The nuts and bolts of a model for Brexit
The Norway model. The Swiss model. The Turkish model. A CETA (the EU-Canada trade deal) inspired Free Trade Agreement. What kind of deal can the UK strike with the EU? And can businesses prepare for one of these options – or even for the possibility of leaving the EU without a transitional or future agreement in place in 2019?
The answer is: at the moment – no. The implications of each of these scenarios are far-reaching – affecting issues such as movement of people, tariffs, taxation arrangements, customs procedures – and the difference between each of these models is so significant, that it is currently too challenging to scenario-plan for any of these eventualities.
This is why many businesses are choosing to get on with their day-to-day work, and wait until there are further developments in the upcoming negotiations. Of course, there are some – such as those that use the UK as a hub into Europe, or businesses that were already looking to expand to the continent prior to the referendum – for whom Brexit has been a catalyst to strengthen their footprint on the continent.
For most other businesses, it is a question of wait and see. But when details start emerging on the future arrangements with Europe, the high-level discussion of models will need to be brought back down to earth. Businesses will not be concerned with how the deal will be called. Instead, they will want to know answers to questions such as: Will I now have to pay VAT on imports? What kinds of origin rules do I need to adhere to? Will I need to prepare myself for longer customs procedures? If my products go through phytosanitary checks in the UK – would they now have to go through a second set of checks in the EU?
These are the questions that will have the greatest impact on UK trade in the immediate term. Changes in areas such as taxation and customs will have significant implications for supply chains, for importers and exporters alike, for companies both large and small. But where a larger company can, should they wish, afford to think through potential answers to the above questions – SMEs will remain focused on the day-to-day running of their business, and wait until there are clearer answers.
And that is why, when significant progress is made in the negotiations, and future arrangements with the EU become firmer – the government must communicate this to businesses without delay. At the end of the day its companies that trade, not governments – so they must make sure not only to deliver the best deal for business but also take into account the tangible impacts and focus on the practicalities for firms.
Only when the future UK-EU trade ‘model’ is broken down into its practical nuts and bolts can Government truly enable companies to keep thriving in their trade with the EU – and beyond.