Regulatory Divergence? Navigating your way through the choppy waters of Brexit
With the Chancellor signalling a hard-line approach to negotiations with the EU, our Public Affairs team explores how businesses can seize the opportunity of a no deal Brexit to shape their sector by implementing a hard hitting public affairs programme.
A reality check on ‘Get Brexit Done’?
If any of us believed that ‘Getting Brexit Done’ was a job already done, recent comments from the Chancellor of the Exchequer provided a wake up call.
In an interview with the Financial Times, Sajid Javid warned businesses that if they favoured close alignment with the EU post Brexit, they were likely to be disappointed.
“There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union — and we will do this by the end of the year,” he said.
The response from industry was swift, and predictably, robust. The Food and Drink Federation warned that divergence would lead to food price hikes, the Confederation of British Industry raised its impact on jobs, and the Society of Motor Manufacturers and Traders said the priority should be avoiding expensive tariffs.
The Chancellor’s decision to make these comments reveals a renewed confidence post general election. With a large majority in the Commons, and a mandate from the people, the Conservatives feel empowered to deliver a simple message to business: ‘Brexit is happening, whatever its final shape, just get on with it’.
A newly confident Downing Street
But why this message now from a Conservative Party that typically prides itself on a good relationship with industry? The answer is simple: negotiations with the EU.
The Government is already taking a hardline towards negotiations on a future relationship. After his election victory, Boris Johnson immediately ruled out an extension to trade negotiations. Thus, he has guaranteed (at this stage at least) that the UK will exit the transition arrangements on 31st December 2020, whether or not a new trade deal had been agreed. By committing himself to this so robustly, the Prime Minister underscored his preparedness to walk away, even if it means a no deal Brexit.
This latest statement from the Chancellor simply reinforces this position. The UK is willing to accept regulatory divergence, won’t bend over backwards to accommodate the EU’s negotiating requests, and business needs to adapt. It’s the firmest negotiating position that the PM could adopt.
The implications for business
But what does this mean for business?
Well, firstly, if you’re not doing it already, step up plans to prepare for a no deal Brexit. Many businesses will have breathed a sigh of relief when it became clear that Boris Johnson’s Withdrawal Agreement would be approved by Parliament. But in reality, this did not remove the risk of a no deal Brexit. If the UK and EU cannot reach a trade agreement by late November (to provide time for the European Parliament to approve it during December), we’ll once again be teetering on the brink of no deal.
And secondly, engage now.
If on 31st December the transition arrangements conclude without a trade deal, the UK and EU relationship falls back on World Trade Organisation rules. Suddenly, after nearly 50 years, the UK government will be in sole charge of the regulations that govern every aspect of our economy. And while this will of course create disruption, as businesses adjust to their new trading environment, it will also create huge opportunities.
Companies that have developed good working relationships with civil servants, MPs and ministers will have an unparalleled opportunity to use their expertise and insight to assist the government as it navigates the new landscape. In doing so, businesses will be able to help shape and influence the regulations that govern their sector. Whether you want stronger or weaker regulatory controls, greater consumer protection, or a more laissez faire approach from government, this will be the best chance in nearly half a century to re-write our economy’s rule book.
Invest in relationship building now
If the Brexit process to date has taught us anything, it is that between now and the end of the year, businesses will need to be agile to adapt and respond to the challenges and opportunities that arise from the ongoing negotiations with the EU.
The one certainty for the business community is that those organisations who invest in building a relationship with Whitehall and Westminster, will be those who are best placed to thrive whatever the shape of Brexit on 31st December 2020.