An early transition deal won’t avoid the Brexit cliff edge

The Brexit cliff-edge is coming in to view. The Article 50 period ends in just 15 months’ time when, unless an agreement is reached on transition, the UK will crash out of the EU.

The Government’s immediate priority is getting a transition deal by March, when talks on the future relationship are set to begin. It would be a vital release valve for those in government and business that are looking at their ‘no deal’ contingency plans and feeling the pressure rising rapidly.

Both the EU and UK seem to broadly agree on what a transition should look like – a complete standstill.

The UK has said it does not want businesses to have to make any changes, and the European Council has drawn up guidelines for the transition that would amount to continued EU membership for the UK, but with no participation in the political institutions. It seems the only thing the UK and EU don’t agree on is what to call such a period – Theresa May prefers to call it an ‘implementation period’.

But this consensus doesn’t make transition a straightforward solution to the Brexit cliff-edge.

If nothing is agreed until everything is agreed, that goes for transition too

The Government is desperate for a transition that offers business and citizens certainty, while at the same time removing the need for Whitehall to prepare for a ‘no deal’ scenario.

However, the Government is also keen to stress that "nothing is agreed until everything is agreed". Theresa May says the withdrawal agreement, including the Brexit divorce bill, is dependent on the UK getting some kind of future relationship agreed by March 2019.

If the withdrawal agreement can still fall through, then so can transition. Business is getting mixed signals from the Government. On the one hand, the risk of a cliff-edge in 2019 will be averted, while on the other it is still as big a risk as ever.

Agreement on transition by March is just the first step and it’s unlikely to be ratified until 2019

Even if the Government has no intention of walking away, there is only so much certainty it can offer on transition next year. A political agreement at the European Council in March is only the first step towards a legally binding treaty. The agreement will then need to be translated into a legal text with ratification and legislation before there is a cast iron guarantee that the Article 50 cliff-edge has been averted.

Neither can be considered a box ticking exercise. Guy Verhofstadt, the European Parliament’s Brexit Co-ordinator, says David Davis “damaged trust” by playing down the agreement reached in phase one. There are also reports that the European Court of Justice could shoot down a transition deal that lasts more than two years.

Back in Westminster, the experience of the EU Withdrawal Bill shows that Parliament is no rubber stamp.

Until ratification is complete and the Government has passed its withdrawal and implementation bills, there will be questions over the exact nature of the agreement.

And that might last right up to the eleventh-hour.

The only way to offer early certainty is extending Article 50 - but that brings its own complications

There is another approach. The UK could seek an extension of the Article 50 negotiating period, avoiding the need for a transition deal. An extension would require agreement from all 27 member states of the European Council, but it would not require ratification by either the UK or European Parliament and could be done potentially as early as the Council meeting in March.

There would be no risk of the deal collapsing at the eleventh-hour and no cliff-edge in March 2019. The UK would continue to have influence over EU rules for the duration of the extension.

But it would mean the UK remains a member of the EU beyond March 2019. That alone seems to be a deal breaker given the political implications. There will be opposition from the Conservative back benches and probably within the Cabinet.

It would also leave open the question of whether the UK would need to hold European Parliament elections, despite being in the middle of leaving, and whether the UK would have a role in making decisions that would affect the EU long after it has left.

Perhaps more importantly, reports suggest that there is little appetite in Europe for a significant extension of Article 50.

A transition won’t remove the Brexit cliff edge in 2018 – just delay it

The Government wants to agree a period of time where nothing changes. It will give businesses and governments a chance to adapt and put new systems and processes in place while avoiding the need for two sets of changes.

However, agreeing to a standstill transition will only defer the cliff-edge. To avoid it altogether, the UK and the EU will need to agree a ‘phased implementation’ of the future relationship, which can only happen once the details of that relationship are clear.

If Theresa May wants any sort of agreement on transition in 2018 she will need to accept that the cliff-edge can only be delayed, not averted. A transition of two years or so will buy important time, but the Brexit cliffs will quickly come back in to view.