Tuesday’s marathon cabinet meeting finally confirmed, as many of us suspected, that the current configuration of the prime minister’s Brexit deal will not get through this parliament.
With cross-party talks – which started yesterday – likely to continue, it is important to remember the real decision will be at the European Council summit in Brussels next Wednesday evening.
The EU27 leaders will decide whether to further extend the article 50 process beyond the default exit date of April 12, and if so, for how long. Would it be for the short period now envisaged by Theresa May (until May 22), or for a longer period, which could be truncated if the withdrawal agreement is approved and implemented at Westminster.
“The BRC has campaigned strongly against a no-deal outcome and urged politicians to compromise”
The one element that remains unaltered is that any extension application beyond May 22 must be accompanied by a willingness to participate in the European elections, and a clear alternative plan from the UK government to justify the extension.
The talks, or the potential for binding votes next Monday, could deliver a clear plan that to provide the basis for an extension. While a mere tweak to the political declaration to green-light a customs union option could be performed within days, a more profound alteration with an even deeper trading relationship could require longer.
The EU27 would have to weigh up the political risks of granting a further short extension that could still run into problems. A longer extension, capable of being reduced should the withdrawal agreement be ratified at Westminster, could yet be the answer.
Checks and balances
Apart from continued EU membership, any orderly departure for the UK requires a withdrawal agreement to secure the standstill transition. No pay-as-you-go variant, as suggested by the Malthouse amendment, is available.
A transition also requires the Irish protocol, including the backstop, should the final UK-EU relationship lack the depth required to avert a hard Irish land border for trading purposes. Unless a major technological leap occurs in the next couple of years, a customs union is the principal means of removing the requirement for checks on the origin of goods and checks for tariffs. Even so, depending upon its depth, a movement certificate may still be required upon presentation of goods (that is the case in the Irish Protocol Single Customs Territory for the UK and EU).
The vast majority of checks on food, pharmaceuticals, chemicals and harmonised manufactured goods arise from regulatory requirements – that is where the nature of the relationship with the single market is of even stronger importance in avoiding new non-tariff barriers. A strong relationship on VAT and excise systems alignment is also required to reduce trade barriers.
“It is in everyone’s interests to compromise so businesses across Europe can prosper”
In any extended period, only the principles of these ideas could be sketched out between the EU and UK and reflected in an augmented political declaration signposting the future relationship. If the UK does become a third country, the full negotiation on the details would only start after that.
All this matters for retailers and consumers because of the prospect of disruption through the Dover Straits from additional checks on products required of third countries (particularly products of animal origin) under EU law. Furthermore, the full picture of what would be required for goods moving from Northern Ireland to the Republic of Ireland has still to emerge.
Across the UK, additional costs from new non-tariff barriers and checks would increase cost pressures on products and increase delays. That is why the BRC and its members have campaigned so strongly against a no-deal outcome and urged politicians to compromise.
If MPs can reach agreement, avert the April 12 cliff edge and, in an extension period, provide a pathway to the tariff-free, frictionless trading arrangements the retail industry wants with customers and suppliers in the EU27, they will have an ally in the BRC.
It is in everyone’s interests to compromise so businesses across Europe can prosper in a strong, mutual market in the coming years, and consumers can continue to reap the rewards through lower prices and the huge variety of goods they currently enjoy.