No deal Brexit preparations

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What is the UK doing to get ready for no deal?

The UK’s no deal readiness is about more than just government – it means public bodies, individuals, and above all businesses taking action to prepare.

Preparations for a no deal exit have been taking place since the referendum in 2016. The government ramped up its preparations in summer 2018, when it started publishing a series of ‘technical notices’ on how public bodies, businesses and individuals needed to prepare for no deal.

The EU’s preparations for no deal are another critical factor in determining how ready the two sides are for no deal.

Will there be any legal gaps in the event of no deal?

The government originally said that it would need to pass several bills to manage the domestic impact of no deal. It has since passed bills on taxation, healthcare and road haulage. The remaining bills, including the Trade Bill, Agriculture Bill, Fisheries Bill, Immigration Bill and Financial Services Bill, do not need to have passed by 31 October but will all be needed in the weeks and months after no deal.   

The government passed the EU Withdrawal Act in 2018, which is necessary to repeal the European Communities Act 1972 and copy EU law into UK law after Brexit to ensure continuity. But it also used the powers in the Act to pass hundreds of statutory instruments. Many of these are uncontroversial, as they simply remove references to EU institutions and other aspects of membership. The Government had passed almost all of the necessary statutory instruments by March 2019 and is expecting to have completed all the remaining changes – including some additional ones – by October.

How much progress has the government made on preparing for no deal?

The government has provided no comprehensive update on how far it has got on preparing for no deal. A government paper published in February 2019 said it was “on track for just over two-thirds of the most critical projects.” However, the report did not explain what those critical projects are, which ones are not on track, or what the government is doing to get them back on track.

In February 2019, the National Audit Office (NAO) published an updated assessment of the government’s preparations for the UK border in the case of a no-deal exit. The assessment found that the successful delivery of certain new IT systems needed for no deal is “in doubt”. It also found that Border Force has made significant progress on recruiting new staff needed to manage the border in the case of no deal.

Since a long extension to Article 50 was agreed with the EU in April, the government has not published any further assessment of the state of no-deal preparations.

Although since March preparedness has improved in some areas, where the government has been able to complete necessary projects or agreements, in other ways the UK is now less ready for no deal than it was before the original Brexit date: for example, key officials have left or changed jobs, while many businesses are reluctant to spend money replicating the short-term preparations they made previously.

The government needs to put in place the new systems, staff and agreements with other countries that will be needed once the UK is no longer part of the EU framework. The table below gives more detail on each area of government business:

Issue

Challenge

Progress to date

The border Ensuring that goods can continue to flow across the UK border (particularly at Dover and in Northern Ireland)

The UK has committed to continuing to recognise most EU standards for goods to ease their transit into the UK. However, the EU has said it will check imports from the UK as it would imports from any other non-member, putting major burdens on businesses.

HM Revenue and Customs has been communicating with businesses about the new customs processes they will need to follow if there is no deal, but many businesses are still unaware of the changes they will face. The government has also been vague on its plans for managing the border with Ireland: no new information has been published since March, when a high-level set of temporary measures were announced.

Citizens and migration

Protecting the rights of EU citizens in the UK and UK citizens in the EU

Establishing a new migration regime

The UK has made a unilateral offer to EU citizens. Those in the UK on or before 31 October 2019 can gain settled status as they would if there was a deal – but there will be fewer rights for them in areas such as family reunification.

The Home Office is putting in place a registration scheme for EU citizens who arrive after October 2019, which would in effect see EU citizens able to come to the UK as now for a period. The rights of UK citizens in EU countries are the responsibility of each individual member state.

Agriculture, fisheries and food Maintaining food supplies and establishing new UK regulatory regimes

The government has said that it will continue to allow EU-approved agri-goods into the UK after a no-deal exit. But UK exporters would need to get approval before being able to export any product of animal or plant origin to the EU. After that, they will face greater checks than now and will have to pass through a border inspection post.

There will also be problems exporting animal products to other countries if current EU agreements have not been replaced. The UK has said it will replace EU funding for farmers until the end of the current payment cycle.

There is no clarity over the UK’s approach to fishing quotas after Brexit.

Health Maintaining medical supply chains

The government will continue to accept EU-approved medicines and medical products. The EU has said that UK companies will need to re-register their medical products in the EU to continue to sell them in the Single Market.

The government has asked pharmaceutical companies to build “buffer stocks” of key items to deal with any interruption to supply. It also plans to buy warehouse space and secure additional freight capacity for shipping medical goods to the UK (as it did in March). The government has committed to prioritising medicines at the border and believes that “if everyone… does what they need to do, the supply of medicines and medical products should be uninterrupted”.

Transport Creating new databases, new infrastructure and ensuring cross-border travel continues uninterrupted

Increased border checks at EU ports will potentially cause traffic delays in Kent, while UK hauliers and coach companies will no longer be able to serve the EU market. The EU has only put in place limited and temporary measures to mitigate road transport disruption, and many of these will expire at the end of 2019.

Flights to the EU and many other countries around the world are governed by EU agreements, which the UK is working to renegotiate on its own behalf.  The government expects to have all these aviation agreements in place by 31 October. The EU has also said it will unilaterally allow some UK–EU flights to continue for 12 months after a no-deal exit, subject to the UK reciprocating.

Services Preparing for changes to regulatory regimes and terms of access to the EU market

The UK government has committed to unilateral actions to minimise financial disruption in a no-deal scenario, including a temporary permissions regime allowing EU financial services firms to continue operating in the UK for a limited period while seeking UK authorisation.

