Brexit Business Brief newsletter | "It isn't really a negotiation"

Welcome to the latest Brexit Business Brief, our regular newsletter looking at Brexit developments in a legal and business context. To receive this by email please register your interest in receiving Brexit Insights.

What’s happening?

The European Council signed off on its negotiating directives to the Commission Brexit team on the terms of the transition period. That transition period is expected to follow the UK’s departure from the Union, a departure currently scheduled for 11.00 p.m. on 29 March 2019. The UK government refers to the transition period as an “implementation period”.

Sabine Weyand, the EU deputy chief Brexit negotiator, pithily summarised the negotiating directives as “Status quo transition without institutional representation, lasting from Brexit date to 31 December 2020”.

The terms of the transition period, and its length, now have to be negotiated with the UK. We know from the Prime Minister’s Florence speech that the UK government is looking for a transition period of “around two years” with the UK retaining access to the Single Market and the Customs Union on “current terms”. Politico quoted one EU minister as saying “we gave Michel Barnier today a mandate to explain rather than negotiate. On transition, it isn’t really a negotiation”.

For business, the transition period − if agreed on terms similar to those in the EU negotiating directives – will mean that very little changes after Brexit day in March 2019 until the end of the transition period. What business will be looking for is some reassurance that the transition terms will be settled by March 2018; if they are not, the need to implement contingency plans for “no deal” will grow more acute.

The crucial issue of what happens after the transition period is no clearer, with little immediate sign that the UK government is any closer to reaching a detailed view on the terms of its desired long-term future relationship with the EU. The European Council expects to adopt additional guidelines on the “framework for the future relationship” between the UK and the Union in March 2018.

General developments

A letter: Continuing with the transition period, the UK government wrote an open letter to business, emphasising ‘three key aspects’ of the expected transition period:

• “First, in order that our terms of trade remain unchanged during the implementation period, it will need to be based on the existing structure of EU rules and regulations…
• “Second, no business need worry that it will fall outside the scope of this period. Our intention is to mimic the breadth of our current arrangements, from goods to agriculture to financial services, meaning that every business, small or large, will be able to go on trading with the EU as it does today until it’s time to make any changes necessary for the future partnership…
• “Third, EU citizens will continue to be able to come and live and work in the UK, with no new barriers to taking up employment.”

“Be prepared”: The European Commission published the complete set of its ‘be prepared’ notices. These are aimed principally at business, and explain the consequences of the UK becoming a “third country” in EU terms. The notices generally do not mention the possibility of a transition period. Amongst the areas covered are health and food safety, medical and industrial products, data protection and public procurement.

Sector developments

Creative industries: The House of Commons DCMS Committee published a report on the potential impact of Brexit on the creative industries, tourism and the Digital Single Market. The Creative Industries Federation also published a report on the risks it argues that Brexit poses to “Brand Britain”.

Energy: The House of Lords EU Energy and Environment Sub-Committee reported on Brexit and energy security, looking at the implications for supply, consumer costs and decarbonisation.

Health and pharma: The European Medicines Agency is surveying companies’ preparedness for Brexit. The Brexit Health Alliance flags up its concerns about drugs supply in this paper.

Financial services: This usefully short report from AFME looks at cliff-edge risks in wholesale financial services.

Infrastructure: RICS issued a Brexit position statement about EU funding streams.

Legal developments

The Withdrawal Bill: The European Union (Withdrawal) Bill, which will transpose all existing ‘EU law’ into UK domestic law at the date of Brexit and is the centrepiece of the UK government’s Brexit legislation, started its passage through the House of Lords. It wasn’t met with much enthusiasm there. For hardcore students of Brexit, the House of Commons Library published a good summary of what has changed in the Bill during its time to date in the Commons.

Other Brexit legislation: The Taxation (Cross-border Trade) Bill – known to its friends as the Customs Bill – is starting its Committee stage in the Commons, as is the Trade Bill. The Sanctions and Anti-Money Laundering Bill completed its House of Lords stages and now goes off to the Commons.