Brexit Back on Track as we look to Build Back Better

As Boris Johnson and EU Commission President, Ursula Von der Leyen, embarked on Brexit talks this afternoon (Monday 14th June), it is hoped that the country will experience more than one ‘restart’ as our non-essential stores re-open their doors which, rather like the Brexit negotiations, have been impassable for some time.

The parties were joined by European Council President, Charles Michel, and European Parliament President, David-Maria Sassoli, who pointedly noted that a "broad and ambitious agreement" was their goal, being “in our mutual interest”.

Far from a broad and ambitious agreement Brexit talks have so-far stalled over ‘gateway issues’ -- the retention of the ‘level playing field’ (or core social, environmental and consumer standards), remaining in lock step over state aid and fishing rights. Lobbies, such as the CBI, fear we’re not even getting close to clarifying issues such as product standards, qualifications, financial services passporting, until these gateways are ‘passed through’.   There’s been a resigned feeling about the 30th June deadline for extending the transition period which runs to end December - an option which has anyway been repeatedly ruled out by the government.

The negotiating argy bargy has continued with the UK government recently suggesting it could modify its ask and give up on a “zero-tariff, zero-quota” trade deal so it does not have to adhere to EU standards and state aid, with the EU responding by stating that a trade deal with tariffs on goods would “never happen” in the outstanding six month period.

But following the talks held 15th June, the PM suggested a deal should be "done in July", concluded by December, and that both sides had agreed to intensify talks over the coming month to find an "early understanding on the principles". He added, "I certainly don't want to see it going on until the Autumn/Winter as I think perhaps in Brussels they would like. I don't see any point in that so let's get it done."

Perhaps this will provide the ‘political push’ the CBI has been asking for. They have made it clear that without this it won’t be possible to get the civil servants together to deliver what is required because for them it’s not all about policy positions but about having the ‘go ahead’ to negotiate over the summer months.

Speaking last week at a CBI daily webinar briefing, Nicole Sykes, the CBI’s Head of EU Negotiations, reaffirmed that business organisation’s position as a ‘big fan of getting a deal’ which they continued to push for recognising that the government had stated they would not extend the transition period. “The deal we are heading for is much lighter touch than we would have wanted,” she said. “It looks as though it will be good on some services elements – data flows for example, but business will face significant barriers. The UK is looking for a number of annexes where there would be some areas of alignment but the EU is not looking at these at present or discussing them. But even this will be better than a no-deal Brexit.”

Explaining that the UK had worked hard to reduce conflicts around the EU deal in terms of the USA trade deal Ms Sykes stated, “The civil service knows we need two huge deals with our single biggest market and our single biggest country market. They have tried to keep these separate without any cross over. Decisions are still awaited around technicalities but we have to see where these go. The civil service have changed the timetable around the US deal and it looks like being a post-election deal now.”

She acknowledged that businesses were starting to prepare for a no-deal Brexit again, recognising that the government here, as elsewhere, had been fully focussed on Covid-19 with civil servants being pulled over to work on this emergency. “From a business perspective it’s what do you do about the regulatory environment,” she asked. “Last time when we were facing a no-deal Brexit there were a number of technical notices on the UK and EU side to create exceptions and easements for services and goods movements. These were removed earlier this year as we now look like we are saying no-deal Brexit from day one. If there is not going to be any extension of transition or an implementation period then easements coming back will be essential. Let’s not kill the food supply chain in the event of a no-deal Brexit.”

Professor Anand Menon, Director, The UK in a Changing Europe, speaking at the same CBI briefing, highlighted the divergence between the business and political timetables with business wanting an early deal so they could prepare and politicians wanting to run down the clock. Although David Frost, the UK’s chief Brexit negotiator was saying he wanted a deal by end September so business could prepare, it would  already be too late by then. He said, “No-deal Brexit is more likely than it’s ever been. We are pinning all our hopes on an Autumn deal, but that’s when we could have a second Covid spike…No-deal used to be a massive big deal. Now it’s virtually no big deal. Businesses need to start preparing for a no-deal Brexit which is now a perfectly plausible outcomes.

“Talk about tariffs will take longer. This will require impact assessments. The thinner the deal the harder it will be to conclude before the end of the year. Politics is the big fear. If we undermine the political trust between us and our 27 closest neighbours this matters to the mitigation of the economics of no-deal Brexit, to crime, terrorism and the many other collaborations which will suffer.”

Professor Menon bemoaned the lack of good interaction between business and government stating, “Government is berating business which it thinks does not see the opportunities for Brexit. But this relationship needs to function well for our country to function well.

Last week we saw the release of the first output numbers for April. Aviation output fell 92.8%, car output by 90.3%, food and beverage services down 88.5%, hotels by 86.9%. With 9 million people on furlough and some industries such as high street retail and aviation facing structural challenges, unemployment is forecast to increase anything from 9% to as much as 20%.  In light of current deprivation levels across the region, the Midlands Economic Forum (MEF), warns in its latest monthly report for May that ‘demographic stability’ would be ‘tested’ should regional unemployment accelerate past 12%. Employment demand, they highlight, has been weakening since the Q3 last year according to PMI data. In the past two months it plummeted in the West Midlands to a low-point of 26 in April. With national unemployment projected to reach 9%, MEF notes that in the previous 2009 peak post the global financial crisis, regional unemployment was almost 3% higher than that nationally.   Add to this recent announcements of job losses by Jaguar Land Rover to cut 1,100 agency staff on 15th June, brick manufacturers, Ibstock and Forterra, cutting 600 jobs, Churchill China in the Potteries losing 250 jobs. In the East Midlands Rolls-Royce announced 9,000 redundancies, Travis Perkins, headquartered in Northampton 2,500 job losses (15th June) and Triumph in Hinkley announced 240 lay-offs at the start of the month. And this small sample is sadly just the start.

Now, more than ever pragmatism needs to trump ideology. Especially if we are going to ‘Build Back Better’.  Recent research showed more than half of people surveyed by Ipsos MORI believed the UK should request an extension to the transition period so the government could focus on COVID-19. A second and later sample showed a growing proportion wanting to see the transition period extended with two-thirds (65%) in favour, and just 31% against any extension. Young people aged 18-24 years were far more likely to be in favour an extension at 85%. Given these views and the huge challenges facing us there needs to be some really good reasons why we would forge ahead with a poor deal or even worse a no-deal Brexit this year.

15th June 2020

Postscript: ONS Unemployment data released 16th June 0700:

UK Claimant Count level increased by 125.9% since March 2020;
Number of people on payrolls is down 600k ;
Number of vacancies at a record low for May;
February to April 2020 saw a record quarterly fall in the number of self-employed (down 131,000) ;
March to May 2020 saw the largest quarterly decrease to the vacancies total since the current series started in 2001;
There were an estimated 771,000 young people (aged 16 to 24 years) in the UK who were not in education, employment or training (NEET) in January to March 2020; this was an increase of 6,000 compared with January to March 2019 

West Midlands has the second highest unemployment rate at 4.8% after the North East at 5.2%

Associate Professor Beverley Nielsen is Director at the Institute for Design & Economic Acceleration (IDEA) at Birmingham City University. She is Senior Fellow at the Centre for Brexit Studies, BCU. Beverley is also a Councillor on Malvern Hills District Council and Mayoral Candidate for the Liberal Democrats in the West Midlands.

Beverley and Dr Steve McCabe are due to publish their latest book ‘English Regions After Brexit’, in July 2020, to be launched 30th July and available from Bite-sized books.

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