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Insight

Brexit: The Strategic Focus

Andrew Hood
30/04/2019

Locations

United Kingdom

We have all been consumed with the unfolding drama of the Brexit negotiations in recent months. It makes for compelling – and exasperating – viewing and with no agreement in sight that drama looks set to continue over the summer and into the autumn and, possibly, beyond.

We have all been consumed with the unfolding drama of the Brexit negotiations in recent months.  It makes for compelling – and exasperating – viewing and with no agreement in sight that drama looks set to continue over the summer and into the autumn and, possibly, beyond.  

Getting the terms of Withdrawal Agreement right is undoubtedly important for business – it offers the prize of regulatory continuity and certainty and only one set of changes when the final relationship is settled.  It is, however, the future trade deal that will shape our trading relationship with the EU for a generation to come.  

That trade deal will be shaped in part by the current negotiations and the final text of the political declaration that sets out the ambition of the parties about the scope of their future trading relationship. The EU have agreed there may be scope for future change to the political declaration and the debate in the UK Parliament (and between the Conservative and Labour Party) about whether the UK remains in the European Economic Area (the Norway option) or in some form of customs union could have a significant impact on the final terms of any future trade deal.

Whatever form the final political declaration takes, a lot of work will be required to put flesh on the very bare bones.  Exactly how the UK (and the EU) prepare for those negotiations and the conclusions they reach will have significant and long-lasting impact on how businesses based in the UK and trading with the UK will operate in the years to come.

Free trade agreements are detailed and complex.  The EU-Canada agreement stretches to over 1600 pages. Some 300-pages of general ‘chapters’.  Some of these chapters address horizontal issues around how companies can establish themselves in the other jurisdiction; what rules will apply to Government procurement or competition matters; and  goods and services can be traded across borders.  Other chapters moderate the regulation of specific sectors such as Financial Services and Telecomunications.  There are then some 1300 pages that dive into the minutiae of day-to-day trading across borders covering anything from the growing of wild rice in Ontario to the treatment of second-year apprentice embalmers in Nova Scotia.  

Trade agreements are detailed painstaking pieces of work that need to reflect the particular interests of industries and businesses based in and trading with the UK.   Those views need to shape the framework for EU-UK discussions; the negotiating mandates on both sides; and the outcome of any final UK-EU trade deal.

The future UK-EU agreement is important not only because it will govern around 50% of the UK’s international trade, but also because it will be crucial in shaping the UK’s international trade agreements with other countries. Whilst the Department for International Trade (DIT) is consulting on the approach it should take to those negotiations, many of those countries the UK negotiates with will await the outcome of the UK-EU negotiations to determine exactly what they will demand and what they will concede in their own trade deals.   

Industry will want to engage with DIT on the UK’s objectives for any trade negotiations, but the key remains to achieve the best outcome in any discussions with the EU on the future trading relationship.  

Companies and industry bodies need to develop a clear understanding of how these negotiations are likely to proceed and how the parties will address issues of substance.  If this understanding is combined with a clear assessment of what is needed in any UK-EU trade deal – at both the general and the granular level – then firms can start to focus on the truly strategic issues that will shape their business and so help them succeed in the generations to come.

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Areas of Expertise

Brexit