Published Tuesday 21st July 2020
2020 has been a turbulent year for business. For some of us, Britain’s prolonged exit from the EU feels like a distant memory, although it’s certainly something that companies should be keeping in their long-term focus.
The UK economy is preparing for a period of prolonged recovery following sharp economic declines as a result of COVID-19 lockdown measures. As a result, Brexit negotiations in the coming months arguably take on even more significance than before.
A Brexit Re-Cap
The United Kingdom officially left the European Union on 31st January 2020, effectively bringing to an end debates that had overshadowed British politics since the EU Referendum in 2016.
Leaving the Union triggered a ‘transition period’. During this time, the relationship between the EU and the UK is mostly the same concerning business and trade. During this period, the UK and EU are to hold talks over a future trading and cooperative relationship, which will include all aspects of our partnership going forward, from economic trade to security and beyond.
This transition period will end on 31st December 2020, something which has been enshrined in law by the UK Government. The regulation means that, if no agreement can be reached by this deadline, the ‘No-Deal Brexit’ feared by many businesses would come into force. Both parties are keen to avoid this outcome.
July 2020: Brexit Latest
The EU-UK negotiations were already expected to share the same difficulties as previous Brexit talks. However, recent global events have amplified these concerns.
The latest negotiations between the UK and EU parties have taken place over video conferencing platforms, due to restrictions as a result of coronavirus. The consensus from negotiators and analysts is that talks are behind schedule, as no basic framework for the future relationship has been agreed.
While the coronavirus pandemic has slowed talks, both sides have stressed their desire to see more progress made during the summer. Furthermore, with the deadline set for the end of this year, it is expected that both sides will drastically increase the speed of talks as that period approaches.
There is no indication at this stage that a no-deal Brexit is likely. That being said, significant discussion points have been highlighted which are expected to dominate conversations over the coming months.
The Level Playing Field
One of the most significant points of conversation concerning the future trade agreement is the idea of the ‘level playing field’. In essence, this refers to concerns that the UK, free from its regulations, will be able to undercut EU businesses in terms of regulatory restrictions and state aid when trading with third parties.
The EU wants an agreement that forces the UK to remain regulatorily aligned to the EU as closely as possible, while the UK wants total freedom over its regulations.
The UK Government has since spoken about an independent body that can uphold these standards amongst both parties while freeing the UK of any written obligations. However, it is unclear how this argument will conclude as of this moment.
A Complete Agreement
A potential sticking point further down the line is the actual structure of the deal itself, hence a lack of one at this stage. The argument made by the UK and many businesses is that a free-trade agreement is imperative at this stage, and other aspects of the relationship can be negotiated at a later date. The EU, however, wants this year’s agreement to cover all aspects of the future relationship.
It is likely that, considering the hardships currently faced by both sides, a basic economic agreement could be tabled and ratified before the deadline, allowing for further discussions in 2021. However, this has not been agreed by either party at this stage.
Fishing, Borders and Enforcement
In terms of the deal’s contents, these are three sticking points that have emerged. In terms of fishing, the UK wants full access to the EU’s fish market, which the Union is unwilling to provide without equal access to UK waters. There are also growing concerns on the EU side that the UK may be unable or unwilling to deliver on all of its promises with regards to the land border in Ireland.
There are also growing discussions with how any of the trade agreement will be forced, with the EU demanding legal authority for the European Court of Justice over the regulations. This issue is something the UK government are keen to avoid, further highlighting the many divides yet to be closed.
Ensuring Brexit Preparation During Uncertain Times
What is clear is that Brexit is just as big a concern now as it was this time last year. However, recent events have made preparing for another economic change more challenging than ever.
A recent survey by the Institute of Directors found that three in four companies are currently unprepared for any changes next year following the UK’s exit from EU trade agreements. The next transition is particularly troublesome for industries such as manufacturing which rely on the regulatory direction which is yet to be agreed.
Unfortunately, a lack of certainty appears to be a theme for UK businesses over the last few years. The advantage, if one can be found, is that many of our firms have a newfound resilience which should help to pull them through this turbulent period. Here at Expense Reduction Analysts, we’ve been fortunate enough to work with major UK companies across multiple industries, helping to refine supply chains ahead of Brexit.
Here at ERA, our cost reduction consultants are specialists in their sectors and can work with you to help refine procurement procedures for long-term expense reduction. Our support can provide the stability and assurance that many companies are looking for during this time.
If you’re interested in how we could support your business, get in contact with our team today or explore our case studies to see our work in action.