The UK’s Brexit preparations must now begin in earnest

The deadline for extending the transition period under the Withdrawal Agreement has now passed. The UK will leave the single market and the customs union at 11pm on 31 December. This means individuals and businesses, on both sides of the channel, must now prepare for a substantial change in their economic and security relationship – whether a deal is agreed or not.

Signing an agreement in autumn will not avoid disruption in winter

Both the EU and the UK still believe that a deal can be done. Negotiators are entering a period of intense talks aimed at reaching a compromise on the key sticking points, namely fisheries, the level playing field (particularly state aid), governance arrangements for the future relationship and co-operation on internal security. But even if a deal is signed by the 31 October deadline Michael Barnier, the EU’s chief negotiator, has aired, both sides need to step up preparations for significant changes at the end of the year.

These negotiations are not like the withdrawal negotiations. Earlier this year, when the UK finally left the EU with a deal, the transition period meant that very little changed on the ground. At the end of this year, even if the UK and EU can negotiate some form of free trade agreement (FTA), there will inevitably be some disruption on day one – unless the two sides agree to add a further ‘standstill’ period into the agreement (which is firmly not on the table at the moment).

David Frost, Barnier’s UK counterpart, said in February that there will be a “one-off cost” as a result of leaving the single market and customs union. But while No.10 is keen to present the overall cost as a “one off”, this does not reflect the reality. There are big up-front costs in establishing new processes, from new admin systems to the personnel to run them. There will be ongoing costs as businesses meet the burdens of trading with the EU – including for those exporting goods to the single market under the Northern Ireland protocol. Many services firms have already had to set up subsidiaries within the EU to allow them to remain operational in EU member states, and it will become more expensive to recruit EU citizens to UK businesses.

This will bring fresh disruption at a time when the UK is likely still tackling the economic fallout from coronavirus.

Leaving the EU will make it harder for law enforcement authorities to co-operate

Much of the focus of the current debate is on the economic relationship with the EU. But as a member of the EU, the UK has access to arrangements that facilitate co-operation on criminal justice and policing. This too will cease.

Both sides have said that they want to reach an agreement on continued co-operation – but certain measures are only open to EU member states or countries that are part of the Schengen Area, like Switzerland. For example, the UK is set to lose access to EU-wide databases officials currently rely on to aid criminal investigations. This will likely include the ECRIS criminal records database, and the Schengen Information System (II), for which UK access was negotiated when Theresa May was home secretary, and which provides information on missing or wanted people and goods.  

Where agreement can’t be reached, the UK will need to be prepared to rely on alternative mechanisms for co-operation – but these fallbacks are more cumbersome and limited in scope.

The government has a huge task in persuading businesses to be ready

The government will find it much harder to get businesses ready this time around. Responding to the coronavirus pandemic has taken up all the bandwidth of most businesses, and the lack of detail about what exactly business will need to prepare for has compounded the problem. Many may just hold out until the outcome of negotiations is clearer.

The government’s own preparations have been slowed by coronavirus – the Border and Protocol Delivery Group was only able to share a proposed border operating model with industry two weeks ago, three months later than planned. And there are still significant gaps about how the border will actually work. Industry urgently needs to know what will happen at the UK border on 1 January 2021.

While the government has announced easements on imports from the EU into Great Britain to reduce the burden on businesses on day one, these are not as extensive as those planned for the possibility of no deal in October last year. There is also a question about whether the additional six months (to July 2021) in which traders can complete full customs declarations will just store up problems.

And they will not apply to exports: the EU has no intention of reciprocation and will impose the full panoply of checks – so traders will need to be fully prepared to comply with those obligations to avoid Kent becoming a lorry park.

​The government still needs to make progress on the Northern Ireland protocol

Nor do these mitigations apply to shipments from Great Britain into Northern Ireland. Under the Northern Ireland protocol, the UK must ensure goods moving from Great Britain to Northern Ireland comply with EU rules on customs and regulation from the end of the year – and implementing this in full is as much of a priority to the EU as the future relationship negotiations. Failure to do so could even see the UK hauled in front of the European Court of Justice.

While the publication of a command paper in May was welcome, Northern Ireland businesses still have a long list of questions about how the border will operate in practice. And a senior official in the Northern Ireland executive recently told a Northern Ireland assembly committee that the most the executive can try and deliver is “a minimum viable product to keep product moving and keep food on the shelves on 1 January 2021”.

With the fifth round of the future relationship talks ongoing this week, the mood is largely positive. But what UK businesses need most now is detail – and this has been lacking. The government is running out of time to fill this in.