Brexit Business Brief | Speeches and roads

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What’s happening?

Senior UK cabinet ministers are giving a series of speeches billed as “the road to Brexit”. The Foreign Secretary spoke on Valentine’s Day. The Prime Minister will be in Munich this weekend, covering security cooperation.  The Brexit Secretary, the International Trade Secretary and the Cabinet Office Minister go next, and then – after an “away day” for the cabinet Brexit sub-committee – the Prime Minister is to make the third of her set-piece Brexit speeches.

The first was at Lancaster House in London more than a year ago, and laid down several of the “red lines” that have since framed the UK government’s approach to Brexit.

The second, in Florence in September 2017, requested the transition period that is expected (but not yet guaranteed!) to follow after the UK leaves the Union on 29 March 2019.

The third speech is expected to describe in more detail how the UK government sees the “future relationship” between the UK and the Union that will follow any transition period.  The Prime Minister has so far been famously (and to many, frustratingly) opaque about the specifics of the end state relationship. We know little more than that she would like it to be a “new, deep and special partnership”.

Meanwhile…attention will be turning to what happens at the European Council meeting on 22 and 23 March 2018.  That meeting is scheduled to approve the terms of the transition period.  Those terms remain to be negotiated, but it seems likely that they will resemble the Council’s negotiating directives to its Brexit team – so a “status quo” transition. Business will be focused on the outcome of the Council meeting and whether a measure of certainty on the transition is achieved.

General developments

The European Commission continues to publish its “be prepared” notices across a range of topics, and has pulled the series to date together here.  These notices explain the consequences of the UK becoming a “third country” in EU terms. More on this in “Sector developments”.

The Commission also published various sets of slides used in internal EU27 seminars on the framework for the future UK-EU relationship.  These are interesting as, first, they describe some of the legal and trading parameters that will frame that relationship and, second, they hint at how the EU27 may approach a possible free trade agreement with the UK.  Amongst subjects covered are financial services, the Digital Single Market, telecoms and tax.

The UK government issued a “Technical Note” on what it would like to happen during the transition period to international agreements which currently bind and benefit the UK as an EU Member State.  These agreements are made between the EU and third party countries and largely relate to trade, from wide-ranging free trade agreements to sector-specific arrangements.  The UK is asking third party countries to regard the UK as a Member State after 29 March 2019, despite the UK ceasing to be a Member State on that date.  That would enable the UK to continue to benefit from those agreements during the transition period.

A detailed Harvard Kennedy School survey on the views of SMEs:

The overwhelming majority who expressed an opinion want to stay in the Customs Union, believing that the potential gains from Britain negotiating its own trade deals elsewhere in the world cannot offset the substantial disadvantages of leaving the Customs Union.”

The Government of Ireland published an excellent paper on the strategic implications of Brexit for the Irish economy.

Sector developments

Financial services “be prepared” notices
More in the Commission’s series.  The notices do not take account of any possible transition period, so are largely written for a “cliff edge” scenario.  But they are useful summaries of some of the principal issues, whatever happens. Banking and payment services note here. Insurance and reinsurance note here. Markets in financial instruments note here. Asset management note here. Post-trade financial services note here.

Customs and indirect taxation
Another Commission notice summarising the rules on customs and VAT if there is a “cliff edge”.

And also:
Two Brexit position papers from Insurance Europe…a Joint Brexit statement from 37 organisations representing the UK’s food and farming industry…an Ofgem letter on preparing for EU exit… Osborne Clarke’s Marc Shrimpling on the recent House of Lords report on competition and State aid…Q&As from the EU Intellectual Property Office on EU trade marks and registered Community designs.

Which manufacturing sectors are most vulnerable to Brexit?
This is discussed by the UK Trade Policy Observatory in this paper. Amongst the conclusions:

High tech and medium-high tech manufacturing sectors are more at risk of a significant decline in domestic production than medium and medium-low tech sectors. This has important implications for the UK Government’s Industrial Strategy, which aims to support economic growth and drive productivity through Research and Development (R&D) and innovation.”

Legal developments

One of the first “Brexit contingency planning” pieces of legislation was introduced into the UK Parliament last week. This is the Haulage Permits and Trailer Registration Bill.  The useful Explanatory Notes are here.

After Brexit, hauliers established in the UK may need to obtain a permit to provide services to and from EU countries.  This new legislation would enable the UK to operate such a permit system, should it become necessary.

The UK government is also proposing to ratify the 1968 Vienna Convention on Road Traffic to ensure that, after Brexit, UK drivers will continue to able to drive in all EU countries. A consequence of ratification is that a trailer registration scheme will need to be implemented.  The Bill gives the government power to introduce such a scheme.

Depending on what, if any, deal is done between the UK and the EU, some of the powers in this Bill may not be needed.  The Bill is part of the government’s Brexit contingency planning.  As the Freight Transport Association says, “this Bill is a sensible contingency measure, but one that exporting and importing businesses hope never has to be used”.