Boris Johnson is highly unlikely to be able to meet his promise to “get Brexit done” by the end of this year.
That’s the conclusion of a report by the Institute for Government think tank, published on Monday, which spells out the monumental challenges the United Kingdom has to prepare for Johnson’s deadline of replacing all existing custom and trade ties by the end of December.
The 11-month transition will begin on February 1, once the UK has formally left the EU. During this time, the UK will continue to follow EU trade rules, giving both sides time to adjust to their new relationship.
Johnson says he will not extend the transition period beyond December, despite myriad warnings about the little time there is to prepare for life outside of EU structures, including the task of negotiating a new trade deal with Europe.
The prime minister has sought to underline this statement by including a block on extending the transition period in the Withdrawal Agreement Bill, which will become law in the next couple of weeks.
But sticking to this tight deadline creates a brand new Brexit cliff edge for the UK — and one that for many businesses would be just as damaging as the previous no-deal Brexit cliff edge avoided by negotiators last year.
Getting ready for December is ‘the biggest job yet’
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The IfG points out that businesses usually have years to prepare for new international trade deals. By contrast, trade negotiations between the UK and EU are extremely unlikely to be concluded until late in 2020, meaning British businesses will have just weeks to prepare for what could be huge changes.
“The kinds of changes businesses will face as a result of Brexit are likely to be much bigger in scale but with possibly just weeks of knowing details such as what paperwork is required, which tariffs apply (if any) and what they do and do not need to change in terms of how they operate,” the report says.
This will be particularly challenging for smaller businesses, many of which simply don’t have sufficient resources and expertise to adapt to new rules and obligations for trading with the country’s biggest trading partner in such a short space of time. These businesses will be adjusting to Britain’s new relationship with the EU well beyond December.
Furthermore, if there is a deal signed off by the end of the year, it’s pretty much guaranteed to be limited in scope and exclude key elements of the economy like services, which accounts for around 80% of the UK’s economic output.
Any deal done by the end of the year will therefore only cover “a narrow range of issues, with both sides ending up prioritising a largely goods-only free trade agreement” the report suggests.
Negotiations on other aspects of the relationship will continue for months and probably years beyond December 2020.
… And that’s only if there is a deal
There remains a strong possibility that the UK will drop out of the transition period with no new trading arrangements with the EU later this year, according to the IfG. The impact of this on businesses in Great Britain “would be almost identical” to a no-deal Brexit, the think tank suggests.
It would unleash swathes of new barriers and checks between the EU and UK, creating delays at Britain’s ports and likely leading to shortages in goods, with the most acutely affected being perishable food like vegetables.
As a leading figure in the food and drink industry pointed out to Business Insider last week, this would take place during the Christmas period, when demand for food and other goods is at its highest.
Business Insider reported last year that businesses preparing for a potential no-deal Brexit in the run-up to Christmas were struggling to find warehouses for stockpiling goods, as most were already booked up for the busy holiday period.
This outcome is now very much back on the table.
Johnson, empowered by an 80-seat parliamentary majority, has said that the UK will not follow EU rules after Brexit. This could quickly become a stumbling block in talks, with EU figures warning that the UK must accept a “level playing field” with the EU if it wants high levels of access to the European single market after leaving the bloc.
Then there’s the issue of ratification. It’s possible that the national parliaments — and even regional parliaments — of EU member states will need to approve a deal before it can be concluded. This is by no means a formality. A single region of Belgium called Wallonia held up the EU’s free trade deal with Canada for weeks.
Northern Ireland ‘almost certainly’ won’t be ready
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The biggest obstacle to a Brexit withdrawal deal was the difficulty in maintaining a seamless border between Northern Ireland and the Republic of Ireland.
In the end, Prime Minister Johnson and EU leaders agreed that while Northern Ireland would leave the EU’s single market and customs union with the rest of the UK, it would continue the follow their rules for years to come.
This creates a complex new arrangement between Northern Ireland and the rest of the United Kingdom, about which key details are lacking. The IfG report says it “looks almost impossible to complete the practical changes, for government and business, by the end of the year.”
Failure to make sure the protocol is ready in time for December 2020 would unleash chaotic trading conditions between Northern Ireland and Great Britain across the Irish sea.
Multiple sources in Northern Irish business say that in recent weeks there has been an increase in Northern Irish firms looking for warehousing to stockpile goods, in anticipation of a slow-down in trade with Great Britain after December.
As one leading industry figure in Northern Ireland told Business Insider: “There’s a narrative in Westminster that Northern Ireland is sorted . Quite simply, Northern Ireland is not sorted.”