The Government must set out a detailed vision for a Brexit “transitional” period or risk losing the confidence of business that it can successfully manage to move to a new relationship with the EU, the Institute of Directors (IoD) warns today.
A report from the bosses’ lobby organization hints at rising frustration among the business community about the lack of clarity from Downing Street, warning that “sound bites are no substitute for policy” on Brexit.
In recent weeks cabinet ministers including leading euro sceptics like Liam Fox, the International Trade Secretary, have opened the door to a time-limited transition arrangement for Brexit, but details of what it would remain in practice remain obscure.
Theresa May is billed to make a major speech in early September clarifying Britain’s vision for its future relationship with Europe, including a possible transition, but Whitehall insiders say that deep and unresolved divisions remain in cabinet.
Peter Lilley, a leading Eurosceptic, questioned the need for transitional arrangements at all this week in an article for The Telegraph, accusing remainders of relying on them “like drunks use a lamppost – more for support than illumination”.
However, the IoD report, entitled “Bridging the Gap”, argues that because negotiators will only sketch out the post-Brexit relationship in “broad” terms in the EU-UK Withdrawal Agreement, a transition period will be needed to cover the gap between the two.
“Interim arrangements would, therefore, deal with the bridging period during which the UK and EU would negotiate the technical detail of new regulatory cooperation outlined in the withdrawal agreement’s framework for future relations,” the IoD report says.
The Government, which later this month will begin publishing between eight and ten position papers covering key areas of Brexit, has resisted providing details for fear of revealing the British negotiating stance and weakening the UK position at the talks.
However, the IoD argues that “engaging in discussion about objectives is not tantamount to revealing our negotiating hand” and urges the Government to “signal to industry and enterprise that an orderly exit is not just sound-bite but an active policy objective.”
The compact 10-page paper by Allie Renison, the head of EU and trade policy, lays out the spectrum of options, beginning with the extension of the Article 50 negotiation, which must be done unanimously by the EU, but would be the most comprehensive way to retain the status quo.
A second avenue would be for the UK to join the European Economic Area (EEA) – the so-called ‘Norway option’ – which would give the UK effective single market access, but would require an exemption for the UK from bureaucratic ‘rules of origin’ checks.
However, both sides indicating that these options are either politically unpalatable or too legally complex and time-consuming, the report explores a list of alternative measures that would effectively mirror existing arrangements and keep trade moving.
These include porting over the EU’s Common Customs Code in the forthcoming Customs Bill, agreeing to maintain the Common External Tariff that ensures goods can cross EU borders freely and accede to the Common Transit Convention to smooth passage for hauliers.
Other ideas to reduce EU-UK trade frictions during the transitional period include setting up a joint EU-UK customs cooperation committee and Trade Contact Group.
A final, more radical idea, which is envisaged in the EU’s own negotiating directives, would be for the UK to agree to continue applying the entire body of EU law, or the acquis, for the transitional period – this would be comprehensive but would effectively remove any independence of action from the UK.
Whatever the final choice, Ms. Renison said it was vital to stress that a transition was not a substitute for an end-state agreement, but a means of reaching that goal without excessive disruption.
“If discussing interim arrangements helps progress negotiations on the financial settlement – or vice versa – then it’s an added impetus for doing so,” she told The Telegraph.
“But the main point here is that soundbites are no substitute for policy – the Cabinet rapidly need to come to a collective decision on this as an object that is part of the withdrawal agreement.”