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What is next for UK trade with the EU?
17 May 2018
As the negotiations approach the second half of the year, the details of the Withdrawal Agreement are being agreed. Whilst this is not expected to be finalised until after the summer, attention is now turning to what comes after the end of the agreement, and David Davis has stated he wants a political document on the framework of the new deal to be adopted in October.
Nearly half of the UK’s goods are exported to the EU and 54 per cent of imports to the UK come from the EU, affecting the supply chains and trade in goods of many London business. It is vital that the UK and EU get the trading relationship right – not just for London, but for European business too, particularly in Germany and Ireland.
With trade talks expected to continue during the transition period, business and citizens on both sides are unlikely to know the detail of a new deal any time soon. This is largely because the UK Government’s negotiating positions have remained unclear, complicated by the Government recently being defeated in the House of Lords on two key issues relating to the Withdrawal Bill. One amendment gave MPs the power to stop the UK from leaving without a deal or to make the PM return to negotiations, and the other included an amendment that would force the government to explain what it has done to pursue remaining in a customs union.
We have laid out the options for the future UK-EU relationship, and several possible future deals have been proposed by different organisations, based on the UK’s and EU’s red lines. For now, though, the stumbling block remains solving the transport of goods across the Irish border. The Cabinet is currently considering continuing adhering to EU customs rules for some time after the transition period, but the EU is unlikely to accept this. Overall, the Cabinet has been arguing over which of two proposals to endorse that would solve the border issue for the UK: a customs partnership, or “maximum facilitation”. Both have been rejected by the EU.
The customs partnership would involve British customs officers collecting the EU’s taxes on imports on the bloc’s behalf and conducting all the same border checks on goods arriving, even though the U.K. won’t be a member any more. Companies whose products don’t end up in the EU will be refunded any difference in taxes, because British customs processes will be tracking those goods as they move.
The other option, that Brexit backers would accept, is known as “Max Fac,” short for “maximum facilitation.” In this scenario, the U.K. designates some firms as “trusted traders” and uses new technology to minimize — but not totally eliminate — the need for border checks. The problem is, any new frontier procedures are unacceptable to Ireland and, by extension, the EU. This would put the overall deal in doubt.
To keep our capital working for all of the UK, we need a deal that protects frictionless trade with our largest trading partner in the world. As we approach two years since the referendum we look forward to offering members expert insight into the negotiations at an event with Lord Liddle in June. Watch this space.
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