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Keep the champagne on ice for now

Friday, 19 October 2018
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Friday, 8 December 2017

As widely reported in the press, the European Commission has announced that, in its view, "sufficient progress" has now been made to allow Brexit talks to advance to the next stage (including discussion of the UK's future relationship with the EU).  

It is undoubtedly good news that "sufficient progress" appears to have been made – if it hadn't, the time left for discussions on the remaining matters which need to be agreed (particularly the pressing issue of transitional arrangements) would have been extremely tight.  It is also good news that agreement in principle seems to have been reached on citizens' rights and money – which were highly sensitive issues for both sides and could easily have derailed the talks. 

It may be possible for business to draw some comfort from the "backstop" position on Northern Ireland – which appears to be that, unless the UK can reach agreement with the EU on other ways to avoid a "hard border"  between Northern Ireland and the Republic of Ireland, it will continue to align itself with "those rules of the internal market and the Customs Union which, now or in future, support North-South cooperation, the all-island economy and the protection of the Good Friday (Belfast) Agreement." 

But the final decision on whether "sufficient progress" has been achieved will be made by the European Council at its summit meeting on 15 December 2017 – and until that has happened, celebrations may be premature.   Assuming that the Council gives the go-ahead for talks to move onto other issues (including the shape of the UK's future relationship with the EU), there are a number of other reasons why any champagne should probably be kept on ice for the time being:

  • Emblazoned in large font on the front of the joint EU-UK document issued today is the caveat "nothing is agreed until everything is agreed";  this indicates that "Phase 2" issues could still cause the "in principle" Phase 1 agreement to unravel at a later stage.
  • There is very little of substance in the documents on transitional arrangements, which is the key issue for business in the short to medium term.  In particular, according to the European Commission, there were no discussions in Phase 1 on separation issues relating to IP rights, customs related matters, use of data or ongoing public procurement procedures.   This may make it difficult to reach agreement in principle on transitional arrangements early in 2018, which is what many businesses will be looking for if they are to avoid activating contingency plans in the first quarter of 2018.
  • The citizens' rights agreement only applies to EU citizens who are legally in the UK at the exit date – so there is still no clarity for business on the extent to which they will be able to rely on EU migrants entering the country after Brexit as an important part of their workforce (for more information please view our Employment briefing here)

In conclusion, whilst today's announcements are encouraging, a great deal remains to be agreed in "Phase 2" of the Brexit talks.  As a result, our view remains that businesses should continue to hope for the best, whilst planning for the worst.

Brexit