Summary – Negotiating Brexit: Preparing for talks on the UK’s future relationship with the EU

The UK has secured a six-month extension to the Article 50 period, meaning it is unlikely to leave the EU before the end of October 2019. While the Government works to build support for its Withdrawal Agreement, it also needs to prepare for the next phase of negotiations, on the UK’s future partnership with the EU. If the current Withdrawal Agreement is approved, the UK will move into a transition period and begin negotiating its long-term relationship with the EU.

Those negotiations will be more complicated and wide-ranging than the first phase; covering trade and security co-operation, and involving issues as diverse as fisheries and financial services, intelligence sharing and intellectual property, student exchanges, and sanitary and phytosanitary regulation. Even if the UK leaves with no deal, it will still need to talk to its nearest neighbour and most important trading partner.

This report considers how the UK can prepare for this next phase of negotiations. It starts from the assumption that a Withdrawal Agreement is signed and the negotiations take place during the transition period. If this assumption proves incorrect and the UK leaves without a deal, much of the analysis is still relevant: although negotiations may pause for a time, the UK will still need to talk to the EU.

To be ready, the Government needs to take into account the different context of the next phase of negotiations. These negotiations will be much more complex than those on the UK’s withdrawal from the EU, and have the potential not just to determine the UK’s relationship with the EU for decades to come, but also to set the context for the UK’s relationship with other countries. As a result, many more departments across government will be involved; and the views of a much wider range of external groups will need to be considered before and during the negotiations.

The UK must have a better understanding of how the EU will approach the next phase, as well as the starting conditions set out in the Withdrawal Agreement and Political Declaration. The Government must also be mindful that there is still a risk of a cliff edge: if no deal is concluded by either December 2020 or December 2022, the UK will again face the prospect of a disruptive no deal exit – albeit into the ‘backstop’.

The UK needs to learn from what went right – and what went wrong – in the first phase of negotiations:

  • Negotiations succeeded where the UK decided on its objectives early and engaged with specifics. For example, while the decision to leave Euratom (the European Atomic Energy Community) was taken with little consultation, once negotiations began, the Government knew what it wanted and engaged key UK interests and EU counterparts early. With the financial settlement, the Treasury agreed the principle of meeting legitimate obligations upfront and then drilled down into the detail of what that meant in practice, while resisting demands for an upfront settlement.
  • The negotiations were bedevilled by the difficulty of getting Cabinet agreement on the shape of the future economic relationship. The shape of the security relationship seemed less contentious internally, but the Cabinet was split on how close the future economic relationship with the EU should be. This was only resolved in the Chequers white paper; a fragile compromise reached by the Cabinet six months after the EU agreed that talks on the shape of the future relationship could start. But because ministers were still unwilling to face trade-offs, the Prime Minister presented the Chequers position as the non-negotiable end point of negotiations, rather than a starting point.
  • Split responsibilities between No.10 and the Department for Exiting the EU (DExEU) caused tensions and ultimately proved unsustainable. The Prime Minister lost two Brexit secretaries during the negotiation – they were unhappy about being cut out of decisions and felt sidelined by the Prime Minister and her Europe adviser and chief official negotiators. This feeling of division at the top of the negotiating team was compounded by the secretive approach adopted by the Prime Minister and her advisers.
  • Politicians, particularly on the Government backbenches, did not trust the UK’s official negotiators. Politicians routinely criticised the UK civil servants conducting the day-to-day negotiations, particularly the Prime Minister’s ‘Sherpa’ and Chief Negotiator, Olly Robbins. Ministers, from the Prime Minister down, were unclear about the instructions they gave to officials, allowing political opponents to claim political decisions by the Government were made independently by the civil service. This undermined the work of those civil servants.
  • The Government engaged Parliament late, alienated the devolved governments and did not make use of external expertise. Parliament had to resort to archaic mechanisms such as the ‘humble address’ to get information from the Government, and was only granted a ‘meaningful vote’ on the Withdrawal Agreement after it fought for it. The Government’s approach to legislating for Brexit was criticised by the devolved governments and legislatures, which culminated in the Scottish Parliament’s refusal of legislative consent to flagship Brexit legislation in Westminster. Engaging a Scottish government committed to independence was always going to be challenging, but this does not excuse the failure to follow through on the Prime Minister’s early promises. However, engagement has improved more recently. In addition, the Government was slow to take into account the views of external groups including businesses, unions and non-governmental organisations (NGOs).
  • The ‘divide and rule’ diplomatic strategy cut little ice with leaders who rallied behind the European Commission negotiators. The UK tried to go over the heads of the EU institutions and go direct to member states – but this just reinforced the determination of the leaders of the EU27 to present a united front. The UK’s attempts to divide and conquer were not helped by tone deaf interventions by ministers and senior politicians designed to appeal to domestic audiences. The Government’s engagement strategy with EU embassies in London was also weak.

Preparing for the next phase

Preparations need to begin before the negotiations start

The UK and the EU have signalled their joint ambition to start negotiating the future relationship as soon as the UK Parliament gives the green light to the Withdrawal Agreement. But the time available to conclude an agreement by the end of transition in December 2020 is already very short and it is far from clear that the UK is ready.

The Government needs to be clear about its negotiating objectives

Negotiations will be shaped by the Government’s decision on what type of relationship with the EU the UK is seeking. The first decision, which will shape the whole negotiation on the economic partnership, is whether the UK is seeking an institutional relationship with the EU (based on the European Economic Area [EEA] and/or a customs union) or is seeking to negotiate a chapter-by-chapter bottom-up trade agreement. The Government should use the extension of Article 50 until October to come to a clear position on what it wants from the future relationship.

