Once again, the Brexit negotiations seem to be at an impasse. Although at a detailed level there are news stories every day describing the latest proposed compromise, backbench rebellion, change to red lines or extension to the transition period, the overall picture remains remarkably static, with the EU demanding that the UK finds a way of delivering on its December commitment to an Irish backstop, and the Prime Minister looking for a compromise that can keep her Cabinet on board and get through Parliament.
Just to recap on recent events, the October summit held in Brussels last week was until recently seen as the latest realistic deadline to reach an outline deal, with an ‘emergency summit’ pencilled in for November to finalise the details once agreement was reached. However, negotiations broke down the weekend before the summit, with the EU demanding that the UK should either accept the ‘Irish backstop’ to meet its December 2017 commitment to prevent a border on the island of Ireland, or present an alternative proposal to achieve the same outcome. Theresa May’s room for manoeuvre on this point is severely limited by the refusal of many of her MPs to accept any form of non-time-limited alignment arrangement, and her reliance on Northern Ireland’s DUP MPs who have made clear that they will withdraw their support if she signs up to any commitment which creates new barriers between NI and the rest of the UK.
Over the weekend, there were rumours that the Government were considering an extension to the transition period (currently scheduled to end December 2020) in order to provide more time to resolve the Irish border question so that no backstop would be required. The Prime Minister made a statement to the House of Commons this week in which she said the withdrawal agreement was ‘95% settled’ but confirmed that an extension was now a possibility. She also said that the UK would offer a UK-wide customs territory in an effort to break the impasse. However, she reiterated that no backstop arrangement could be ‘indefinite’ which the EU are likely to see as incompatible with the December 2017 commitments.
The latest proposal does not seem to address the EU’s key objections and contains elements such as the joint customs territory which are unlikely to be acceptable to those Conservative MPs who prioritise the UK being free to make its own trade deals after 2020, so it remains hard to see progress being made in the immediate future. The November ‘emergency summit’ has been cancelled due to the lack of progress and December is now being talked about as the ‘last possible date’ for an agreement to be reached. The stakes are increasingly high, as if no deal is reached, the transition period will not come into force leading to an immediate ‘cliff-edge’ exit on 30 March 2019.
Daniel Sladen, Brexit Lead at PKF Francis Clark said “The UK’s 30 March 2019 exit date is growing ever nearer and we are encouraging businesses to take professional advice on the steps they can take to future proof their operations. If no deal is reached the transition period will not come into force leading to an immediate exit at that point. This means that businesses who would need to have restructured their operations by 30 March really need to be starting to implement changes now”.