5 thoughts to kickstart your business’ 2020 Brexit planning

1) Focus less on backbench MPs to have impact on Brexit this year  

In the last parliament, backbench MPs successfully prevented no deal on three separate occasions and secured a high level of transparency on government planning on Brexit. Companies – and the CBI – spent a lot of time educating and informing MPs to achieve this.  

A government majority of 80 and the retirement, resignation and replacement of dozens of remain Conservative MPs means marginal voters and parliamentary procedural shenanigans are a thing of the past. The government will have multiple Brexit votes in January, all of which will pass few, if any amendments. Elected on non-traditional votes to deliver Brexit, the last thing any of the 107 new Tory MPs will do is burn their pinch of newbie political capital doing anything that might even be perceived as holding up the process of leaving the EU.  

Business’ with strong views on Brexit and the future UK-EU negotiations are best spending their time speaking to other stakeholders. Of course, the business team in Downing Street – still somewhat under construction – is essential. Second, ensuring civil servants that will brief the newly announced Taskforce Europe have business’ needs in mind will be crucial. Despite promises of reform, the civil service hokey cokey will inevitably continue throughout the year, so firms should not assume telling one civil servant their views will mean substantial numbers will hear them. Thirdly, the new Labour leader and shadow team. While diminished in size, the opposition’s platform in the media – particularly if the new leader is charismatic or courts journalists in the way Jeremy Corbyn never did – may be impactful.  

Firms, of course, should continue reaching out to new and re-elected backbench MPs to help them understand their priorities on a range of issues. But if discussing Brexit, it will be necessary to be much more specific about what is essential for the negotiations, and the consequences for jobs in their constituency if that is not achieved. The objective now is to have parliamentarians echo business’ messages to Taskforce Europe, not to vote in a particular way.  

2) Invest more thinking in how to lobby the EU for the long-term as well as for the FTA 

The UK will no longer be an EU Member State at 11pm on 31 January in what’s been called a ‘status quo transition’. The CBI led the charge for this period of economic continuity and was almost entirely successful, allowing the UK to remain in the single market and customs union as a de facto Member State until the end of the year.  

For the overwhelming majority of firms, this reduces risk in 2020 dramatically. But there are three risks that remain.  

First, two minor risks are worth considering in the transition period. The UK’s relationship with many non-EU countries during transition will be based heavily on goodwill. They are being asked to treat the UK as an EU Member State during transition, but only time will tell if they do so. Additionally, the UK’s precedented, untested legal status may also be tested domestically through commercial litigation over the next year. The effects of this cannot be predicted.  

The biggest change during transition is that the UK will no longer be represented in legislative and regulatory processes in the EU – but will still accept the EU’s rules. Particularly for highly regulated firms, coordination with and information from European business groups will be important. The timing of transition should be helpful on this front: the European Commission is new in post and refreshing its legislative agenda, so lower levels of new laws will be passed. However, changes coming from EU agencies will continue. Over the next 11 months, EU agencies and regulators are the priority for relationship building and influence for UK firms. With UK companies inevitably being affected by EU rules into the decade ahead, building the foundations of relationships that can help influence in Brussels can only be a good objective for 2020.  

3) Watch the expectation games carefully in the first three months 

For the last three years, the UK and the EU can be said to have had matching ideal outcomes on market access, but mismatched ambitions on what has been termed ‘control’ – the level of alignment to be negotiated on level playing field commitments and product standards. The UK wanted frictionless trade, which the EU preferred as well. But the UK simultaneously wanted to be less closely bound to the EU, which was unacceptable to Brussels.  

This new government places a much lower priority on market access and a much higher priority on regulatory freedom. There are even rumours circulating in Westminster that No.10 are willing to accept some tariffs on UK-EU trade if it’s necessary to avoid being strictly bound to the EU’s level playing field, and that services will hardly feature in negotiations at all.  

All of this is signally, and not necessarily what will translate to the negotiating table – but it will be interesting to see how the EU responds to this re-prioritisation. Businesses will be hoping that the EU shifts away from saying the UK must accept less market access to pushing for greater market access than the UK is aiming for. This would change the negotiation dynamic significantly, but it would arguably be closer to how the EU would normally negotiate trade deals – with an objective of opening up market access rather than closing it down, even if this time it is from a position of openness rather than distance.  

Companies will need to do two things to respond to this. Firstly, it would be wise to evolve their language as they lobby on the new UK-EU trade deal. Firms will need to move on from the phrase ‘frictionless trade’, for example, and avoid ‘ambitious’ as what the UK government defines as an ‘ambitious’ trade deal is no longer what many businesses would.  

Secondly, it would be prudent to have conversations with any European stakeholders, partners, branches or HQs about what lobbying they can do to ensure that the EU’s ambition for market access is high.  

4) Prepare for another debate about timing

There have been lots of theoretical arguments about how long trade negotiations will take. The new UK government has made clear it wants to stick to its deadlines, with a deal negotiated and implemented by the end of the year.  

The negotiation stage of trade agreements is the first of several. It can be condensed if there is agreement between both sides and if red lines are compatible. But there are consequences of condensing the timeline: stakeholder engagement can fall by the wayside and difficult issues are unlikely to be reached and resolved. For business, the risk is that the trickier issues are the most important ones, for example politically contentious services sectors may be put aside.  

The agreement must then be ratified by national and regional parliaments, the timing of which the UK government cannot control.  

The length of the implementation of the deal, which in many ways can take place concurrently to ratification, should depend on how big the changes business will face are. It is likely that a less comprehensive and timely negotiated deal will take longer to adapt to. The reverse is also true: a deal that takes longer to negotiate will likely be more comprehensive, providing greater market access, less change and take less time to implement. The government’s preference is clearly for the former. From a political perspective, ongoing negotiations are far more newsworthy, involving personality and drama. Implementation involves systems changes and backroom alterations, often well outside of government.  

The questions for business are therefore how to ensure the government does not skip out on tackling difficult negotiating topics because of time limits, how to ensure sufficient time is provided for implementation; how a cliff-edge is avoided between the end of transition and the end of implementation; and how to achieve all of that without creating the impression it wants to put off leaving the single market and customs union.  

5) Be clear that the cliff edge risk has changed, reduced – but not removed 

The debate about implementation, negotiation timescales and transition will play out most particularly in the run up to summer. The deadline for the UK to request the transition negotiation period to be extended is June. Businesses may need to be very clear about what kind of cliff edge would appear if implementation is not complete before the end of the 2020 transition period.  

There are already arguments being made that the cliff edge is more of a rolling hill if the transition ends abruptly. In some ways – particularly in a Northern Irish context and for citizens’ rights – a no trade deal is much less abrupt than the previous no Withdrawal deal scenarios. But conversations will still need to be had about avoiding the myriad of other forms of disruption.