Yesterday the new Brexit secretary Dominic Raab presented a 98 page white paper in the House of Commons which outlined UK government’s plan for a future trade arrangement with the EU after 2021. While EU’s reaction to it is far from being acknowledged, the business and economic implications of Brexit are predictable.
At Aspioneer we will be analyzing the paper in depth, since it is one the most significant events in the history of both the UK and the European Union. The impact of Brexit on businesses operating in UK will be immense. The white paper tells us how the Tory government is going to negotiate with the EU. Drawing immediate conclusions at this point would be irresponsible. However, our analysts have done a quick impact assessment which businesses can use as a guide in making future decisions. In the coming days we will do a detailed analysis of Brexit and its impact on the business world.
Key Proposals by the UK:
- Common Rulebook for UK-EU trade: The white paper proposes a “common rulebook” for UK-EU goods trade. It also suggests that the UK must stay in European Union’s VAT system after it has left the bloc. We think this proposal has been set up in order to avoid lengthy standard checks on products and industrial components when they cross the border.
- Holding on: The UK government offers to stay in the EU agencies which cover industries like chemicals, aviation and medicines. It proposes to does so by contributing to their running costs.
- Facilitated customs agreement: There is a commitment of a “facilitated customs agreement”. This would give UK flexibility to apply its own new goods trade deals with other countries while staying in EU’s customs union.
- New arrangements: The document also put forward “new arrangements” for digital and financial services trade between the UK and the EU.
- Reciprocal mobility arrangements: It suggests a “new framework” for free movement of students and skilled workers.
Implications for businesses
While the Brexit white paper has clarified the UK government’s ‘negotiation position’ of soft Brexit, businesses should expect new frictions. While many business leaders describe it as a ‘massive step forward’ and called for a collaborative response from EU, the financial service industry has describes the white paper to be huge dissapointment.
Policy chairman at the City of London Corporation, Catherine McGuinness, said: “Today’s Brexit white paper is a real blow for the UK’s financial and related professional services sector. With looser trade ties to Europe, the financial and related professional services sector will be less able to create jobs, generate tax and support growth across the wider economy. It’s that simple“.
The document allows UK to exit from the single market for services. However, as the financial services sector implies it is clear that the inevitable loss of the pan-EU “passport” to would be quite damaging.
“The sector has been clear since the referendum: Equivalence in its current form is not fit for purpose so any “enhancements” to this regime would have to be substantial. As the EU’s gateway to capital, the UK is a significant trading partner for the bloc. It’s in the interests of households and businesses on both sides of the Channel that an ambitious future trading relationship, covering services as well as goods, is secured. Failing to secure such a deal would put up unnecessary trade barriers and runs the risk of fragmentation of financial markets, increasing costs and reducing choice for consumers” McGuinness continued.
Though the UK government has worked pragmatically and productively for making trade frictionless between UK-EU, more work is needed in some areas especially like VAT. Dr. Adam Marshall, director general of the British Chambers of Commerce, said,” Even with the welcome direction of travel in the white paper, companies still don’t know how they’ll be paying VAT, how they can move people between offices, or whether goods will get across borders with a minimum of fuss.”
It is not just the financial sector which is feeling concerned. TV broadcasters have also raised eyebrows on the ‘no solution’ white paper released by the government. This is because the broadcasters in London would now need licenses in order to provide its services in any EU country after Brexit.
“We remain deeply concerned that broadcasters will have to reluctantly start restructuring within the next few months, and possibly within weeks for some companies.” alleged Adam Minns, the executive director of the Commercial Broadcasters Association
Many small businesses and professionals in sectors like law, accountancy, consultancy, architecture and advertising, which rely heavily on inter-company movement of professionals, are puzzled due to no clear insight into the government’s position on post-Brexit immigration policies.
“But the biggest question mark looms over what will replace freedom of movement. The government is right to prioritise an ambitious scheme on labour mobility with the EU, but businesses need to work from concrete proposals. We would urge the Government to bring forward its plans for post-Brexit migration, which should be at the heart of our future economic partnership with Europe.” said, Stephen Martin, director general of the Institute of Directors.
While the white paper presents some positive proposals for UK businesses, there are many sectors which remain in the dark when it comes to doing business with the EU. Needless to say the UK government must clarify concerns of many businesses in order to calm them down. If the Tories provide clarity on these concerns promptly, businesses in the UK will be in a better position to adjust to the coming reality.