Brexit: What’s the deal on the table and what happens next?

The Government has finally produced the result of its negotiations with the EU over Brexit. This marks the end of a long negotiation process that was initiated by the result of the EU Referendum on 23 June 2016.  In advance of that vote techUK surveyed its members and published the results which showed a strong majority view for remain.

As a vocal supporter for ‘remain’ techUK has always believed that staying in the EU would be preferable to leaving. It is therefore no surprise that in our view any deal is less good than the deal we already have – membership of the European Union. But in terms of the current political process the option to remain is not on the table and the Withdrawal Agreement, alongside the Outline Political Declaration on the Future Relationship, is therefore the only deal that will be formally put in front of Members of Parliament.

When the vote on the Withdrawal Agreement, which sets out how the UK leaves the EU in March and our ongoing liabilities, and the Political Agreement, which sets out how we will go about negotiating a long term future relationship, takes place, techUK believes that Members of Parliament should support these agreements. That is based on the clear view that, compared to the real alternative of no deal, it would provide an acceptable course to mitigate some of the most negative impacts of Brexit.

This deal is a long way from perfect and will leave a lot of uncertainty. But our view has always been that a bad deal that gives scope for a better outcome, is substantially better than the real hazard of no deal.

In the rest of this blog I will go through why we think this deal is worth voting for, and whether it meets the long standing policy objectives of techUK, and then look at what happens next- the political process and the question around alternatives to the deal.

 

Does this deal meet techUK’s policy objectives?

Following the EU Referendum, techUK and Frontier Economics produced an analysis of the biggest risks posed by Brexit. From that we identified five areas that any Brexit deal would have to address if it were to mitigate the impact on the sector. These are:

  • Securing the continued Free Flow of Data
  • Ensuring continued access to talent
  • Enabling the frictionless movement of tech across borders
  • Providing alignment on rules covering digital services to avoid barriers to market access
  • Retaining access to EU funding streams like Horizon 2020 and the European Investment Fund

Added to this, we were clear on the need to provide certainty to businesses and avoid any cliff edge through a transition agreement that ran past March 2019.

 

Transition

The most important benefit of the Withdrawal Agreement is that it provides for a transition period until the end of December 2020.  That means the UK will remain part of the vast majority of EU processes and rules past March 2019. It means the businesses can continue to operate smoothly after March 29 2019.

It means, for example, that EU citizens will still be able to come and work in the UK. And that data can continue to flow.  It is not perfect – the UK will no longer have a seat at the table in the European Parliament or in EU regulatory bodies, but it is better than being outside the tent entirely.

What’s more, the agreement provides that the transition can be extended even further if necessary.  This is something techUK has consistently called for, because we are sceptical a final deal can be done by the end of 2020. Therefore, on this test, the deal on the table meets techUK’s objectives.

 

Data

The Withdrawal Agreement makes clear that legacy personal data (i.e. data transferred before Brexit) will have to be maintained under EU data protection standards (based ultimately on GDPR).  The alternative option to this would have been to require all legacy data of EU citizens held in the UK to be returned to the EU- a logistical nightmare for tech businesses.

More importantly, the Political Agreement makes clear that the EU will undertake the processes for an adequacy decision, with the aim of completing the process before the end of 2020- before the end of transition.  This would avoid any gaps in the legal basis for companies to transfer data. It does not guarantee adequacy, but techUK remains confident that it is possible for the UK to secure an adequacy decision.

The Political Agreement also keeps the door open for the UK to remain part of the EU regulatory mechanisms on data flows- specifically the EU Data Protection Board.  This would in turn keep the UK in the one stop shop mechanism- reducing additional burdens on businesses. While techUK believe it will be difficult to secure such an arrangement in the final agreement, the fact it remains on the table shows substantial progress has been made.

The one big area missing on data flows is what happens with third countries- in particular the US Privacy Shield. This isn’t included in the agreement because it concerns parties other than the UK and the EU.  techUK has raised this with Government and will continue to push for absolute certainty on these arrangements ahead of March 2019.

On this basis, the deal on the table provides a path to securing techUK’s objectives on data flows that would not be available in the case of no deal.

 

People and talent

When we speak to our members, talent and skills is always at the very top of people’s agenda. Immediately after the Referendum techUK was clear that the top priority was ensuring that all those EU citizens living and working in the UK tech sector should be able to stay.  The deal puts that beyond doubt by binding the UK into a legal treaty that grants so-called ‘settled status’ to EU citizens.

In addition, the Withdrawal Agreement also locked EU Member States in to providing a similar ability for UK citizens to remain in their country. Without an agreement this decision would be left up to each individual Member State, so the deal is preferable to that alternative. It is far from perfect- for example settled status for UK citizens in the EU will only apply to the country they live in at the time, so they will not be able to move freely to another EU Member State just based on the Withdrawal Agreement.

