EPRS | European Parliamentary Research Service, Eva-Maria Poptcheva and Carmen Cristina Cirlig, Members’ Research Service

Following the referendum held on 23 June 2016, the UK Government formally notified the European Council on 30 March 2017 of its intention to withdraw from the European Union, officially triggering a two-year negotiating period stipulated under the EU Treaties (article 50 TEU).

The negotiations opened on 19 June 2017 in Brussels and aim to reach a conclusion on the terms of the Withdrawal Agreement by the Autumn 2018, in time for the EU Member States, the European Parliament and the UK Parliament formally to approve this ahead of the Brexit departure date of 29 March 2019. However, the negotiations have been difficult, particularly on issues concerning the Irish border with the UK and the status of Northern Ireland and may continue well into the last quarter of the 2018 or even beyond.

The initial phase of the negotiations covering withdrawal issues such the financial settlement, citizens’ rights and avoiding any physical infrastructure or related checks and controls on the Irish border officially concluded on 15 December 2017, following the European Council’s decision that ‘sufficient progress’ had been reached.  The EU and UK have also provisionally agreed a 21-month transition period to last from the end of March 2019 to the end of 2020, during which time the UK as a whole, will remain in both the EU Single Market and Customs Union, although able to negotiate trade agreements with other countries for implementation after this date.

With only a few months left before the UK formally leaves the EU, there remains uncertainty about the direction of travel of the negotiations.  Both sides hope to succeed in finalising the Withdrawal Agreement, but difficulties remain over the EU’s demand that the UK sign up to a legal ‘backstop’ guaranteeing no hard border on the island of Ireland. The need to reach agreement on this now in turn impacts on the nature of the future EU-UK trading relationship: the EU insists that the four Single Market freedoms (goods, services, capital, and people) are ‘indivisible’, while the UK has been seeking to remain part of the Single Market for goods, but not services, and states that free movement of people will come to an end. The EU Council is due to issue a political declaration to coincide with the Withdrawal Agreement, setting out the basis for the future EU-UK trading relationship at the end of the transition period.

Even if the initial Withdrawal Agreement can be finalised, many details may remain to be resolved and a possible cliff-edge at the end of 2020 remains a concern. What sort of cliff-edge depends on the outcome of negotiations on the post-transition trading relationship. At present, the trajectory appears to be towards a Free Trade Agreement similar to the EU-Canada Comprehensive Free Trade Agreement (CETA), avoiding the need for all tariffs but falling short of the UK government’s original aims. Calls for the UK to reconsider its position or for there to be a second referendum are unlikely to disappear in the months ahead.

Businesses for whom the UK is an important export market, or UK businesses that trade with the rest of the EU, need to prepare for all scenarios. While positions on the terms of the Withdrawal Agreement appear to be converging, time is short. The contours and more detailed substance of a future trade agreement are yet to be determined and the next few months offer a key window of opportunity for businesses to make their views, concerns and preferences known to decision makers in London, Brussels and other EU capitals. Only companies who become more agile in an inherently uncertain political environment will be in a position to maximize their bottom-line opportunities and secure their interests.

How Fipra can help

Fipra can help firms assess potential risks, plan for the different scenarios that may arise, and engage with policy makers to ensure that their concerns are heard and understood. Our Brexit practice draws on the expertise of our senior advisers, with experience of both the EU institutions and complex trade negotiations.

Fipra’s Brexit team includes Lucinda Creighton (former Minister of European Affairs in Ireland, including during the 2013 Irish EU Presidency), Juan Prat y Coll (a former Director-General for External Affairs within the European Commission and former Spanish Ambassador to Italy and the Netherlands), Peter Chase (former Vice President, Europe for the US Chamber of Commerce, with responsibility for negotiations on the Transatlantic Trade and Investment Partnership) and Dirk Hudig, the Head of our Brussels office and formerly Secretary General of UNICE (now BusinessEurope).

With offices in Brussels, London and every EU Member State, Fipra is in a unique position to draw on political insight and analysis from across our network, providing up-to-date assessments of the direction in which negotiations are moving and advice on next steps. For more information please call Daniel Furby on +32 2 613 2828 or contact: brexit.team@fipra.com