Brexit Update: Political Declaration - PKF Francis Clark
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Brexit Update: Political Declaration

Thursday saw the release of the text of the Political Declaration (PD) agreed between the Prime Minister and the EU negotiating team.

This text sits alongside the Withdrawal Agreement (WA) published last Wednesday and outlines the intentions of both parties for the future relationship between the UK and EU following the end of the transition and backstop periods.

Unlike the WA, it is not legally binding on the parties.

In a carbon copy of last week’s events, Theresa May gave another mammoth statement to Parliament, dealing with questions for over two hours.

Like last week, the reaction to the document was overwhelmingly hostile with almost as much dissent from her own backbenchers as from the opposition. The biggest issue continues to be the Irish backstop arrangements, which opponents of the deal didn’t consider to be addressed by the PD, but the level of uncertainty about the ultimate arrangements was also a major concern, with fears that the Government was planning to pursue a ‘blind Brexit’ appearing to be justified.

In some ways the PD doesn’t get us much closer to knowing what Brexit will really look like as it seems very unlikely that the current proposals will pass a Parliamentary vote due to declared opposition from around 90 Conservative MPs.

However, if it were to pass, what does it tell us about the future relationship?

Unfortunately the answer is still ‘not much’. The PD is drafted widely and, as Theresa May was keen to point out, provides for a broad spectrum of outcomes on the main contentious issues. In reality this means it contains a large number of contradictory aspirations, reflecting the gap between what the UK wants as a non-member and what the EU is prepared to offer. Most difficult issues have been kicked further down the road for resolution during the transition period, meaning a further 18 months (or more) of uncertainty. Nevertheless the PD has narrowed the scope of outcomes in some areas.

This is not a soft Brexit.

The PD does not provide for frictionless trade, and would see some non-tariff barriers created if it was implemented. In particular, ‘Chequers’ is dead, with the concept of a new common rule book being conspicuously absent. The UK will not be a member or associate of many EU bodies and financial markets access will be as an external country.

The transition may go on for some time

This is connected to the previous point, because the lack of regulatory alignment and frictionless borders remains a major issue for resolving the Irish border issue. Although the PD contemplates the oft-proposed ‘technological solutions’ solving the problem, there’s no realistic technology in sight at present. In the absence of other solutions, and given how unpalatable the backstop arrangements are, opting to extend the transition at the June 2020 review date seems probable.

Fisheries will be a major issue

Theresa May insisted that access to British waters would not be traded for wider market access, but the text of the PD anticipates a deal for shared access to UK and EU waters. The EU remains clear that the UK will not get favourable access to export fish to EU markets without a deal for access. This is politically significant because it risks losing the support of the 13 Scottish Conservative MPs.

The WA and PD were considered at a special EU summit this weekend

There has been some opposition from EU members, with Spain in particular expressing discontent about arrangements relating to Gibraltar. The bigger risks to the deal are the Parliamentary vote and the ever-present threat of a Conservative leadership challenge. It’s likely that we will know more about the direction of travel by the end of next week, but whether that will be a drift towards a further referendum or reluctant acceptance of the deal as drafted is hard to call.

In the meantime, businesses have very little new information on which to plan. The key takeaway now is that, although the length of the transition period is unknown, the future arrangements will involve some trade barriers. This means it is increasingly important to develop plans to protect business that crosses the UK’s border with the EU.

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