Now we get down to the real stuff of Brexit

Good afternoon, I’m Peter Foster, the FT’s new public policy editor, and from today I’ll be writing your weekly Brexit Briefing newsletter, tracking developments as we enter the final, critical stages of EU-UK negotiations.

Every Thursday Brexit Briefing will look to probe the gap between ministerial rhetoric and the complex realities that business and industry face as they prepare for the UK’s departure from the EU’s single market and customs union on January 1 2021.

While seeking to inform you of unfolding events via FT colleagues and a network of personal contacts on both sides of the Channel, I also want to hear your insights into how Brexit is actually going to land in the UK. From supply chains to state aid, from immigration to our shifting political landscape, please share your real-world knowledge of this uncertain world as it emerges.

We want your feedback and your views on what this all means for life back in Britain. 

Please contact me at brexitbrief@ft.com. I look forward to hearing from you. And sign up for our newsletter here.

Peter

Officials optimistic that a deal can be done

Michel Barnier and his team are in London this week for the latest cycle of Brexit negotiations. This not officially being a formal negotiating “round”, the idea is to give both sides some breathing space to try to enter what one EU official calls the “conversation chamber” of real negotiation.

To date, both sides have largely stuck to their scripts (literally in the case of British negotiators last week, according to officials), but this week there seems to be reason to hope that the two sides can enter into substantive discussions about future EU-UK trade arrangements.

Last week, we understand, Mr Barnier opened the door to a discussion on a more flexible EU approach towards governance of the agreement. That move did not initially win the response from David Frost, the UK negotiator, that the EU had hoped for, but then later last week the whisper was that the British side did signal they were ready to talk.

The big issues of contention are well known — the overall structure of the agreement, the role of the European Court of Justice, thrashing out a common framework on state aid policy, agreeing a reference point for “non regression” on environmental and social standards — and so are many of the potential compromises.

It is worth remembering that the UK “ask” from Brussels — while exceeding, in aggregate, a Canada-style trade agreement — is still incredibly unambitious. 

This is ultimately why many officials still remain optimistic that a deal can be done. Last year it felt, at times, as if the Irish border issue was intellectually and politically insoluble — but that is not the case with the current talks.

Practical solutions are there, if the political will is there — on both sides — although time is running very short to grind out the technical elements of the compromises on, say, state aid, some of which the FT explored recently with the help of several top competition lawyers.

All of which helps to explain why the talks are perhaps not as charged as in previous iterations of this process — because the range of possible outcomes, now that the legal guillotine has fallen on the UK’s membership of the EU, is actually reasonably small. 

The UK will leave the EU on December 31; it will phase in a significant amount of new frictions and costs in its trade with Europe and it will seek to forge a new trade and foreign policy outside the orbit of the EU. Deal or no deal, these are now the “known knowns”. 

As a result, the balance of the Brexit “story” now falls firmly on this side of the Channel. This process is no longer principally taking place in Brussels — au contraire. And that is why this Briefing will focus on Brexit as it lands in the real world.

In the next year or so hauliers, freight forwarders and ferry companies will have to adapt to the government’s new Goods Vehicle Movement Service for pre-lodging consignments to the EU (without which they will not be able to board) — and that IT system has not even been trialled yet.

Even more urgently, given that unlike the Dover-Calais crossing it needs to be fully operational from day one, the Northern Ireland protocol must be implemented, meaning that all goods going from Great Britain into the province must comply with the EU’s customs code.

The chemicals industry, which touches all of our lives in ways hard to imagine, will need to adjust to a new UK version of the EU chemicals register Reach — but once again that software has not yet been shared with industry.

And even if a “zero tariff, zero quota” deal is struck, the food and drinks industry will have to grapple with the “hidden hard Brexit” that comes with leaving the EU’s customs union, making it impossible for many manufacturers to qualify for zero tariff access because of new restrictions over so-called rules of origin.

Services industries will need to adjust to a new immigration regime on this side of the Channel; British business professionals may find their current automatic “fly in, fly out” access to the EU becomes entangled in a web of different national regimes. 

And as “Global Britain” looks to strike trade deals with other regulatory regimes in the US and Asia-Pacific, the UK will need to create a new “internal market” at home where the regulatory disciplines that were once enforced across the UK by Brussels will now have to be enforced by London.

That prospect, as we reported this week, is already creating significant political tensions with the Scottish National party that will only grow as we head into the Holyrood elections for a new Scottish government next May.

The UK government will also need to begin to wrestle with the politics of trade more broadly. We have seen already with the million-signature National Farmers’ Union petition against low-animal-welfare food imports how civil society pressure can potentially change policy, after Liz Truss, the international trade secretary, announced an independent commission to advise on post-Brexit agriculture trade policy.

But this is only the beginning. Civil society is gearing up to beard the government on a range of issues from GMOs, to pesticide residues, fish stocks and the fate of Welsh lamb farmers.

All this is now the real stuff of Brexit: the gristle and sinew of a massive process of national transformation the upsides and downsides of which this Briefing will look to unpick and explore. Please do not hesitate to tell us where to go looking.

Brexit in numbers

It is easy to forget that for all the sound and fury of the past four years, the ground-level impact of Brexit has barely begun to play out. Even if a “zero tariff, zero quota” trade deal can be negotiated, industry will face substantial new bureaucratic barriers to trade with the EU — or more accurately, the return of old ones that have been stripped away over the past 27 years by the gradual emergence of the single market for goods.

The costs of these new barriers will not fall evenly, geographically — as this chart from UK in a Changing Europe illustrates — or across individual manufacturing industries. So while manufacturing might on average account for about 15 per cent of regional economies, the Midlands is particularly reliant on autos. The region employs about a third of all UK car workers and accounts for about half of the £16bn value added the industry creates nationally. Jaguar Land Rover alone employs 20,000 people of the 170,000 the industry employs directly in the UK. 

So while economic dislocation of a no deal or a very thin deal might be manageable when expressed across the entire economy, those impacts will be concentrated on particular regions and particular industries — with all the localised political fallout that implies.

Further reading

Doubts over EU regulations deal raise prospect of higher City costs
On a Monday morning, just over a year ago, investment firms across the EU found they were no longer allowed to trade on the Swiss stock exchange. It happened almost overnight — simply because Brussels refused to extend a regulatory “equivalence” deal with Switzerland, which gave each side free access to the other’s markets. This looks increasingly similar to the situation Britain could end up in next year, experts say. (Matthew Vincent, FT)

Johnson pledge to recruit 50,000 more NHS nurses is in doubt
Boris Johnson’s pledge to recruit 50,000 more NHS nurses is in doubt after the number coming from the EU fell again and coronavirus prevented thousands of arrivals from the rest of the world. The prime minister made the promise a cornerstone of his general election campaign last year. (Denis Campbell, The Guardian)

Source: Economy - ft.com