Just over a week after the “last possible date” for an agreement on the terms of the UK’s exit from the EU at the October summit, it looks like the shape of a deal might finally be emerging. As well as setting the terms of departure, an agreement will enable the transition period (currently scheduled to run until December 2020) to take effect. Without an agreement the UK will leave the EU with no deal in place on 29 March 2019, causing massive disruption to many areas of business and daily life.
Despite this, it’s still hard to be certain that any deal will be accepted by the Cabinet and Parliament. On one hand, there seems to be no realistic chance that the UK can actually prepare for a no deal exit between now and March – to give one example of this, a National Audit Office report last week concluded that it was very unlikely that 11 out of 12 critical border IT systems could now be implemented by that deadline. On the other, any deal expected to be on the table will include a long-term commitment to avoiding a hard border on the island of Ireland, through either a special status for Northern Ireland (seen as creating a border in the Irish Sea) or continued alignment between the whole of the UK and the EU. Many Conservative MPs and a significant number of Cabinet ministers have stated that they will not accept either of these arrangements.
This means that the immediate future is very difficult to predict and contingency planning for no deal remains important.
So how would no-deal affect the South West in particular? Well, the general disruption to everything from animal exports to air travel covered in the Government’s no-deal papers applies nationwide. On the bright side, the region’s industry has relatively little dependency on just-in-time supply chains and may not see the level of disruption facing (for example) Midlands carmakers. Domestic tourism into the region has already seen a boost with the decline of the value of the pound which would likely continue in the event of no deal being agreed; as a major food-producing region, the South West could also benefit if the UK needed to produce more of its own food supply.
Nevertheless, studies from the Government’s own assessments in February this year to a more recent report have suggested that the region would see a major impact on growth so the hope has to be that some form of deal is reached to mitigate these effects.
In the midst of this we have a Budget – unusually early, and generally thought to have been brought forward in order to prevent disgruntled Conservative and DUP MPs using the Budget vote to vent their frustration at any Brexit deal that may be agreed in the next few weeks. Because the Budget is taking place before the outcome of negotiations is known, it is likely that keen Brexit-watchers will be disappointed by the lack of any definite announcements by the Chancellor and will have to make do with general promises of large-sounding amounts of money for contingency planning. In this context it’s important to remember that the Government’s weakness in Parliament also affects the Chancellor’s room for manoeuvre, and he is unlikely to be able to win support for the tax-raising measures that would be required to fund significant new spending.