The Withdrawal Agreement also ensures that things like social security systems are aligned and professional qualifications continue to be recognised.  This is really important to make sure EU workers are not second class citizens in the UK because of Brexit.

The Withdrawal Agreement doesn’t deal with the future migration system. That will be dealt with either by the future agreement or set unilaterally by the UK and EU.  The Political Agreement suggests an intention to agree a system in the future agreement, but provides little detail on what the might look like.  techUK has already set out what we think the system will need to deliver here.

Would techUK like to retain Freedom of Movement? Without a doubt.  But we also want to see the system for the entire world improved, and so we continue to work to put pressure on the Government to provide details of how they plan to approach this issue in their (very delayed) White Paper.

Based on this view, we believe that the deal on the table provides stability for EU workers now, and the possibility of a full system to come, which again is preferable to no deal.

 

Movement of Goods

The approach set out in the Political Agreement would ensure that the UK signs up to the majority of EU rules on movement of goods in order to ensure that it is as frictionless as possible.  techUK thinks this is a good starting place. It would ensure that on requirements such as CE Marking the UK remains aligned with the EU.

What is more, the Withdrawal Agreement makes clear that, unless a different system that prevents a hard border in Northern Ireland can be found during the future negotiations, the UK would remain in the EU’s Customs Union.

techUK has always said we are willing to explore alternatives to the Customs Union that allow the UK to also do Trade Deals with other countries.  However, if no other solution can be found, then the Customs Union will provide the best solution for UK tech businesses and their customers.

On that basis, we believe that the deal meets our objectives in this area for now, while providing room for discussions of alternatives for the future.

 

Alignment of rules around services

This is the area of most concern for techUK when it comes with the deal on the table. The Political Agreement provides very little detail on the level of regulatory alignment that the UK will seek with files of the Digital Single Market.

However, the Withdrawal Agreement provides a stable starting point for negotiations by committing to a ‘level playing field’ approach, that reduces the ability of either the UK or the EU to seek an unfair competitive advantage by unpicking rules around things like worker’s rights or environmental standards. 

Importantly, nothing in the Political Agreement shuts the door on the kind of high alignment techUK would like to see.  It does however also provide the opportunity to look at each aspect of EU regulation in turn and see if there is a case for divergence.  techUK has never said that all EU rules are good (just look at the Copyright Directive that is currently on its way to becoming EU law), so flexibility may be helpful, but these choices will inevitably be made in the next phase of discussions- which can only happen if the UK avoids no deal.

 

Funding

Access to funding is hugely important for the UK tech sector to continue to innovate and develop.  There are multiple EU funding streams and programmes which are beneficial to the sector.

The Political Agreement makes clear that both sides are aiming to negotiate a final deal that continues to give access to EU research programmes like Horizon 2020 and its successors, as well as EU space programmes. While this is likely to never be on as good a terms as being a member of the EU, it avoids losing access entirely in the event of no deal. So on that basis, the deal on the table remains more positive for funding that the current most likely alternative.

 

So what happens next- the political process?

The deal that has been published is not yet set in stone.  First it has to be agreed by Member States at the EU Council meeting on 25 November.  After that it will be put to the UK Parliament under the ‘meaningful vote’ procedure set out in Section 13 of the European Union (Withdrawal Act).

techUK strongly supports Members of Parliament having a say in this deal. We do not think consensus can be built by Government alone, and have consistently said we want Government to engage even more, with MPs, with businesses and with the public both now and, crucially, in the next phase of the negotiations.

There remains a lot of uncertainty about how the meaningful vote will occur. What we do know is that the motion to support the current deal (made up of both the Political Agreement and the Withdrawal Agreement) will be put on ‘neutral terms’ by the Government.  That means a motion that doesn’t try and do anything other than agree the package.

This motion will be amendable by MPs.  There has been some debate over whether amendments would come before the motion (i.e. each amendment changes the motion which is finally voted on) or after it (i.e. MPs agree the motion but provide an additional view).  However, the Procedure Committee of the House of Commons has recommended that normal procedure (where amendments come first) should apply.

In either case, as the motion has not yet been tabled, there are no amendments to it. That means that all the speculation about whether Parliament could vote for an alternative (such as a Second Referendum) is based on theory, not text on the table. techUK has not taken a view on any of these amendments because they do not yet exist.

That means our assessment of whether MPs should support this deal is based on a choice between the deal that has been negotiated or rejecting it with nothing in its place. On that basis we believe MPs should back the deal. 

There is a very real prospect that the deal fails to pass through Parliament.  Should that happen then techUK will be asking our members what they wish to see happen.  Our primary goal has always been to ensure that, at the very least, Brexit meets the objectives set out above.  Any measure that fails to meet those requirements would clearly be a bad deal for the sector, and for the entire UK economy.

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