No one, least of all myself, can yet predict either the political endgame or the ultimate economic impacts of the transition that lies ahead.
Most of the pronouncements we have seen and heard so far are little more than political warning shots, with the heavy artillery and the precision weapons held in reserve for later. They may make waves in the British and international press, but until Article 50 is triggered by the end of March 2017, and the exit process is well underway, many of these positions are just speculative.
There are a number of areas that are of prime importance to business:
There is universal agreement across government that Britain’s future is as “a trading nation”. Yet that is where the consensus ends. Many Brexiteers want a full exit from the EU customs union, eschew access to the single market, and favour the conclusion of free trade agreements with our traditional allies and the Commonwealth. Others speak more cautiously about maintaining single market access, particularly in sensitive sectors like financial services, and prioritising an in-depth agreement with the EU over free trade agreements elsewhere.
There are a number of nations who will want to do a trade deal with the UK in future – although most are careful to say that this can only take place after we leave the EU. Even where there’s a will, there is caution – which will likely keep talks informal for now.
What’s most interesting is that, in this era of protectionism and conflicting interests, many also express a private belief that doing a trade deal with the UK will be easier than doing a deal with the EU, as one country is easier to reach agreement with than 27.
So there are some who believe that there is a real opportunity to increase the flows of two-way trade between the UK and a range of other countries, something that we must continue to explore. Our growing network of British Chambers and business groups in markets around the world will be key partners in helping to seek out intelligence and opportunities in this regard.
Of all the Brexit-related subjects we’re dealing with, this is the most pressing one for many of the UK and multinational firms we speak to, and possibly the most frustrating for me. We continue to call for guarantees for existing EU workers in the UK. It’s the right thing to do for our businesses, for the economy and for the individuals concerned.
Ministers, even those sympathetic to our arguments, demur. They insist on their responsibility to British citizens living elsewhere in the EU, and that formal guarantees can only be made when both issues are resolved. The issue with this “bargaining chip” approach when it comes to existing EU workers is that businesses are left with unacceptable levels of uncertainty about their workforce planning.
My present worry is a short-term crackdown on non-EU skilled workers and students – so that ministers can say they are making progress on migration. We will have to fight this as a business community, to protect both the interests of our firms and the universities and colleges that serve as anchors for many local economies and as links to many markets around the world.
Good news here. Regulatory stability, at least in the short-to-medium term, looks to be the order of the day. Businesses around the UK, and those they trade with around the world, cite potential regulatory instability during the Brexit transition as a key concern. Ministers have, to date, sensibly spoken of maintaining regulatory equivalence for a period of time, including bringing forward a Great Repeal Bill, to transpose all existing EU law into the UK statute books before we leave the European Union.
The early talk is of making regulatory change as painless as possible – a good aspiration when compared to the long history of burdensome, resource-sapping regulatory change that businesses have often faced.
Here, the Chamber Network has already had a significant – if incomplete – win. Following on from our protests about the impact of the potential withdrawal of EU funding for key local growth projects, research collaborations and infrastructure schemes, Chancellor Philip Hammond responded with a swift Treasury guarantee for all projects signed off by Autumn 2016. This will keep many local projects, as well as match-funded schemes for trade with other countries, going until the end of the current parliament in 2020.
TAXATION AND CUSTOMS
Indirect taxes, such as VAT, and questions of origin, are important concerns for UK companies doing business across Europe – and beyond – during the Brexit transition.
While the UK itself is very likely to adopt much of the EU Union Customs Code as a point of departure, there will be opportunities to sharpen and improve some elements of this in the interests of our importing and exporting firms. While it is still very early days, the Chambers of Commerce plan to engage at both political and technical levels to achieve a good outcome for businesses and the Chambers that support them.
The Prime Minister and her team have a real chance to craft a bespoke set of arrangements that are both advantageous to UK firms and acceptable to our trading partners in the EU and beyond.
The diverse businesses in the Chamber Network are – rightly – focused on the impact of our transition on their own business models and prospects. They expect HM Government and the Bank of England to deliver stability of markets, further clarity on the timetable for transition, and firm action on those matters that are entirely within Westminster’s gift. Calm, rational consideration is the order of the day.