When the UK’s Brexit chief accused the European Union of threatening democracy with its outrageous demands, his target audience was his opponents in trade talks in Brussels. But the alarm bells from David Frost’s stinging attack this week will reverberate among businesses back in Britain, too.
After leaving the EU on January 31, the UK government is about to embark on 10 months of talks over future trading arrangements with the bloc. Pro-EU campaigners and business leaders fear a violent rupture of the kind Frost and his boss, Prime Minister Boris Johnson, are contemplating could spell disaster. And while they lost the war to stop Brexit, the remnants of the Remain campaign are not giving up the fight to stay close to the EU’s single market.
“Its a bit like guerrilla warfare,” Alistair Carmichael, whose Liberal Democrats’ fought December’s election on a platform to cancel Brexit, said in an interview as he contemplated how his party can influence the government in its arguments ahead with the EU. “You have to pick your battles.”
Johnson says he wants a free trade agreement similar to Canada’s with the EU, and to use negotiations due to last until December to determine the level of cooperation on everything from fisheries to security and data protection.
The Brexit package Johnson’s government crafts will have an impact on the economy for decades to come — affecting the ease of trade in goods and services with Britain’s closest neighbours worth about 650 billion pounds ($850 billion) a year, and also commerce with global powers including the US and China. And those who didnt want the UK to quit the block still have skin in the game.
This week, Johnson’s administration doubled down on its negotiating position: it wants to be able to diverge from EU rules on competition policy, subsidies, social protection and the environment from next year. That clashes with the EU position of wanting close regulatory alignment.
We must have the ability to set laws that suit us, Frost said in a speech in Brussels on Monday. He warned that the EU position threatened to undermine democracy itself. It isn’t a simple negotiating position which might move under pressure — it is the point of the whole project.
Johnson earlier this month set out his stall for a Canada-style deal with the EU his administration admits will lead to increased friction for goods at the border. But given the EU’s insistence on regulatory alignment — which is not a feature of Canada’s deal — the premier also says he is prepared to fall back on Australia-style arrangements, which include tariffs and quotas, if he cant secure what he wants.
The tension makes businesses which trade with the continent edgy. “You will see businesses affected significantly by additional costs at borders,” British Chambers of Commerce Director-General Adam Marshall said in an interview. “Inevitably when you have any form of change, in terms of trade flows and trade arrangements, some will be able to respond well, and others will find it more difficult.
Businesses are pushing for an EU trading relationship that keeps commerce as free of hurdles as possible. Johnson’s Canada-style deal involves extra paperwork, even if tariffs are eliminated on almost 99 per cent of goods. Both that outcome and the premiers fall-back plan for a far looser agreement with the EU would strain existing commercial ties.
“Regulatory alignment is crucial,” said James Greenham, managing director of EMS Physio Ltd, a 96-year-old medical appliances manufacturer. He warned that the effect of Brexit could be perverse: If new UK regulations differ vastly from EU ones, he will still manufacture to EU standards because they are internationally-recognised and help him export globally. “And if British rules are too expensive to comply with, we may have to consider not selling into the UK market,” he said.
It is not just businesses that are waiting for the new relationship to take shape. The terms Johnson and his team negotiate also will have an impact on UK academia. British universities and other institutions are historically among the biggest beneficiaries of EU research funding, but that is set to end on December 31, when an 11-month post-Brexit implementation period comes to an end. Johnson has said he won’t extend it.
A case in point is the Joint European Torus project at Culham, near Oxford in central England, which aims to develop nuclear fusion technology. If its successful, it could revolutionise the energy industry, producing carbon-free power with less toxic waste than nuclear fission currently produces. But 88 per cent of the projects funding comes from the EU, and that is set to expire in December.
Ian Chapman, who as chief executive of the UK Atomic Energy Authority oversees the JET project, said the timing of Brexit — just as another round of European funding is renewed — is not particularly helpful. While he expects the government to find a solution, “there’s some risk to funding,” he said.
To gain EU funding for projects such as JET from 2021, the UK must renegotiate its place in Horizon Europe, the EU’s science programme, by the end of the year. Mike Galsworthy, co-founder of Scientists for EU, said that ensuring the UK continues to participate is his post-Brexit priority. “If you’re not prepared to put in the money and if you’re not prepared to respect the rules, then its hard to get participation in that,” Galsworthy said in a phone interview.
New immigration policy
When Britain escapes the EU’s single market rules, including the free movement of people, Johnson will introduce a new Australian-style immigration point system that prioritises talented individuals, with details to be announced on Wednesday. “Our new immigration system will turn off the tap of cheap, foreign low-skilled labour,” Home Secretary Priti Patel wrote in the Sun on Sunday newspaper.
That has raised the concern of industries as diverse as agriculture and hospitality, which rely on lower-skilled workers from the EU to fill roles that Britons typically will not do.
Former Immigration Minister Caroline Nokes, a self-described Remainer who served Johnson’s predecessor, Theresa May, said she was concerned the prime minister is rushing to implement a new system at the end of the year, rather than phasing it in over time as businesses want.
“It is going to be incredibly challenging at pace to introduce and implement a system that is going to work across a whole raft of sectors of the economy,” Nokes said in an interview. “You have to have a points-based system that’s going to work as effectively for the banking industry as for the care industry.”
In Parliament, the main opposition Labour Party is immersed in an internal leadership contest until April. But all three of the candidates — Keir Starmer, Rebecca Long-Bailey and Lisa Nandy — have in the past indicated they want UK standards on the environment and workers rights to keep pace with the EUs’.
Starmer, the favorite, has said he wants EU workers to continue to be able to move freely to the UK, with those already here being given the right to vote.
Some exhausted campaigners have decided to walk away from the battlefield. “I’ve been at this for the last four years,” said James McGrory, one of the founders of Peoples’ Vote, the most visible pro-European group. “I’m a bit tired.”
For others, its only a matter of time before the battle kicks off again.
“Pretty much everyone under the age of 45 voted to remain in the European Union,” said Mike Buckley, a director for Labour for a Public Vote, another pro-EU lobby group. “We will rejoin the EU at some point.”