By Mark Titterington, Deputy Chairman, South East Conservative European Network
It is now more than eight months since I offered SECEN’s ‘Monitoring Brexit’ Conference a perspective on leaving the E.U. from someone who has operated at an executive level in a global business for many years. Since then, the Prime Minister has triggered the Article 50 mechanism for the United Kingdom to leave the European Union by spring 2019. We’ve also had a general election that has resulted in a minority government, with at least two schools of thought on what Brexit should look like, and five rounds of negotiation between the EU and UK, which have told us little about the terms of the divorce, let alone what a new relationship between the two looks like.
In fact, the only thing that we do seem to know is that the U.K. has, at least, recognised that business requires some certainty about its short to medium term operating environment. This means that some form of transition agreement lasting ‘around two years’ is needed and that ‘no deal’, (which must be planned for) would almost certainly be a disastrous outcome.
Given all this, I think it’s fair to say that business is, in the words of the Director General of the British Chamber of Commerce, ‘becoming impatient’. It’s no wonder because many businesses which trade across the single market are well into their next planning cycles that will take them across the March 2019 ‘Brexit date’.
For them, the question of whether their goods, services, and indeed, people can move across Europe, as freely as possible, is critical to the assumptions they will make about how and where to operate their businesses and the investments they will or will not make over the next five years and beyond. These are not abstract decisions but ones which have a fundamental impact on the people they employ and the local supply chains they sustain.
It’s why, in recent weeks and months, businesses ranging from Airbus, UBS, Goldman Sachs, AstraZeneca, EasyJet, and many others, have started to set out their own ‘red lines’, which effectively urge both sides to preserve as many of the current benefits of the single market as possible in a new relationship between the E.U. and U.K.
It’s why the Port of Dover advertised so prominently at the Conservative Party’s Conference. In doing so, they reminded Ministers and delegates alike that even a minimum disruption in trade between the U.K. and E.U. could lead to 17 mile traffic backlogs due to the additional time it will take to process the lorries flowing through the port.
I don’t believe businesses are doing this for political or ideological reasons – they rarely operate in that way, in my experience – but rather they are acting out of deep concern that many of the benefits of the single market, which contribute to such a favourable operating environment in the U.K., are going to be discarded with no alternative to sufficiently offset the losses.
Such an outcome would leave companies with no choice but to recalibrate their operations. This will particularly effect the many who are heavily integrated with the European economy and supply chains. At times, the point about the high degree of economic integration which has occurred, especially over the past two decades, between the U.K. and E.U. is either misunderstood or inexplicably ignored by those who have advocated a so-called ‘hard Brexit’. And this all impacts on jobs and livelihoods, ironically in many of the areas which voted most strongly to leave the European Union.
The trouble is that although the first warning signs of an economic slowdown are already there – the U.K. already has the slowest growth rate and weakest productivity in the G7 – there is a significant time lag in the impact of decisions taken by companies today feeding through to the individual and personal level, by which time it might be too late to reverse them.
Leaving the European Union is, as many commentators have remarked, the biggest challenge ever mounted by a government in peacetime. It’s as much a legal as a political challenge, because any agreement must be consistent and compatible with the EU’s own body of law as well as the U.K’s. That’s what makes the challenge of preserving the current benefits of the single market so difficult, given the UK’s resistance to freedom of movement and the longer term reach of the European Court of Justice.
It’s surely why Philip Hammond argues that we must not downplay the difficulties or underestimate the complexities of this negotiation. The Prime Minister is also correct to say that it will need creativity and flexibility on both sides, if we are to get this right. And get it right we must because it is people’s jobs and livelihoods which are at stake, and not just corporate profits.
Yes, the British people voted to leave the European Union and that must be respected. But they were not asked what kind of a Brexit they wanted nor the timeframe in which it ought to be implemented.
With that in mind, there is every reason for the necessary time to be taken to exit the EU on terms which are fair to all and to negotiate a future relationship which sustains and, indeed, enhances the mutual benefits that both of us have enjoyed over the past four decades. Looking ahead, a bespoke Association agreement between the E.U. and U.K. seems to be the best possible available route for achieving this.
Before any final agreement is reached, however, a comprehensive and transparent impact assessment should surely be carried out, so that everyone understands the upsides and downsides. No serious business would move ahead without such an assessment. It’s not clear why the standard in politics should be any lower, given the impact on all of us.
On the other hand, if the process is rushed and botched, it is likely that this, let alone a future, generation will ever forgive those responsible.
Brexit can be a success from all perspectives, including that of business, but only if negotiated by serious people on both sides that take the necessary time to understand the detail and do what is right and in the long-term interest of all. Reports from the recent Downing Street meeting with senior business leaders suggest that our political leaders are waking up to this fact.