It is hard to see how the sort of comprehensive deal the UK and EU say they want can be agreed without an extension, a new report by academic think tank UK in a Changing Europe finds.
The report, The Brexit Negotiations: A Stocktake, finds:
- Time is short to conclude a deal (negotiators have set autumn deadline for ratification and implementation). The EU has never concluded a trade deal this quickly and if it involves tariffs, the EU argues, this would be even more time consuming.
- The economic impact of leaving the EU at the end of the year with no deal in place – trading with the EU on WTO terms (what the government calls an ‘Australia-style’ deal) – would be serious.
- The political ramifications of a no deal would be severe and strain relations between the two sides, making collaboration significantly more difficult.
- There are real concerns about business readiness for the new trade regime with the EU (deal or no deal), especially as they will be dealing with the furlough scheme ending and are already in a precarious position trying to recover from the pandemic.
- There has been some progress on meeting the UK’s commitments to have the arrangements agreed under the Northern Ireland Protocol up and running by the end of the year – but there remains a lot to be clarified and business will struggle to be ready.
- Even with an extension, the gap between the two sides is currently very significant in key areas – level-playing field rules, fishing, security – and cannot be bridged without considerable movement by one or both, which they do not seem willing to move on.
- Extending the transition after the June deadline will be legally very complicated and there is little guarantee it can happen.
- It is hard to see how a new immigration system will be up and running by the end of the year. Should it not, this will have significant practical and reputational effects.
Professor Anand Menon, director of the UK in a Changing Europe, said: “It is little surprise the talks last week did not make any real progress.
“If the Government sticks to its guns and refuses to ask for an extension to transition, it is hard to see either how a deal can be agreed, or how the necessary preparations for either deal or no deal can be carried out by either the government or businesses”.
Professor Jonathan Portes, senior fellow, UK in a Changing Europe, said: “Covid-19 pandemic and Brexit are major shocks for the UK economy. The interaction of the two is complex and unpredictable, with the potential to amplify some impacts while moderating others.
“On balance, the pandemic probably does make the economic risks of exiting transition on January 2021 without a trade deal larger, but considerable uncertainties remain.”
Professor Catherine Barnard, senior fellow, UK in a Changing Europe, said “The Withdrawal Agreement provides a legally simple route to extension of the transition period. If that route is not taken, there is serious legal trouble ahead if both sides decide they need more time.”