04 August 2017

The sequencing of talks was supposed to be the Brexit “row of the summer” with the EU. But Joe Owen says that the real wrangling is a UK internal debate over whether and what sort of transition we want.

Key Cabinet members appear to be using the Prime Minister’s holiday as an opportunity to jostle for position on what any transition might look like. The Chancellor used an appearance on the Today programme last week to advocate a transition that looks remarkably similar to the status quo, while the Transport Secretary pushed the possibility of no transition whatsoever. Number 10 intervened to talk of “no off-the-shelf solution”.Not all transitions are equalThe Government acknowledges that some sort of “implementation phase” will be required for Brexit, but pressure is mounting for it to confirm what this looks like in practice. The CBI is calling for a transitional "bridge", and the Institute of Directors has highlighted some of the options.

Like the final deal, there are different models for transition. There are some readymade options – remaining full members (or extending the Article 50 period), EEA membership, customs co-operation – and there is the bespoke option.

Each of these bring their own implementation requirements. Anything other than a replication of the status quo will require change in place by March 2019 and in some instances that change is significant. The ease with which each option can be negotiated will vary, with a bespoke deal likely to be most complex – indeed, potentially as complex as the final deal.

But for many, a transition agreement of any shape or size is an important way of buying some time and establishing some certainty.

With no guarantee of what the future UK-EU relationship will look like or when it will become clear, government and business have no option but to prepare for the worst: the no deal scenario. There are some who favour this ‘clean exit’, but for those preparing for ‘day one’ it is the biggest change in the shortest time frame, with the greatest chance of disruption.The longer it takes to agree, the less valuable a transitional period isPreparing for a clean break on March 2019 leaves little time to make big changes. Government will need to establish new public bodies, take new powers and set up new customs systems. Meanwhile, business will need to adjust supply chains and adapt to new laws.

However, until there is agreement on a transition or the final deal, these preparations must continue full steam ahead.

A transition agreed this autumn would give government and business time to catch their breath, readjust plans and make full use of a new timeline. It could open new options around technology or infrastructure that simply aren’t viable in the current timescales.

A transition agreed at the 11th hour in 2019 would mean significant effort would already have been expended on the no deal scenario. Government and business will be so far down the track of preparing for a clean break, money will have been spent and contingency plans will be in place. The value of any transition would be considerably less.But the cliff-edge is a useful negotiating tool Despite the calls for clarity on transition, negotiators will not want to play their transition cards too early. This is perhaps true for both sides of the negotiating table, but even more so for the EU Chief Negotiator Michael Barnier and his team.

They may see the cliff-edge working to their advantage in certain areas. As the March 2019 deadline draws closer and the temperature rises, it may make concessions more likely and prompt breakthroughs in areas of deadlock.

Agreeing a transition deal will only get easier as the cliff-edge approaches. When the complexities and costs of preparing for no deal in March 2019 become clearer, both sides will be more willing to mitigate it.

But there’s a careful balancing act to be done for both sides. Play the transition card too soon and you risk losing important negotiating capital, but wait too long and the transition becomes less and less valuable.

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