Out-Law News 2 min. read

UK businesses certain that Brexit deal will leave them worse off


Evidence given to a House of Commons committee by companies in the aerospace, automotive, processed food and drink, and pharmaceuticals sectors has shown that all believe the recently-negotiated Brexit withdrawal agreement will leave them worse off.

Businesses said the agreement, a draft of which was published in November, would mean they were less competitive than under EU membership. However they also said that the deal was a better solution than for the UK to leave the EU with no deal at all.

The Business, Energy and Industrial Strategy (BEIS) committee took evidence from business representatives as well as travelling to Northern Ireland to produce the report. Chair Rachel Reeves said businesses were supportive of the withdrawal agreement as it provided certainty and avoided a ‘hard’ Brexit situation whereby the UK left the EU with no access to the single market or customs union.

“However, they are under few illusions - they believe that the withdrawal agreement will leave them less competitive than the status quo of EU membership,” Reeves said.

Businesses also stressed the importance of a transition period, but said that the government needed to make sure this did not become a negotiation period, leaving them with little time to implement any changes.

Those giving evidence added the political declaration which accompanied the withdrawal agreement was vague, lacking the detail or clarity needed for them to plan for the future.

“The regrettable absence of a common rulebook for goods and an assurance of frictionless trade in the political declaration means that businesses cannot rule out increased bureaucracy and costs,” said the report. “Witnesses signalled that they expect such burdens to be bearable, but reiterated that in a highly competitive market, small margins could weigh heavily on UK industry’s ability to compete for investment.”

Those in the automotive and aerospace sectors in particular said they were disappointed the declaration did not include an explicit commitment to frictionless trade, which was particularly important for just-in-time supply chains. Businesses said they were beginning to stockpile goods and supplies in anticipation of a no-deal scenario.

Brexit expert Clare Francis of Pinsent Masons, the law firm behind Out-Law.com, said: "The report brings into spotlight the challenge with the political declaration in that it does not bring businesses the certainty that they have been waiting for. Ultimately it brings more time but no guarantees about what the future will look like or, critically, about when businesses will know what it will look like."

"As the report highlights, the critical factor is how much of the transition period will be used for negotiation and exactly when businesses will get the certainty and whether this will actually leave time to implement relevant changes," she said. "Therefore, although more time would be bought if the withdrawal agreement is ultimately voted through, businesses still need to progress with their planning as certainty could take many many months to actually emerge."

The UK parliament was set to vote on the withdrawal agreement on Tuesday 11 December but on Monday it emerged that the vote would be delayed. The news followed the publication of a judgment from the Court of Justice of the EU, which ruled that the UK could revoke Brexit and remain an EU member state.

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