexit Minister, Steve Baker - who quit as a minister in the Department for Exiting the European Union last month – Instagram posted that his parachute failed to open during a skydive on holiday in Portugal.  He performed an emergency landing on a golf course in the Algarve after a “fast spiral dive” forced him to open his reserve parachute.

He’s the one pictured above with his reserve parachute!


 
John ShuttleworthComment