What now for Brexit? The challenges and deadlines facing the UK

The European Union is no light-weight ingenue bargaining power – though the United Kingdom might prove to be. Certainly, the UK cannot match the EU’s size, power or clout. So where the talks will go during the year, how rough they will be and what sort of future UK-EU deal might emerge by December 2020 are key questions that lie ahead.

But it is clear now that, with the Withdrawal Agreement Bill (WAB) ­having passed its second reading before Christmas with a majority of 124, Brexit will happen on January 31. Before then, the House of Commons will finish passing the Bill; and the European Parliament is expected to give its approval, alongside the European Council. The huge act of folly that Brexit constitutes, whatever subsequent form it takes, will happen.

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Ominously, Prime Minister Boris Johnson moved quickly after his election win to amend the WAB to reduce parliamentary scrutiny of the upcoming EU-UK talks. And he will now do what he can to avoid openness in the process – though that, happily, is likely to be trumped by the EU’s own commitment to transparency (something less likely to be the case for UK-US talks).

But taken together with the UK’s relative lack of bargaining power, and the tricky compromises that will be necessary to get to any deal, we can expect to see many more dishonest and grandiose claims from the UK Government about where Brexit talks are going. There are no sunny Brexit uplands – but we will be told there are, alongside claims of Britain strutting the globe anew.

Challenging talks ahead

FROM the start of February, the transition period will begin. The UK, as a third country outside the EU, will stay for 11 months in the EU’s single market and customs union. This may ease the immediate economic pain of Brexit but it won’t remove it altogether.

The fact that Brexit has happened but uncertainty remains, the fact that any deal will introduce new trade barriers and friction at borders – all this will have a big impact, with investment delayed or made elsewhere. A bonanza of foreign direct investment is certainly not on the cards.

Johnson also amended the WAB to rule out asking for the one- to two-year extension of the transition period that the UK-EU deal allows for. This gesture politics both limits sharply what can be agreed in a year and reduces the UK’s bargaining power. A rapid deal will need many concessions.

And while Johnson’s self-imposed time constraint could be repealed, that looks highly unlikely – not least since any request to extend the transition has to happen by June.

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So by the end of the year, the UK will either have agreed some form of basic free trade deal with the EU, or will be facing a new No-Deal Brexit – our friend the WTO, cliff-edge Brexit has not gone away.

Both sides are expected to draw up and agree their negotiating mandates by the end of February so talks should start in March. And any deal will have to be agreed too by the European Parliament, so a final text will be needed, realistically, in November to allow for that. It’s a nine-month negotiation window or less. It could be a bumpy ride.

Fisheries, finance and level-playing fields

AND there are other deadlines within that period, not least on fisheries and financial services. The UK-EU Political Declaration, agreed last autumn, outlines the goals for the future relationship. It sets an end-of-June deadline to come to a new fisheries agreement, so it can be operational by the start of 2021.

So the neuralgic issue of fish is ­going to get tricky very quickly. The EU has used the mantra before now in the Brexit saga “no access to markets without access to waters”. The EU will be tough on this – and the timing is tricky. Agreeing a deal on fish ahead of one on trade may not help finding a compromise either.

The end of June is the deadline too for both sides to sort out financial services access to each other’s markets under so-called equivalence – a way the EU gives some partial financial services access, on its own terms and with the unilateral power to ­withdraw that access.

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And apart from financial services, a basic free trade deal is only, at best, expected to cover goods not services. Certainly, the dominant service sector – 80% of UK output – is going to be hard hit by Brexit. Yet ­serious talks on some limited openness to trade across a wide range of services is likely to be postponed ­until 2021 and beyond.

And if some of this sounds familiar from the last three and a half years of Brexit debate, so too will the arguments over tariffs, borders and regulations. The UK and EU say they want a free trade deal without tariffs or quotas. But the Political Declaration contains a string of tough statements on ensuring a level playing field as part of that: “… in the areas of state aid, competition, social and employment standards, environment, climate change and relevant tax matters.”

That doesn’t sound like the sort of freedom from EU regulation that Johnson and his band of Brexiters are after. And some trade experts suggest the EU will actually demand more than this – dynamic alignment of standards, so that the EU doesn’t increase standards over time only to be undercut by the UK. Where this will end up, in terms of tariffs or no tariffs, is unclear. But UK-EU trade in goods may take a bigger and quicker hit than some expect.

And whatever deal is done – if one is – the UK will be outside the EU’s customs union, which means goods crossing the UK-EU border will face customs checks (even in the absence of tariffs – rules-of-origin checks for a starter, to ensure goods coming into the UK from the US or China for instance cannot use the UK as a back door into the EU). And there will be regulatory checks too. The days of frictionless, just-in-time cross-border supply chains are set to be well and truly over by the end of the year.

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Meanwhile, there will have to be a separate set of talks on Northern Ireland given the deal done to keep the Irish border open. This means that goods being exported from Great Britain to Northern Ireland will be subject to customs tariffs and checks if they are “at risk” of going on to the Republic of Ireland. How this will all work in practice has yet to be agreed. And yes there will need to be regulatory checks too since Northern Ireland will stay effectively in the EU’s single market for goods.

Security, migration, transport and more …

ALL that is without mentioning security – co-operation on justice, criminal and counter-terrorism co-operation, data transfers, foreign policy, ­defence and more. Agreeing future relationships in all these areas is going to take more than a year. But there may need to be some form of interim agreements if crucial areas of interaction are not to be badly disrupted.

The UK has also been clear that free movement of people ceases at the end of the transition period. The Political Declaration aspires to avoiding visas for short-term visits – beyond that, little is clear. A comprehensive aviation agreement is needed too – and road haulage, maritime transport … The list goes on.

The Prime Minister wants everyone to stop using the term Brexit from next year. But it seems clear Brexit is going to be the big issue for years to come.

The UK is heading to a hard Brexit. It’s a Brexit that will see Northern Ireland in a different relationship to the EU than the rest of the UK. It’s a Brexit that looks like paying little attention to the interests, needs or views of the devolved administrations of Scotland and Wales.

As Theresa May infamously said, “Brexit means Brexit.” In the year ahead, it will be clearer what Brexit means, how damaging it is going to be, and that Brexit is not going to end any time soon.