Securing a full deal on Brexit within the required timeframe is looking increasingly unlikely, and with the deadline for an extension just weeks away, a no-deal Brexit is now a serious concern, according to a report published today by thinktank UK in a Changing Europe.
The report, The Brexit Negotiations: A Stocktake, has found that there are a number of what Jill Rutter, senior research fellow at the UK in a Changing Europe, describes as an “entirely predictable set of stumbling blocks”, including fishing, governance and a level playing field, with the two sides “locked into completely incompatible positions”. On some of these issues.
As a result, the organisation argues that an extension is currently the best option, however the deadline for asking for one is less than a month away.
“June is clearly crucial. If we’re going to extend transition as a lot of organisations have asked, we’ve got to ask by the end of June,” said Professor Catherine Barnard, senior fellow at the UK in a Changing Europe, speaking at a press conference on the launch of the report.
She added that while the EU was open to an extension, the UK was “adamant” that it would not be asking for one.
“If we haven’t asked for an extension by next week or the week after, that is it for asking for an extension.”
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Facing the growing reality of a no-deal Brexit
If the UK does decide to continue with negotiations in an attempt to secure a deal on Brexit – the path that the UK in a Changing Europe expects it to take – then it will face a very tight timescale to do this by.
Rutter highlighted that both sides have their own deadlines for when they need negotiations to be finished by. The UK has said it wants an agreement in place by the end of September, while the EU has given 31 October as its deadline so that it has time to ratify all aspects of the deal.
“It’s probably the EU deadline that matters more than the UK deadline,” she said, adding that this created a “Halloween II” scenario, echoing the previous deadline the UK was working towards under Theresa May’s government.
This gives an extremely tight negotiating window to resolve the many sticking points still present,
“Assuming the UK doesn’t walk away, then we would be negotiating throughout the months of July, August, September,” said Barnard.
If this isn’t successful, a no-deal Brexit is the most likely scenario, which will see the UK default to trading on World Trade Organisation terms. This would, according to the UK in a Changing Europe, cause a GDP slump of up to 8-9% over the next decade.
Challenges for business
For businesses, this adds considerable uncertainty at a time when many industries can least afford it.
“What’s missing from all this narrative is how on earth business is going to adapt,” said Barnard.
Supply chains in particular are a key concern for many businesses, with Professor Jonathan Portes, senior fellow at the UK in a Changing Europe, warning that “the UK might find itself excluded from supply chains and markets as it rebuilds”.
There is also the issue of immigration, although Portes stressed that on this issue, it is “not about whether we do a deal” as immigration is generally not a key topic in the trade negotiations.
“The UK is going to have a new system either way. We’re going to need radical changes to immigration,” he said.
“If transition isn’t extended, we need a new immigration system in January 2021, deal or no deal.”
This is of particular concern to the UK technology industry, which relies heavily on talent from the EU, and which is being seen as a key driver of UK growth in the post-Brexit era.
There are also fears that bungling this could have severe “reputational damage” to the UK for years to come at a time when it is trying to portray itself as having a “global”, business-friendly mindset.
Covid-19: A spanner in the works
The thinktank also acknowledged that doing this during the coronavirus pandemic has created an additional unexpected complication, with many member states unwilling to engage heavily with the Brexit deal negotiations while they are fighting an unprecedented health crisis.
“The EU is very irritated that the UK is insisting on doing this while member states have things that they think are much more important to deal with,” said Rutter.
There are also competing schools of thought on whether dealing with Brexit during the pandemic is a good call.
While some see it as adding dangerous additional stresses to businesses and the economy at a time when they can least afford it, others believe that tackling the two at once will cause less overall damage than them being handled as separate incidents.
“Our view is that on balance Covid-19 does make the economic risks of exiting transition without a trade deal in January even larger than they already are,” said Portes, “but there are a lot of uncertainties.”