On Friday we will know if the UK, despite concerns from Spain about Gibraltar, has secured a 21-month Brexit transition, allowing time until 31 December 2020 to prepare for the final legal reality of the future UK-EU relationship.
If they do, this will undoubtedly be met with some relief by business, as the prospect of the mad scramble to assess vulnerabilities, audit contracts, review customs readiness and ensure adequate cash-flow (with the return of VAT payable and duties) seemingly recedes.
The extension also provides breathing space for sectors that have time sensitive Brexit concerns, like airlines that often sell tickets up to a year in advance. It will also enable authorities on both sides of Channel to put in place the personnel, procedures and systems to minimize the risk of the most visible negative manifestation of Brexit: long queues of trucks with blocked goods at pinch points like Dover, Calais and Ostend the morning after Brexit.
However, despite all of this, the real value of this transition agreement to business and the economy remains to be seen. Even with an additional 21 months, time is still very short and business is no closer to legal certainty, with the transition agreement conditional on full, final agreement. As Michel Barnier said, “nothing is agreed until everything is agreed” and the not insignificant questions of Ireland and dispute settlement, amongst others, remain.
Furthermore, by taking this step “forward”, the UK is now cruising to life outside the EU customs union and the single market and that reality is stark. In the absence of legal certainty, there is the growing certainty that the UK’s relationship with the EU will be like that of any other 3rd country after the transition period is over. Business will need to be ready for the major changes that implies.
So while we might not see a succession of headlines about organisations moving operations outside the UK in the weeks ahead, planning for Brexit will accelerate and it would be surprising if many business altered their “worst case” scenario plans, transition or not. On the customs front alone business will need, amongst many things, to: assess additional customs brokerage costs, evaluate customs software capability, determine preferential content supplied to the UK, dialogue with suppliers to understand their Brexit readiness….
The Brexit clock is at two minutes to midnight and for many, if not most, much work remains to be done.