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The tight EU deal sought by Boris Johnson will act as a “deadweight” on the UK’s ability to trade, the former Brexit department chief warned, amid growing concerns the country remains dangerously ill-prepared for such an outcome. .
Negotiations with the EU remained stalled this weekend after Downing Street told EU negotiators not to bother taking a planned trip to London without offering a “fundamental change of approach.” The prime minister failed to suspend the talks, which will continue this week. In a sign of the severity of the business malaise, more than 70 trade associations and professional bodies today issue an extraordinary joint request to both parties to reach an agreement.
However, there are concerns within government and industry that the dire threat of a no-deal outcome has masked the impact of a “weak” EU deal on trade. While a deal will remove tariffs on trade, significant ‘non-tariff barriers’ will be imposed, adding serious costs for manufacturers and practical difficulties for shippers, while the UK’s large service sector is also expected to be subject to new barriers. Philip Rycroft, who headed the Brexit department until last year, said negotiators were essentially working on “the scope of the new barriers to trade.”
“No deal is certainly worse than a deal, but it’s worth remembering: customs declarations, security declarations, regulatory checks, rules of origin, compliance, the whole panoply of a border applies if we get the deal,” he said. “The change that occurs at the end of this year, however, is a massive and very costly logistical challenge.
“It has the short-term impact, but then it has dead weight in trading forever, because that’s the nature of being out of the box. [EU’s] single market. It puts friction on our trade relationship with the EU: that friction equals cost. The nature of the business relationship between the UK and the EU will change. If you believe in free trade, that’s clearly not a good thing. “
In talks held last week between the Cabinet Office and industry figures, both sides expressed concerns about preparing for the changes expected in January. Industry concerns also remain around the preparation of a new border computing system, as well as the impact on sectors such as financial, legal and commercial services.
Ben Fletcher, Make UK’s chief policy officer, said that even the best deal being offered now is “a far cry from the kind of deal that was discussed as a starting point during Theresa May discussions, which itself was a long way off. “. of the status quo ”.
“In every sector of large companies there is real nervousness because too many companies think that the potential deal is largely the status quo: there is a dangerous underlying belief that ultimately someone will walk out of a building in Brussels with a agreement and things will continue to continue normally. There are real fears that the hidden impact here is that the scale of change, from where we sit today to where we could sit even with a deal on January 1, is quite significant and quite scary. “
Some in the industry said they were reluctant to raise concerns about the potential deal because the lack of a deal was the immediate threat. Anand Menon, Director of the UK in a Changing Europe, said: “One of the things that the current furor over the deal and no deal serves to disguise is the fact that even if there is a deal, it will be relatively ‘scarce’. which will lead to a potentially serious shock and will have a significant impact on the economy. “
No deal remains a danger as talks have stalled over fishing rights in British waters and the so-called level playing field (LPF) rules in relation to the future use of state aid by Britain. Industry sources said they hoped the shortage in supermarkets would force the UK to return to the negotiating table in the event of no deal. Nick Macpherson, the top Treasury official from 2005 to 2016, said the UK government would have few options. “The deal being offered will cause economic damage as there will still be friction along the border that will discourage trade with our largest market,” he said. “But no deal would do much more damage, particularly to manufacturing industries like automobiles and chemicals, and make Britain’s return to the negotiating table inevitable.”
However, Ivan Rogers, Britain’s former ambassador to the EU, suggested that political pride can prevent that from happening. “The [EU] The objective would be to force the British side to come back to the table. But since LPF conditionality would still be on the table for any negotiation after a no-deal, it’s hard for me to see how Johnson could get back to the table when the other side’s terms clearly didn’t change. Now he is locked up. No deal has, for many years, been a substantial risk, mostly because, for many on the right, it was always the goal and the “only true Brexit.” If we go down that path, it is in the strategic interest of the EU to make it more difficult. And they would. “
