CBI @10am: Preparing for the end of the EU/UK transition

Speakers:

• Ceri Thomas, Editor and Partner, Tortoise Media (Chair)
• Dame Carolyn Fairbairn, Director-General, CBI
• Jess Glover, Director-General, Transition Taskforce, Cabinet Office
• Sally Jones, Partner, EY
• Jill Rutter, Senior Research Fellow, UK in a Changing Europe

Overview:

An update from Carolyn on the negotiations

According to Dame Carolyn Fairbairn, Director-General of the CBI, we’re in “last chance saloon” territory when it comes to getting a Brexit deal. But, she said, she takes comfort in the fact that negotiations are still continuing, and there is clearly will on both sides. That said, the sense of a ticking down of the clock is really weighing hard on business – and it’s very hard for businesses to prepare as the goalposts keep moving. And of course, COVID-19 is proving to be a huge distraction.

Many businesses are still hopeful for an extension to the transition period. But Carolyn confirmed the CBI doesn’t think that’ll happen. The CBI made a direct intervention on Brexit over the weekend with a letter to the government asking for a deal, which was signed by 71 trade associations – representing over 1/3 of the private sector workforce. And the CBI’s sister organisations in France, Germany and Italy have done similar.

The main risks to the possibility of a deal

Jess Glover, Director-General of the Transition Taskforce at the Cabinet Office, said that whatever happens, the transition period ends on 31 December, and this is a transformational moment for the UK – bringing both great opportunity and disruption. Of course, the biggest risk to a deal is COVID-19. The government and civil service is really struggling with bandwidth, as a wide range of the actors required are working on the response to the pandemic.

Jess added that the vast majority of things businesses need to do to prepare are common to both a deal and no deal scenario – a fact she thinks isn’t well understood. Time is limited, so businesses need to get on and prepare now.

What business needs to be thinking about

According to Sally Jones, a Partner at EY, there are three themes that are common across many businesses at the moment. Firstly, they’re struggling to deal with the pandemic and Brexit at the same time. Secondly, they’re finding they’ve prepared well for some aspects of Brexit, only to find they haven’t prepared as well on others. And finally, some feel that they’ve run out of time to get ready, and so don’t know what to do.

In a recent survey run by EY, over 70% of respondents said their Brexit preparations have been significantly disrupted by COVID-19. Many of the specific concerns businesses have around IT systems and data, commercial operations, and compliance. And there’s enormous concern about the fact that businesses don’t know how the new import/export system will work yet.

Does the government have capacity?

Jill Rutter, Senior Research Fellow at UK in a Changing Europe added that clearly it’s not ideal for two mega events to coincide. In the civil service, many staff who were working on Brexit have been moved to COVID-19 work, which places a huge amount of demands on the civil service.

And as Jill said, it’s important to remember that the transition period was originally negotiated in Theresa May’s deal, to allow the UK 21 months to negotiate its future relationship with the EU. But this still hasn’t happened. This is a complicated process, and it’s not clear if talks will be successful. Jill added that the government’s communications campaign over the summer was hampered by the fact ministers felt the need to stress the positive of Brexit – which made it feel a bit like an advert for a summer holiday rather than an order to prepare. So, they’re now having to dial up the rhetoric urgently.

What could the first three months of 2021 look like?

The government published a reasonable worst-case scenario that 40-70% of trucks travelling to the EU may not be ready for border controls in January – which could cause delays of 1-2 days. Jess confirmed that the government’s ‘Check an HGV’ app will be live by January, and she feels that the disruption in January will reduce over time.

Sally added that EY’s advice to businesses is to expect and prepare for no deal. There may be a deal with relieving provisions, and if that happens, that’s great. But by preparing for no deal, businesses will be as ready as it’s possible to be. “It’s like an insurance policy”, she said.