Last reviewed 30 November 2020
The negotiations between the UK and the European Union over their future relationship have been all about time ever since Prime Minister Theresa May set a deadline for completing Brexit. This is not how trade negotiations normally work: most of the EU’s major deals have taken years of detailed meetings — seven in the case of Canada, five to reach agreement with Japan — and have been open-ended with no fixed conclusion date.
Brexit supporters pointed out that this sort of time span would be pointless in the UK’s case as it was already closely aligned with the EU, so reaching a deal would be simple. Indeed, in Boris Johnson’s famous phrase, the deal was “oven-ready” before the two sides even sat down. Unfortunately, both sides brought fixed demands to the table that neither has been prepared to abandon. Compromise has been thin on the ground but seems to be the only way out of the impasse in which the two sides find themselves as the talks head for the final deadline.
In the midnight hour
It has become something of a cliché during the months of negotiations that the EU never concedes in negotiations until the 11th hour but, as one German MEP pointed out recently, it is now “five past 12” given that both the UK and EU Parliaments still have to find time to ratify a deal that has yet to be agreed with just four weeks to go to the end of the transition period. And that period includes Christmas!
It has proved impossible to meet previous dates, of course, as 29 March and 31 October 2019 both came and went with the UK still a Member State. However, the latest date, 31 December 2020, seems set in stone. This is because Prime Minister Boris Johnson has said that he is prepared to leave without a deal and has several times passed over the opportunity to extend the current transition period, even when the arrival of a global pandemic offered the ideal excuse to put the talks on hold. Time has been lost to coronavirus as some meetings had to be held online during the first lockdown and then a positive test led to a period of isolation for the EU team. Barring the most spectacular U-turn of Mr Johnson’s career, however, there will be no extension, so only two options remain on the table as the clock ticks on.
Deal or no deal
No deal has always been an option for Brexit supporters, although it has been sometime since the mantra “no deal is better than a bad deal” was being regularly repeated in the House of Commons. More worryingly, the EU side has started to make similar comments in recent weeks with Commission President, Ursula von der Leyen, going on record to say that the EU was ready for the possibility of Britain leaving without a new trade agreement in place. The EU needed to be able to retaliate if Britain undercuts labour or environmental standards, she went on. It also wanted long-term predictability for its fishing industry, still a major sticking point despite the industry adding only 0.02% to the UK’s GDP.
Even if a degree of compromise does creep into the increasingly fractious discussions, the lack of time will almost inevitably mean that a comprehensive deal is impossible. The most probable outcome remains an outline agreement that avoids the worst of the forecast chaos at the UK-EU borders on 1 January and leaves the door open for future detailed talks that could well continue for several years to come.
Would no deal really be a better bet?
Think tank the New Economics Foundation recently added another to the list of doom-laden forecasts that trade organisations have been putting before the Government even since the referendum. Turning away from the more usual warnings about problems with moving physical goods, it produced a report arguing that, if the UK failed to reach an agreement with the EU on data protection, the ensuing disruption to EU-UK data flows could cost UK companies at least £1 billion. “Data adequacy agreements are essential for the operation of thousands of British businesses, from enabling online trade to powering media research collaboration,” the report pointed out.
The car industry has repeatedly highlighted its need for access to unhindered supply chains after Brexit and now it too has put a figure on the likely damage caused by no deal. The Society of Motor Manufacturers and Traders (SMMT) has warned that “WTO tariffs would strike a £55.4 billion blow to the UK automotive sector by 2025” as no deal would see vehicle production cut by two million over the next five years. SMMT President Dr George Gillespie said: “We’ve already spent nigh on a billion pounds preparing for the unknown of Brexit and lost 28 times that to Covid. Let us not also be left counting the cost of tariffs, especially not by accident.”
Although it did not feature in the Chancellor’s statement to Parliament, the Office for Budget Responsibility (OBR) considered the possibility of a no-deal Brexit in its report released alongside Mr Sunak’s Spending Review. It said that the “material risk” of no deal would knock 2% off GDP growth in 2021, significantly hampering the UK’s recovery from the massive shock of this year’s pandemic. A no-deal Brexit would also, the OBR forecast, cause unemployment to peak at 8.3%, rather than 7.5%.
When will the whistle blow?
Ireland’s Prime Minister Micheal Martin recently added to the list of metaphors used to describe the countdown to a possible deal when he said that “sometimes you can get a good result in extra time”. That may be the case but if so, when will the referee blow for full time? The general view in Brussels seems to be that the last meeting of EU leaders for 2020, to be held on 10 December, would be the final chance for a deal to be passed by them and recommended to the European Parliament for ratification before the Christmas recess. The only problem with Mr Martin’s comment, of course, is that even after extra time, some games end as a draw — and then we go to penalties.