Stuck in the middle with EU - the halfway point for Brexit.

We have reached the half way point in the mammoth constitutional and diplomatic exercise that is the UK’s withdrawal from the EU. 505 days ago the UK voted to leave the Union and in 505 days’ time we will do just that. Yet for tech businesses with an international outlook, reliant on EU talent and trade, the future in many areas seems as clouded now as it did on 24th June 2016. As the sixth round of negotiations between David Davis and Michel Barmier concluded today, now is time to take stock – what do we know now, and what do we need to know by the time March 30 2019 comes around?

What We Know

It’s very easy to get lost in the daily headlines and political back and forth that surrounds Brexit and think that we frankly haven’t moved on a great deal from the panic that greeted the Referendum result. There is no doubt that uncertainty is beginning to take its toll economically and that tech businesses are getting impatient to see real progress to the negotiation talks. But if we take a step back, it is clear just how much has been done since the vote.

The UK’s Plan

For starters, the Prime Minister has set out some clear red lines for the negotiations. The Lancaster House speech remains the foundation stone on which the UK’s expectations are built. Under the plan, the UK will leave the Single Market, leave the Customs Union and leave the jurisdiction of the European Court of Justice (ECJ).

Of course, these red lines come with a whole host of complexities for business. It remains unclear how leaving the ECJ will work given the close regulatory cooperation needed within tech, leaving the Customs Union potentially presents a whole host of problems for businesses operating “just in time” services, and leaving the Single Market puts the free flow of data under threat. Yet the fact remains that the Government has been clear about their intentions and that gives more clarity as to the kind of Brexit we are likely to see.

The First Phase

We also know a lot about the likely landing zones for agreement on the range of issues contained in the first phase of negotiations. For example, we know that the UK is prepared to pay a hefty bill in order to meet is contributions to the current EU Budget cycle, in addition to further payments, though these are still a contentious point for the negotiations.

We also know far more about EU citizen’s rights here in the UK. The Government’s last revisions to the ‘Settled Status’ scheme take on a number of techUK recommendations including allowing EU citizen’s with Permanent Residency status to have this status automatically converted to the new Settled Status scheme. Gone too are proposals to require finger printing of citizens or the retention of biometric residency data. While there are still outstanding issues, such as the concerns about the cost of application, this marks real progress since the Government’s first attempt at providing reassurances to those EU citizens living and working here in the UK.

Future Planning

The flurry of Future Partnership Papers produced by the UK Government over the summer also provided an insight into the UK’s ambitions in key areas for the next round of negotiations.

Of particuarl importance to tech was the paper on protection of personal data, where the government confirmed their desire to secure an ‘adequacy- like’ agreement to allow the continued free flow of data. Sitting alongside a continued role for the ICO in the future of data protection policy, this marks an ambitious, but sensible approach to this critical issue. Of course, the hard work is yet to come in securing such an agreement.

In other areas too the UK has set out a positive vision. In scientific cooperation there remains a strong desire to remain part of the European community, including participation in Horizon 2020. All this shows a real desire from the UK to balance the decision to leave with a strong future relationship.

What we need to know

Transition

Since the Prime Minister’s speech in Florence we have known that the UK accept the desire to secure a transition period in order to implement any final Brexit deal. However, despite broad agreement that this is desirable from Michel Barnier, until there is a formal agreement on such a period businesses cannot base their plans on the hope they will transpire.

Tech businesses urgently need to see a concrete agreement on transition, setting out exactly how long such a transition will be, and ensuring that it is a ‘status quo’ transition, with the UK remaining a member of the Single Market and Customs Union until any new system is put in place. Without clarification of these issues early next year, then businesses will start to assume a ‘cliff edge’ Brexit in 2019.

Getting to the Second Phase

Closing the last round of talks today, Michel Barnier stated that there are now two weeks to come to agreement on a range of outstanding issues in the first phase of the negotiations, most notably the Brexit Bill. Without a break in the deadlock then there is a serious risk that the December Council meeting concludes that sufficient progress has not been made to move to the next part of the negotiations. That would represent a serious risk for tech businesses, and likely precede a radical change of tech attitudes to the UK’s future. Getting agreement at the December Council meeting is absolutely critical for everything that is to come.

The EU approach

The EU 27 have been incredibly disciplined in not discussing the second phase of the negotiations, so it remains unclear how they will approach issues ranging from immigration, to trade to customs. At the October Council meeting EU leaders agreed to begin internal discussions on these issues, but as yet, we simply don’t know what from they envision from the future of the talks. Given the cautious approach and strict interpretation of the treaties seen so far in negotiations, it is likely that the EU will be very wary of giving the UK a deal that risks opening themselves up to challenge by other nations keen to secure greater access to the Singe Market.

A key issue will be whether the EU is willing to go further than simply scoping a Free Trade Agreement (FTA) before March 2019. The current attitude is that formal negotiations cannot start until after the Article 50 process, but this is a long way away from the UK’s hope of agreeing all but the technical detail of an FTA in 2018 ahead of the ratification of the Withdrawal Agreement.

...and almost everything else

The reality is that, until sufficient progress is secured for the first phase of negotiations, businesses will remain in the dark on huge amounts of Brexit detail, from what kind of customs system we will have, what our future immigration system will be, and the extent to which the UK can fulfil the ambitions it has set out while maintaining the red lines outlined. What is truly clear is that, there remains a lot to do in the 505 days left before Brexit, and the clock is very much ticking.

 

FROM SOCIAL MEDIA

What are the key takeaways from the #AutumnBudget2017 for tech companies? Check out our long read below. https://t.co/SXwMA8vAjt
Many thanks to @bricksilk @brickcourt @cyberleagle @gordoncorera and others for a fascinating evening last night lo… https://t.co/zJxLdOk3t2
The acknowledgment of the importance of tech is welcome from the Budget. Still major questions though around… https://t.co/NPzJuwEc5K
Speakers confirmed from @TSCatapult and @CBTransport https://t.co/IV0XY4N46B
#PolicyPulse is out! Get all the latest on #AutumnBudget2017 #Brexit #NetNeutrality and more…https://t.co/KKbe4BlFQP https://t.co/0F6tfVLdN3
Susanne Baker #techuk chairs a panel today at #saferproducts on how to ensure safer and sustainable product life cy… https://t.co/aTm3upFfjt