Brexit signals new era for the UK, one of prosperity and greater control according to its advocates, but one of uncertainty and hardship according to its opponents. The deal agreed on Christmas eve is complex and spans over 1200 pages. This article attempts to boil down some of the key points.
The UK achieves “zero tariff, zero quota” goods trade and the EU keeps its cherished single market and Customs Union. Compromise can be achieved after all. Despite the lack of tariffs levied or restrictive quotas imposed, there will be a whole series of new customs and regulatory checks on exported goods. This will increase costs and cause headaches for many.
Fishing
The big issue everyone has been talking about. Under the deal EU boats are still allowed to fish in UK waters but they will give up 25% of their fishing rights over the next 5 years. In 2026 when this transition period runs out, the UK has the right to exclude EU fishing vessels from its waters. This is unlikely to happen and talks will continue as to how much of a right to UK waters EU fishermen will get. Unsurprisingly this has angered the UK fishing industry and was considerably less than the government had originally asked for.
Car Manufacturing:
The manufacturing industry will be hit hard by customs and regulatory checks. It will mean extra manpower and costs due to added administration. The rules of origin mean that a percentage of each product (car) must be made of a given percentage of parts from the exporting country. Parts from the EU are included in this for the UK but will cause problems with many parts coming from Japan and Turkey, resulting in more red tape and paperwork.
The electric car industry has been given concessions and the rules of origin will subject to a 6-year phase in. Important as most batteries currently come from Asia and manufactures need time to build capacity in the UK if the industry is to thrive in the country.
Farming:
It is a similar tale for the agriculture industry with export prices set to rise with increasing paperwork and administration costs. Animal products entering the EU must be inspected to ensure strict sanitary rules are being adhered to. It is being said that there are currently not enough vets to sign off on certificates that ensure each shipment complies with regulations. The British Meat Processors’ association says it will cost an added £300 per load for certification. In the short to medium term this will prove burdensome to exporters.
Financial Services:
The UKs biggest industry is getting ready for effectively a no-deal outcome. The deal currently means they lose the right to trade in EU markets and rather than following one set of rules for the whole of the UK, they must face rules for each nation. The industry has been preparing for this outcome for some time so they will be well prepared. The EU and UK are set to draw up plans for closer access to EU markets for the sector, but no time frame has been set.
Security and Global Cooperation:
There is little change here, the UK and EU will continue to cooperate closely on security issues. Exchanging of intelligence on cyber threats, counter-terrorism and hybrid threats will continue with no change. There is scope for cooperation on the European Defence Fund and the European Defence Agency programmes. The UK will also continue to participate in EU operations on a case-by-case basis within Europe and around the world, sharing information and best practices. One stipulation is that the UK does not have access to the EU criminal database. Despite the continuing cooperation, this still may restrict the UKs capacity in countering terrorism and international fugitives.
The relationship regarding global cooperation will not change either, with a mutual understanding that on these issues that they are stronger together. Cooperation on climate change, global development and aid, along with the G7 and G20 will continue to grow.
Many of these new measures sound negative with increasing administration but across almost all sectors there is room for streamlining. The rules and regulations currently in place will be regularly reviewed to ensure best practice. There is also still a lot to be decided and the deal is fluid in that changes can be made if better solutions are agreed upon. There will be a breaking in period in the short term at least.
Geo-Political Risk Review 