The UK and the EU have reached agreement on changes to the post-Brexit arrangements for Northern Ireland, known as the Windsor Framework. For businesses which don't have activities in Northern Ireland, the reaction might be: so what? But as we explain below, there are some important wider ramifications.
The Windsor Framework: what does it mean for businesses with no activities in Northern Ireland?
Short to medium term implications
- Reduced risk of EU-UK "trade war": without the deal, the UK Government might decide to proceed with the Northern Ireland Protocol Bill in its current form. The EU has made clear that it would see this as a serious breach of the Withdrawal Agreement and would be likely to take retaliatory steps, potentially including suspending parts of the UK-EU post-Brexit trade agreement, the TCA. This would be likely to have a detrimental effect on the economy as a whole. With the UK Government having indicated that the deal means there is "no legal justification" for the Bill, that risk is now greatly reduced (assuming the deal proceeds).
- Research and development: For businesses involved in sectors which are heavily focussed on R&D, the deal is important because the EU has confirmed that it will "unblock" the UK's application to participate in the EU's Horizon scheme for funding scientific research. That said, agreement is still needed over the exact terms of the UK's participation – so this is not yet a "done deal".
- Financial services: according to press reports, the EU may now be willing – subject to some discussions with the UK and uncertainty over the timetable - to sign the Memorandum of Understanding on financial services envisaged at the time of the UK-EU Trade and Cooperation Agreement and agreed in March 2021. Whilst this would not deliver any immediate substantive improvements, it would allow the Joint UK-EU Financial Regulatory Forum to be established, which was intended to serve as a platform for discussion of more concrete measures.
- State aid: the post-Brexit arrangements for NI will still need to be considered when assessing the legality of state subsidies and other forms of support, despite the UK's enactment of its new post-Brexit subsidy control regime. For more detail on the state aid position, see our briefing "The Windsor Framework: is it a good deal for business?".
Improvements to UK-EU trading relationship
Looking at the longer term, the deal could also open the way to improvements being made to the TCA, which is up for review in 2025 (although in principle there is nothing to stop the EU and the UK making changes to it ahead of this). For example, the parts of the TCA dealing with temporary service provision in the EU are widely regarded as sub-optimal; various accounts of the TCA negotiations suggest that the EU would have been open to going further on short term mobility for business people, had the UK been interested in doing so.
What about the Retained EU Law Bill?
Many businesses will also be hoping that a successful deal on NI and a "reset" of the relationship with the EU will encourage the UK Government to reconsider its approach to the Retained EU Law (Revocation and Reform) Bill, which is currently before Parliament. The Bill has been heavily criticised by a very wide range of stakeholders for effectively creating yet another Brexit cliff edge for business at the end of 2023, which is when large numbers of EU-derived measures would in theory be revoked. Rather like the Northern Ireland Protocol Bill, this strikes many as an unnecessary and damaging distraction from the key task of ensuring a return to healthy levels of growth in the economy. Click here for our briefing on the Bill.
The deal also removes a potential obstacle to the UK's application to join the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). With China also looking to join, other CPTPP signatories were thought to have misgivings about the UK's threat to breach international law by proceeding with the Northern Ireland Protocol Bill – but as noted above, the UK Government now accepts that there is no legal justification for it. That said, CPTPP accession is unlikely to bring significant economic benefits in the short term, as the UK has already agreed preferential trading arrangements with 9 of the CPTPP's 11 members. See also our interactive map of the UK's post-Brexit trade agreements.
But the deal isn't done yet
Having said all that, at the time of writing, the Windsor Framework was still in draft – and until it has been adopted by the UK and the EU, many of the potential wider benefits outlined above shouldn't be considered a "done deal" either. For a more detailed look at the new arrangements, including likely timing, see our briefing "The Windsor Framework: is it a good deal for business?".
Beyond Brexit: more information
As the level of debate surrounding the Windsor Framework demonstrates, the fallout from Brexit is not just a political issue and continues to be a live issue for business, despite the UK having left the EU and entered into a new, more distant trading relationship. For more information, see our Beyond Brexit client portal, which includes coverage of:
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