The EU has committed to a similar temporary permissions regime for some key financial services sectors, for a very short time, on a unilateral basis. For non-financial services like telecoms and broadcasting, firms may need to re-register their services in an EEA country.

Energy and environment Creating a new nuclear safeguards regime, replacing other functions currently carried out by EU agencies

The UK will no longer be bound by EU regulations in these areas, making trade more complicated. It will also lose access to EU regulators and systems governing these areas. The Office for Nuclear Regulation will take over some EU functions and is in the process of procuring a new IT system, training new inspectors and has secured funding for its increased role.

The UK has promised a new environmental watchdog to replace EU functions. However, this will not be in place until 2021 at the earliest – so any complaints cannot be dealt with until then.

Data Securing an “adequacy” decision to allow data flows to continue

It will not be possible for organisations inside the EU to send personal data to the UK after a no-deal Brexit, until its data protection regime has been found “adequate” by the European Commission. This process takes several months and cannot start until after the UK has left.

Competition Beefing up the Competition and Markets Authority The Competition and Markets Authority is expanding to handle an increase in the volume and complexity of its cases, as it takes on the responsibilities of the European Commission in monitoring state aid and other competition policy in the UK.
Law and justice Finding replacements for EU tools allowing cooperation in law enforcement

The UK cannot recreate the EU’s existing cooperation mechanisms on its own: it will have to rely on outdated or less secure methods to work with EU counterparts, as the EU’s tools are only for member states or countries with special agreements.

Sajid Javid, then Home Secretary, wrote to his counterparts asking for contingencies to be in place – there has been no move from the EU to agree these.

EU programmes and funds Replacing EU funding for research, infrastructure and agricultural subsidies, among other areas The government has guaranteed that UK beneficiaries of EU funds will continue to receive funding until the end of 2020 – this will be funded by HM Treasury. Many of the payment mechanisms exist already; it will just be the source of funding that changes.
International agreements Replacing the UK’s access to the EU’s agreements with countries around the world

The government has ‘rolled over’ trade agreements with a number of countries, including Switzerland, Chile and Israel, as well as agreements on aviation services with a number of key countries, including the US, Canada and Brazil, and nuclear agreements with partners including Australia and Canada.

However, we do not know what, if any, concessions the government is having to make to other countries to secure these rolled-over agreements. Moreover, some countries have refused to roll over agreements: Canada for instance has refused to roll over its trade agreement with the EU.

What are the devolved governments doing to prepare for no deal?

The Scottish and Welsh governments have also been preparing for a no-deal Brexit. The Scottish Government has warned of the impact of leaving with no deal and has made funds available for firms to adapt to post-Brexit trading circumstances. Scottish Finance Secretary Derek Mackay has insisted however that “regardless of how much planning or contingency work we do, it will not be possible to allay every impact of a ‘no deal’ Brexit”.

The Welsh government has produced a website setting out its preparations and providing advice to businesses on how they can prepare for no deal, but First Minister Mark Drakeford has nonetheless warned that no deal would be “catastrophic” for Wales and could even cause civil unrest.

How is the government helping business and the public prepare?

Given all the new processes and systems that the government will be setting up in the UK, there will be a lot of new British bureaucracy for businesses to deal with, including filling out customs declarations, changing labels on food products and getting export health checks for exports containing animal products. 

In the run up to March, the Government launched a communications campaign to alert businesses to actions they need to take ahead of a no deal exit. This includes letters from HMRC to businesses that will face new customs procedures and a website with information for businesses.

However, this campaign was far from successful: the government’s February 2019 paper assessing the impact of no deal stated that “there is little evidence that businesses are preparing in earnest for a no deal scenario”, and HMRC estimated that only one in five of the most at-risk businesses had done the minimum to signal they were actively preparing for no deal.

Moreover, many businesses that did make significant preparations for no deal in the run up to 29 March found themselves at a competitive disadvantage relative to those that did not and may be reluctant to expend yet more money preparing again.

Businesses have criticised the government for a lack of information about what they need to do to prepare for no deal. Key issues include the lack of warning of the UK tariff regime after a no-deal exit and the government’s plans for the border between Northern Ireland and the Republic of Ireland. The government has committed to provide further information on both of these issues.

In July 2019, the government announced that it would be spending £100m on a new advertising and information campaign to warn the public about the need to prepare for no deal.

Who is responsible for managing no-deal preparations?

Under Theresa May’s premiership, the Department for Exiting the EU (DExEU) had primary responsibility for co-ordinating preparations for the UK’s departure from the EU. However, each department was required to develop and implement plans in their areas of responsibility. As 29 March approached, civil servants were moved from across government to support no-deal preparations. At its peak, there were 16,000 officials working on Brexit.

More recently, new Prime Minister Boris Johnson put Michael Gove, the Chancellor of the Duchy of Lancaster, in charge of no deal preparations. As the Chancellor of the Duchy of Lancaster is based in the Cabinet Office, it is as yet unclear how this will affect the role of DExEU.

Finally, Operation Yellowhammer, the government’s contingency planning for the most severe disruption, is organised through the Civil Contingencies Secretariat based in the Cabinet Office.

How much is the government spending on no-deal preparations?

Since 2016, £4.2bn of spending has been allocated to Brexit preparations, although not all of this has been on no deal.

In August 2019, Chancellor Sajid Javid announced an additional £2.1 billion spending on no-deal preparations specifically. £434 million will be spent on ensuring medical supplies, £344 million will be allocated to new border and customs operations (including hiring 500 new border guards), and £108 million will be spent on helping businesses adapt.  

 

Update date: 
Thursday, August 1, 2019
Authors: David Klemperer