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Why business is fretting over the Windsor framework

Good afternoon. Brexit is back on the front pages with the story of carmaker Stellantis (that’s Vauxhall to you and me, Peugeot if you’re French) warning that if the EU-UK trade deal isn’t tweaked it may be forced to close its factory at Ellesmere Port in north-west England.

The story, which relates to how the so-called ‘rules of origin’ requirements for cars will see EU and UK carmakers facing 10 per cent tariffs on their exports from next year, was entirely predictable. 

Indeed, it was talked about at the time the Trade and Cooperation Agreement was struck, but the industry didn’t want to sound churlish, so largely kept quiet about it.

This impacts both sides (since neither EU nor UK carmakers can reach those ‘locally made’ targets given the state of the battery supply chain on both sides of the Channel) but when you look at the relative position on battery factories, it’s clearly much more existential to the UK.

You can read about the issues, and whether the EU Commission will ultimately delay the deadlines here. (There is, of course, a much bigger story, which is EU and UK competitiveness in battery production vis-à-vis China.)

But I have two quick observations on the Stellantis story and what it tells us about the emerging new Brexit narrative.

First, the fact that the Stellantis threat over its UK operations led the BBC 10 o’clock news this week (when this has been an iceberg, lying dead ahead for the industry, for three years now) shows that Brexit is once again becoming a ‘live’ issue. News editors who until quite recently groaned at the prospect of another pointless Brexit story, now apparently perk up at the prospect. 

This links directly to my second observation, which is that this is because the shape of Brexit feels genuinely up for discussion now that the Johnson-Truss era has passed and the hardcore Brexiters are increasingly being ignored.

It is noteworthy that both Rishi Sunak (and Keir Starmer, were he PM) have made it clear the TCA should be tweaked for the sake of both EU and UK carmakers.

This could be applied as a very narrow fix, but it could also (to the right kind of politician) be used to raise much broader questions about how ambitious the UK should be in the five-year review of the TCA in 2025, and with EU relations more generally.

For now Starmer and Sunak are both still gripped by the same old cakeism — they’ll ‘fix’ the deal without joining the EU single market and customs union — but as the cars story will increasingly show, that’s pretty shallow thinking. 

Sir Keir wants to arrest the slow death of the car industry, but doesn’t want to join a customs union with the EU? Someone should ask him how compatible those positions really are — but they never seem to. 

Anyway, the point is that the door is starting to open to a new discussion and yes, I have written a book about what that might look like. (And apologies, I won’t do that plug every week but the discussion around Stellantis is worryingly narrow and the book is designed to pull the focus out a bit).

But all that is of preamble to my main point this week which is, given that today is local elections day in Northern Ireland, the looming list of technical challenges around the implementation of the Windsor framework deal. 

As my colleague Jude Webber reports here — these elections are a test of the Democratic Unionist party’s decision to keep boycotting the Stormont power-sharing executive because of Brexit, which the party says the Windsor framework deal still hasn’t addressed.

The deal has unblocked relations with Brussels (we’ll see on EVs, but the memorandum of understanding on financial services and a possible deal on Horizon Europe are in the offing) but the Windsor framework still needs to be delivered in practice.

When he announced the deal Sunak said that the new arrangement “removes any sense” of an Irish Sea border, which was obviously a careful choice of words. It hasn’t convinced the DUP yet, and business has started to interrogate what that actually means.

Broadly speaking, the trick of the Windsor framework was to put the (reduced) burden of the Irish Sea border back on to business and away from the consumer, so that Northern Ireland residents felt as much part of the UK internal market as possible.

To that end, this week the Northern Ireland Business Brexit Working Group, which represents 14 industry bodies in the region, has set out its concerns in written evidence to a House of Lords inquiry into the implementation of the deal.

The challenge facing business

The document is worth reading because it unpicks in some detail the challenges that businesses will still face.

For example, parcels being sent from GB businesses to NI consumers will still need a six-digit commodity code to enter the light-touch ‘green lane’ and give those customers the sense that they’re getting the same service as the rest of the UK.

Business has lots of questions over whether it might need to get in new software to run the system (costly for small businesses) and still awaits details on how a new authorised carrier scheme (trusted parcel carriers) will operate. 

It needs this information sooner rather than later, along with other aspects including VAT, veterinary medicines and the application of ‘tariff rate quotas’ for commodities other than steel. 