Before negotiations begin, the Government should publish a mandate that sets out its ambition for the future relationship. This should clearly set out the UK’s objectives for both the economic and security partnership. It should be ambitious, but needs to be developed with a clear view of what is negotiable. It needs to take account of wide external input to make sure it meets the business and operational needs of affected groups. This applies both to trade, where the EU rejected the Prime Minister’s Chequers proposal, and to the security partnership, where the current Political Declaration sets too low a level of ambition.

The mandate and detailed negotiating positions must draw on departmental inputs – but reflect an agreed, whole of Government approach. In Phase One of the negotiations, decision-making structures were created, but the negotiations suffered due to the inability of the politicians to make decisions and/or reconcile different positions – resulting in undeliverable objectives. A similar scenario would spell disaster for Phase Two. The Government will require detailed negotiating positions – and a clear strategy for achieving them – on everything from financial services, to participation in EU military missions. The Government will also need to define what it is not prepared to accept: when will the backstop be preferable to a deal? These positions should draw on shared analysis from across different departments, rather than relying on each department to produce their own, to ensure that decisions are being made on a shared evidence base. Ministers will also need to agree in advance where negotiators have leeway to move, and where they need to refer back for a further political decision.

The Government needs to be clear on negotiating roles and responsibilities

The Prime Minister should appoint a ministerial deputy, based in the Cabinet Office, to oversee the day-to-day negotiations. Theresa May is unlikely to lead the Government during the next phase of the negotiations. However, her successor as Prime Minister cannot oversee the day-to-day detail of the negotiations – but will be ultimately responsible for the final outcome. The next Prime Minister needs to appoint a senior Cabinet minister, capable of knocking departmental heads together, as his or her political deputy. But he or she must avoid the risk that they have a separate departmental agenda. As a senior Cabinet minister without a separate departmental agenda to advance, the Chancellor of the Duchy of Lancaster (currently David Lidington) would be the best person for this role.

DExEU cannot co-ordinate the negotiations: that role must fall to the Cabinet Office. Co-ordination by the Cabinet Office, as the trusted neutral secretariat, would avoid the confusion and conflict of Phase One. The Phase Two negotiations should be co-ordinated by a beefed-up Europe Unit, with a secretariat that draws on departmental policy expertise and the experience gained in the first phase. That secretariat should perform the dual role of supporting UK negotiators and the decision-making machinery in London.

Ministerial and official structures should enable decisions to be made quickly, based on the best available evidence and expertise. Negotiators need to be able to refer up for quick decisions whenever they reach the limit of their mandate. Those decisions can be prepared for ministers by a senior cross-departmental officials’ group, but need to be taken by ministers, with the most important issues going to a top-level committee chaired by the Prime Minister. Those decisions should not only be able to draw on shared analysis, but also operational expertise from beyond core government departments.

The Government cannot afford to ignore the trade expertise in the Department for International Trade (DIT). The EU is likely to run the trade part of the negotiation out of the European Commission’s trade department, DG Trade. In other countries, the natural lead in negotiating a future trade relationship would fall to the trade department. But the initial division of labour in the UK gave EU negotiations to DExEU and confined DIT to negotiating with everyone but the EU. All indications are that DIT will play only a limited role in negotiating the economic partnership with the EU. Given how limited trade expertise is in the UK Government, it makes no sense to cut out the department where that expertise is supposed to reside – and the Government needs to remove any barriers to using that expertise.

The Government needs to build an effective engagement strategy

The Government should engage Parliament and the devolved administrations early. The Prime Minister has provided assurances that Parliament will be consulted on the mandate for the future relationship – but has yet to say how. The Government should allow parliamentary time to debate the mandate for the future relationship negotiations and provide Parliament with the analysis underpinning its decisions. The Government must develop effective mechanisms for engaging Parliament early on in the process and keeping it informed throughout the negotiations. Likewise, the Government should continue to engage the devolved administrations at the beginning and throughout the negotiations. The Government should also give the House of Commons the chance to approve the final agreement with the EU.

The Government needs to be much more receptive to outside input into its plans. The EU made a virtue of its transparency and willingness to engage during Phase One, whereas the UK was secretive and defensive, and failed to engage properly with Parliament, the devolved administrations, business groups and civil society. If the Government is serious about negotiating a future relationship that works for the whole UK, that needs to change. The Government needs to establish effective structures to allow all these groups genuine input. There needs to be a real willingness from the Government to use and engage with that external input so there is genuine dialogue rather than the one-way flow that characterised Phase One. DIT is developing such structures for future trade negotiations, and those may be useful for the economic element of the future partnership.

The Government needs to get the tone right for its engagement with member states. The Government’s faith in its ‘divide and rule’ attempts to go over the head of Michel Barnier and Taskforce 50 (the body created within the European Commission to formulate the EU’s position and negotiate with the UK) and appeal to the self-interest of individual member states, was one of the biggest failures of Phase One.

In Phase Two, EU member states will have very different interests, and the European Commission negotiating team will have to manage them – so the UK needs to make sure it understands those, drawing on its network of embassies and the UK mission in Brussels as well as engage with EU embassies in the UK. The Foreign Office was largely sidelined in Phase 1 of the negotatiations, a major error which must not be repeated. It needs to have a strong voice in the Government’s decision-making process and the UK needs to start with a genuine interest in what each country wants and cares about. It also needs to pay particular attention to any possible veto players, given the need for unanimity in Phase Two, as well as how to influence potential supporters.