There may have been a few sore heads on 1 February this year, but the reality is the time at which we left the EU on 31 January probably passed most of us by without much fanfare. Even the government seems keen to move on as quickly as it can – it’s even removing the word ‘Brexit’ from departmental vocabulary and winding up the Department for Exiting the European Union – it’s job apparently done.
That’s not strictly accurate, but we’ve now entered a year-along transitionary period, where the real detail of our future relationship with the outside world and our own internal structures for tax, farming, healthcare and many other day-to-day issues need to be addressed.
In our view, there are three areas the government needs to offer clarity on.
Alignment and divergence
It’s become clear that the government is taking a harder line than first anticipated when it comes alignment with EU regulations and rules. The City – and how our financial markets operate – is likely to dominate headlines this year and will pose relatively little immediate impact on most households. But the issues of insurance (particularly travel), agriculture, food standards and worker’s rights are much more emotive and problematic for the government. The government also needs to better articulate what sort of the country we want to be post-Brexit. Deregulation is an easy sell, and in certain markets it encourages growth, but expose others to harm or impact standards.
Expect to hear more about red tape as a result. A common-enough criticism levelled at the EU when it comes to imposed standards and bureaucracy, red tape often keeps people safe and protects the interests of businesses. We now have the power to change and update regulations, making them more appropriate to the UK – and what we want to excel in, but what matters is how that case is made to the wider public. Sajid Javid’s recent call on the public to report unnecessary red tape sounds like a lack of strategy and bears the hallmarks of John Major’s much maligned ‘cone hotline’ in the 1990s.
Alignment (or divergence) isn’t all about internal issues either. How closely we do or don’t align with the EU could affect how we manage ownership of IPs, look after data, handle disputes or even track down criminals. As a result, the EU will be keenly watching what regulations we tear up at home. For example, making changes to state aid or animal welfare could make it cheaper to produce food or manufacture goods, ultimately giving us advantages over EU competitors. Where this happens, expect the EU to back the interests of member states.
Trade – free or otherwise – is the headline issue for the government. While the debate is likely to be dominated by references to Canada or Australian-style deals, what’s often missed is that we’re not only directly linked to Ireland and 20 miles away from Calais, but much of our economy is based on 40 years of trade arrangements with the EU. Neither Canada nor Australia have such a close relationship with the EU. Ripping that up in favour of a new deal will cause some friction; we’re not starting with a blank page.
The main issues facing trading arrangements are likely to be about managing ‘just in time’ delivery and making sure critical goods make to their end point without delay. This is often linked to the manufacturing sector and concerns goods, but medicine and food all fit within the same bracket and have wider implications on people. The moment prices rise or the availability of goods decline, expect issues for the government. That’s unlikely to be a factor in 2020, but some sectors are already warning of trouble ahead. For example, the export of grain to the EU – which is planned years in advance – is suffering long-term confidence decline and harming some farmers.
By the end of year, the likelihood is that goods and services produced by continent spanning firms – Ford, GE, BAE, GM and so on – are protected in some way, but debate will rage over food, medicine and how to protect export from UK SMEs into the EU. In the UK we have a significant and diverse range of businesses who import and export into the EU on a regular basis. Damaging these markets through the introduction of tariffs could see their worlds change immeasurably; the government will need to listen to SMEs from across the UK.
The UK has long had an uneasy relationship with free movement, but that largely concerns the movement of people – good and services are rarely an issue. Nonetheless, one of the EU’s most important principles is a commitment to the free movement of people, goods and services. It is non-negotiable.
In the short term, free movement isn’t a significant political issue – the government can claim a quick win with the end of free movement. However, there are problems on the horizon. For example, we face a skills crisis across several of our key industries, including construction, healthcare and education. In most cases we’re partly reliant on migration to provide high quality skills, so we need a fair and inclusive system that allows employers to easily find and appoint good people.
Despite suggestions otherwise, the government knows it needs a system to replace free movement to order to maintain a healthy economy. The danger is a reactionary points or salary-based system, or one that stops a highly qualified individual from bringing their family into the UK will make it much harder to find good people.
Free movement works the other way too. It’s not an issue for most people in the UK, but there are thousands of expats who own homes and use local health services, some may even run businesses. And at the younger end of the scale, there are thousands of people who want to study, work or live abroad. This isn’t an exotic concept either, thousands of people move across the Irish border every day too – some to work, some to fill up their car and there are handful of farms that straddle the border. These are real issues, and what people need to do to be compliant with the law needs careful attention.
Then there’s goods and services – both intertwined with trade. The movement of transactions, materials and consumer items will all come at a greater cost if we can’t find a sensible compromise.
‘Sensible compromise’ are probably the two key words for 2020. The Brexit debate has long been marred by claim and counterclaim, sometimes even by the same people. Stability and clear, concise advice for people and businesses is critical. Whether the government can deliver this is the big test, but we hope by the time 2020 closes, we’ll be able to look to a positive future.
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