For industry, there is still uncertainty over the basic operation of the ‘red’ and ‘green’ lanes system designed to ensure that more goods can flow from GB into Northern Ireland with reduced paperwork.

But the uncertainty is such that Declan Gormley, the boss of Brookvent, an NI manufacturer of energy-saving ventilation systems, told the Committee that he reckoned many businesses would just use the red lane for goods ‘at risk’ of going into the EU. 

“The idea of trying to separate out or create channels to move goods, some staying in Northern Ireland and some moving on, will create another burden on the business,” he said. “A lot of businesses will probably take the view that it is just as easy to do it once and operate the red lane solution and move it on from there.”

That approach doesn’t work for big supermarkets, but they are also clamouring for operating details, with the first controls (on fresh dairy and meat products) entering into force in October this year.

‘Not for EU’

As we reported earlier this month, all companies will have to label products “Not for EU” for the entire UK market from October 2024, even if they don’t sell into Northern Ireland.

Retailers grudgingly accept this is better than the alternative — full export health certificates — but have voiced deep concerns that Whitehall (Defra, of course) is being way too slow in providing details of how this will work.

As Andrew Opie, the director of food and sustainability for the British Retail Consortium, told the Lords, the industry isn’t certain it can comply with the requirements of the Windsor framework by the October 1 deadline. “We do not have sufficient detail. We do not know how the processes will work,” he said.

I’m also told by horticulture industry insiders that significant complexities still persist on sending GB plants to NI consumers, including seed potatoes and other areas that the initial headlines around the deal claimed to have sorted out — for consumers at least.

Why bother about all this? Well, to be clear, the Windsor framework deal is a step forward — as industry groups acknowledge in their evidence — but there is real concern that (as we saw in 2021 when everything happened at the last minute, to disastrous effect) there will be too little information, too late to make it all work smoothly. 

The risk is that without the required operating information, businesses will unilaterally start to delist products because they cannot be sure of the rules for moving them. 

As the NI business groups said: “Our members are therefore concerned about capacity levels within the civil service, UK systems and businesses to implement significant change in such challenging timescales.”

Obviously, it’s really, really important that the Windsor framework works — and doesn’t descend into the kind of acrimony that has already so deeply soured Northern Ireland’s politics. There will be those looking to highlight the problems, not the solutions.

In the new spirit of EU-UK co-operation, the Windsor framework contains new mechanisms for consulting businesses jointly (rather than the UK and EU each listening to business separately and interpreting things differently). These new forums need to be made to work.

And business wants it to work. But given Whitehall’s manifest struggles in implementing post-Brexit bureaucracy — from farm subsidies to chemical regulations — there is perhaps understandable trepidation about delivering the deal on the ground.

As Stuart Anderson, the head of public affairs at the Northern Ireland Chamber of Commerce and Industry, puts it: “Let’s get this off to a good start, but the government needs to be honest and upfront with where businesses need to go.”

Brexit in numbers

In a recent edition I wrote about how Brexit voter identities had proved to be highly sticky since the 2016 referendum which intensified the political “inversion” of recent years where less well-educated and well-off voters — who previously voted Labour — switched to the Conservatives.

However, this week’s chart from Manchester university politics professor Rob Ford suggests that voter patterns are shifting once again after Labour bounced back in the Brexit heartlands at this month’s local elections.

“The electoral coalition which delivered an 80 seat majority in 2019 is unravelling,” writes Ford in an analysis of ward-level results on his Substack, The Swingometer. 

Ford identifies what he calls a “Brexit unwind” from the high water mark of “peak Brexit” at the local elections of May 2021 which saw a double digit swing from Labour to Tory in the most Leave-leaning seats. 

“The Conservatives have lost substantial support everywhere since 2021, but the average Con[servative] decline in the most strongly Leave wards is — at nearly 13 points — almost twice the 7 point fall registered in the most Remain wards,” he writes. 

The fascinating kicker is that when you compare these 2023 results to the pre-Brexit, pre-Corbyn era of 2015, it points to Brexit having a toxic legacy for the Tory party, deeply alienating those voters who would go on to vote Remain in 2016.

According to Ford’s analysis, in the most Remain ward the Conservative share in 2023 was 14 points down on 2015, while in the strongest Leave areas they were down only by one point. 

This points to Boris Johnson’s Brexit election coalition “coming apart at both ends”, Ford concludes, as the Tory “advance in Leave areas is unwinding, but its retreat in Remain areas is still gathering steam.”


Source: Economy - ft.com

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