A Brexit deal could be closer than we think

The government set out today its reasonable worst case scenario for business disruption when the UK leaves the EU on January 1st. It is based on the presumption that just 50% of big businesses and 20% of small and medium-sized businesses will have the necessary paperwork to export to the EU from January, and that as few as 30% of large goods vehicles will have the necessary paperwork to cross the border into France, creating tailbacks of up to 7,000 lorries in Kent.

Survey findings suggest that the model’s numbers are in line with the current state of business preparedness, and that a worrying 43% of businesses are expecting the Brexit transition period to be expected despite the fact that the deadline for such action has long passed.

Michael Gove, Chancellor of the Duchy of Lancaster, who is in charge of no-deal Brexit planning, also confirmed that a regulatory border could be set up to block trucks without the right paperwork from entering Kent, in order to protect local infrastructure. Large goods vehicles without a “Kent access permit” would be turned away by police using automatic number-plate recognition.

Gove, eager to emphasise that the scenario is neither a prediction nor a forecast, told the Commons: “It’s just a prudent exercise in setting out what could in the worst circumstances occur if we don’t improve preparedness, and of course, if our neighbours decline to be pragmatic. … This government is committed to doing whatever it takes to help business, and we’ve brought in a comprehensive series of measures to help businesses and individuals adapt to the changes ahead.”

Measures to soften the blow include a simplified guide to paperwork on Gov.uk, a £705million investment in new border technology and infrastructure, more than 1,000 extra border staff, £80million in grants for organisations to recruit and train new customs agents, and a large PR campaign – “Get Ready” – encouraging businesses to take up the available opportunities. Most of these have been in place for months, however, and appear to have produced dismal results in terms of business preparedness.

The Labour Party has framed the scenario and the accompanying business survey as another example of grand government incompetence, alongside its handling of coronavirus. “It has been estimated that ten new IT systems will be needed to make our new trading relationship with the European Union work,” said Rachel Reeves, the Shadow Chancellor of the Duchy of Lancaster. “Given that we were promised a [coronavirus] contact tracing app – first in May, and then in June, and then in July, and it is now September – what assurance can the Minister give that this time the government will deliver vital technology?”

Reeves added: “We just have 100 days until the end of the transition period. Labour’s message to both sides in this negotiation is clear: stop the posturing and start negotiating. It is in our national interest – it is in all our interests – that the government get a deal, and they get it soon, so that businesses do have time to prepare.”

However, on this front, there are signs of some progress. EU Chief Negotiator Michel Barnier met his British counterpart David Frost for informal talks today ahead of next week’s negotiating round. It comes after Barnier expressed surprise in a recent meeting with EU officials at the UK’s willingness to compromise in the last round, particularly on fisheries, despite the Internal Market Bill chaos playing out in the background. Downing Street has also slowed down the bill’s progress through parliament, making room for a deal to be struck that eliminates the need for the controversial clauses regarding Northern Ireland.

Indeed, multiple sources now suggest there is a clear window for a deal, the potential shape of which is there for all to see. It would require the UK to accept shared principles on state aid, with an independent legal regulator and a dispute resolution mechanism, but fall short of the EU’s opening demand of dynamic alignment and ECJ jurisdiction. Downing Street’s concerns over the EU’s powers to use Northern Ireland to influence the rest of the UK customs union could then be “clarified” by the Commission, allowing Boris Johnson to claim victory.

Compromise on fisheries and the City of London would likely quickly follow, given Number 10’s rumoured flexibility on fish quotas in the last round of talks and the EU’s apparent olive branch on financial equivalence on Monday, allowing European banks to continue to access UK clearing houses for another two years.

Whitehall is clearly concerned about the lack of business preparedness for any Brexit, let alone one in which there is no agreed trading arrangement. Combined with the pressures of a potential second wave of coronavirus, this may result in a big push for a deal in the coming weeks. There is still all to play for.