Whitehall Is Asking If The Eventual Brexit Deal Is Going To Be Better Than No Deal At All
On Thursday, negotiators moved from London to Brussels for the second week of intensified Brexit discussions. Their aim? To reach an agreement in time for the effective mid-November cut-off.
Only a fortnight ago, hopes of the two sides coming back to the table were waning after Downing Street declared that talks had “effectively ended” with “no basis to resume”. Sticking points that prompted the pseudo-walkout were well documented: fishing rights, state aid rules, and how any eventual deal would be enforced.
Soon enough, however, discussions were back on, after the EU’s chief negotiator Michel Barnier said his side was ready to “seek the necessary compromises”.
But many in Whitehall quietly questioned just how genuine the UK’s threats to walk away ever were, and whether the tactic was masking the trade-offs being made to get the deal over the line.
An 11th-hour agreement between the UK and the EU now appears to be on the cards, but has the grandstanding over a no-deal exit been aimed at distracting from the state of the deal we will end up with?
“I think the idea of leaving it quite late and showing that you had a tough negotiation helps sell it because it looks like you fought for it,” a Whitehall source told PoliticsHome. “And, if you have to make concessions in some areas, it looks like you held out and didn't give in too easily.”
There are concerns about the state of post-EU preparations within British industry. Only one out of five businesses surveyed in a separate YouGov poll said they were “well prepared” for the end of the transition period, and some fear businesses have spent too long with their heads in the sand.
“It took an awfully long time for the industry bodies I was dealing with, or some of the industry bodies that I was dealing with, to actually come to terms with the fact that we had voted to leave the European Union and therefore, that meant leaving the single market and crafting a new relationship with the EU,” David Jones MP, a former DExEU minister and deputy chairman of the European Research Group, told PoliticsHome.
The government has launched a fresh campaign in light of such concerns, writing to 200,000 firms with information on new customs and tax rules alongside a warning that “time is running out”. But industry leaders were unimpressed. Responding to the campaign, the British Chambers of Commerce placed the blame squarely on No 10’s doorstep.
“Facing the triple threat of a resurgent Coronavirus, tightening restrictions and a disorderly end to the transition period, it is little wonder businesses are struggling to prepare,” it said in a statement. “Many firms will be tired of posturing, cliff edges and deadlines, while others are still grappling with fundamental challenges as a result of the pandemic.”
It’s not clear whether this disarray is due to industry denial or poor government communication. As one policy expert explained, it could be a bit of both. One the one hand, the government has been noticeably vague about the compromises it has made in negotiations, a decision which is now “coming home to roost” as the end of the year approaches.
“There is really not a huge difference between a deal and no deal,” they explained. “And I think the big challenge for the government is that that hasn't necessarily cut through.”
There is really not a huge difference between a deal and no deal, and I think the big challenge for the government is that that hasn't necessarily cut through.
Indeed, that extends to the general public, who seem to have little awareness of what a future relationship might look like. A recent YouGov poll, reported in the Financial Times, found that two-thirds of Brits are unclear about how the UK’s relationship with the EU will change come 2021.
The trade expert also noted that there was a pervasive sense in some corners of industry that a deal may “save the day”. The issue is that many of the decisions that would have an immediate impact were decided long ago.
“There's going to be massive disruption now whether or not there's a deal. In a sense, the only immediate material difference will be that without a deal you'll have tariffs on pretty much everything,” a senior Labour MP told PoliticsHome.
“The deal would presumably give some kind of preferential treatment on tariffs across a range of products. The question would be which products would be tariff-free and which wouldn't.”
Ultimately, as put forward by Philip Rycroft, permanent secretary for the Brexit department until it was shuttered last year, these final stages of negotiation were largely about agreeing on “the extent of new barriers to trade”.
Speaking to The Guardian, he said: “No deal is certainly worse than a deal, but it is just worth remembering — customs declarations, security declarations, regulatory checks, rules of origin, compliance — all of the panoply of a border applies if we get the deal.”
“You have the short-term impact, but then you have a dead weight on trade forever, because that’s the nature of being out of the [EU’s] single market.
“It puts friction into our trading relationship with the EU—that friction equals cost. It will change the nature of the trade relationship between the UK and the EU. If you believe in free trade, that’s clearly not a good thing.”
This is the argument that underpins concerns for the end of the transition period—a deal with the EU is not as significant an improvement on a no-deal exit than many believe. But getting a deal is still the preferred option for both parties, a fact that may have brought them back to the table last week.
“I'm still pretty confident there will be a deal because it's more in the interest of the EU to get one than the UK. But, you see, it’s in everyone's interest to do it,” said Conservative MP and prominent Brexiteer Peter Bone.
“If there isn't [a deal], so be it, and we will cross that bridge when it comes,” he added. “But what we can't have is a bad deal. And the EU is trying to force us to have a bad deal so we'll just have to wait and see what the next few weeks bring.”
And, whatever the true motivation for the government’s threats to walk away, David Jones feels it has had the desired outcome. “Only when they realise that the Prime Minister is quite prepared to take us out of the transition period without an agreement did they start panicking and luckily they've come back to the table,” he said.
Trying to punish the United Kingdom for having had the temerity to vote to leave back in 2016 is not a terribly adult way of behaving.
- David Jones MP
He also shares Mr Bone’s optimism that a deal will be reached: “I think that they're starting to understand that we have left—slowly, some of them.
“I think that they understand that there is a commonality of interest in having a good trading relationship. Because, at the end of the day, it is business and that's avowedly what the European Union was set up; to achieve economic prosperity.
“But, you know, simply trying to punish the United Kingdom for having had the temerity to vote to leave back in 2016 is not a terribly adult way of behaving. And it certainly will not be accepted by the British government.”
The question is now whether, with so little time left to agree and ratify a deal, significant compromises can be made. It’s also worth noting that negotiations with the EU won’t cease when the transition period ends. The deal being thrashed out now forms the basis of a future relationship that will be adjusted for years to come. So, is there any hope for improving it?
“I think the broader sort of discussion is around, has the EU come to the conclusion that the United Kingdom won't implement whatever deal is done? So, why bother negotiating a deal with them when we don’t actually trust them anymore to even stick to what they said they were going to do,” the Labour MP said.
“The Internal Market Bill had quite a seismic impact on the whole mindset around these negotiations really, and it's a trust issue.”
He added: “This is now a very messy divorce, with a lot of emotions backed into it. Boris Johnson's speech the other day... really felt like a spurned spouse kind of saying, well, I'm going to go off and do my own thing and I don't need you guys.”
And, amid this acrimonious mood, the generous agreement both sides are attempting to reach is proving less and less likely. As one industry source put it: “I still think that there's a decent chance of a deal being done. But when the mindset is such that there's so little trust then I don't see the EU committing to anything but the thinnest possible deal.”
They added: “There’s a hope that political goodwill in a deal scenario could lead the way to some more progress at some point in the future, but it’s a bit of a question about whether or not it will be in the EU’s interest to do that.”