Only the beginning of the Government’s ‘no deal’ Brexit preparations

The Government has published the first batch of a series of ‘technical notices’ setting out what no deal would mean for a variety of industries and other actors across the UK. These notices start to explain what a no deal Brexit would mean for the country. They also show how reliant the UK is on the EU to mitigate the worst of these impacts.

Crucially, these papers do not yet provide all the answers that people and businesses need. And in many areas, no deal planning still assumes that the UK will get some kind of deal.

No deal will mean more paperwork and red tape for businessesThe papers set out how things work now, what leaving the EU with no deal would mean and what the Government is doing to mitigate the worst impacts. In some areas, such as workers’ rights, the paper says that the majority of the relevant EU legislation will already be on the UK statute book by the time we leave. This means that even when EU law no longer applies to the UK, existing rights will be maintained.

In other areas, the papers reveal just how much could change. For example, companies that rely on EU exporting or importing would need to provide customs declarations and potentially pay tariffs (although the Government hasn’t said at this stage what its tariff policy will be). This would be a huge increase in the amount of paperwork these businesses currently have to manage. HMRC have said that this kind of bureaucracy could cost business up to £20bn per year.

Similarly, UK-based medical companies will have to register their products with both the UK and an EU regulator if they want to maintain access to both markets, rather than just one as they currently do.

The outstanding issues are the more controversial areasToday’s batch of 24 (with one overview document) are less than a third of the expected total. An obvious omission from today’s list is how the Government will protect the rights of EU citizens living in the UK, one of the most sensitive issues in the withdrawal negotiations. There have been reports that the Government will unilaterally guarantee all their rights, but this was not confirmed today. Even if the Government does take this step, it will not end the uncertainty for Brits living in the EU.

Another fundamental issue in the withdrawal negotiations, and the one that might eventually lead to no deal, is the Irish border. Today’s papers do nothing to square that circle, simply ‘recognising the very significant challenge’ without proposing any solutions.

For many areas, the Government doesn’t want no deal to mean no dealSeveral papers state that the UK hopes to negotiate some form of arrangement with the EU, or with individual countries, even in no deal. This would be necessary, for example, to ensure that UK financial firms can still provide services across the EU. But the EU’s own no deal notices, published over the last few months, make clear that UK authorisations on products and services will no longer be accepted among the other 27 member states, meaning UK exports to the EU would be treated like those from any other ‘third country’.

The two sides are planning for the same outcome but on a different basis. The UK’s worst-case scenario plans appear to involve some kind of agreement with the EU – even if a no deal scenario would see it walking away with £40bn that the EU believes it is owed. It’s not clear on what basis that assumption has been made – or if it is at all credible.

Even where the UK can take unilateral action, this will take the form of continuing to recognise EU rules on products or services. While this would minimise the barriers on trade coming into the UK from the EU, it is unlikely to be reciprocated.

These papers only scratch the surface Once everyone digests these papers, businesses will have to decide whether to take the steps that the Government recommends. For many, this will take months – particularly if the exact details are still unclear. 

There is a lot for the Government to do. As well as setting up the various approval processes mentioned for EU businesses operating in the UK, they need to pass hundreds of pieces of secondary legislation to provide legal certainty ahead of day one outside the EU.

Much more work will be needed to get ready for no deal – and even then, not every problem can be avoided. This is the beginning, not the end, of that preparation.