Ahead of this week’s European Council meeting, TheCityUK has issued a clear warning that the value of a transitional deal is disappearing by the day. It calls on the UK government to make rapid progress on setting out the detail of transition and for the EU to respond quickly and positively, with an agreement to be reached in Q1 2018 at the latest.
In a summary paper on transitional arrangements, TheCityUK clearly sets out what is at stake for both the UK and the EU if a credible political agreement on transition, supported by all the relevant regulators, cannot be urgently reached. Without this in place, more firms will be forced to accelerate their contingency plans, with significant international investment and jobs likely to leave Europe as a consequence.
Miles Celic, Chief Executive Officer, TheCityUK, said,
EU and UK negotiators cannot delay discussing a transitional deal any longer if they want it to hold any real value. Firms are beyond the planning stage now. If they haven’t done so already, most will be ready to press go on their contingency plans in the New Year. They can still take their foot off the accelerator if a transitional deal is agreed, but without progress soon, it may be too late. Once businesses start moving, there is no reverse gear. It is simply not efficient or economically viable to move operations twice.
This isn’t just about business leaving the UK. It is about the very high risk of jobs, capital and inward investment leaving Europe entirely. The resulting fragmented markets will be of benefit to no-one, with costs likely to increase for customers right across the continent.
The paper makes the case for transition to be as close as possible to the status quo. This would provide continued mutual market access, avoid two sets of costly adaptation phases, and see the UK accept all of the rights – and obligations – of the Single Market in line with EU law during the transition period. It must also cater for new as well as existing business and ensure that existing contracts will continue to be serviced and honoured.
Ultimately, in the long term the UK cannot be a rule-taker in relation to its domestic regulation. Equally, the transition period must be long enough to finalise the new relationship between the UK and the EU27, including the conclusion of an ambitious and comprehensive UK/EU free trade agreement and the design of the new regulatory framework accompanying it.