In this week’s Column, Mark Essex shares why a ‘Bitesize Brexit’ may be the answer to moving UK-EU negotiations forward.
It was a summer of uncertainty for business. And I don’t think it’s going to get more certain any time soon. Each time business leaders approach milestones, with their fingers crossed that finally there will be something concrete on Brexit, their hopes are dashed.
The Autumn Statement on Wednesday contained a number of pro-business measures. Yael Selfin, KPMG’s Head of macroeconomics, welcomed these, saying: “The Chancellor proved a bigger spender, focusing on one of the fundamental challenges facing the UK economy beyond Brexit – productivity.
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And the £23 billion Philip Hammond will invest over five years is going to be vital to the UK as its businesses aim to become more flexible as they face the uncertain world beyond Brexit. I can’t see how that uncertainty will reduce in the near future. While some of Britain’s Brexit wish list has been outlined by the Prime Minister, getting our cake and eating it would mean unprecedented generosity from EU leaders. Even if it is in their economic interest, it will need political will to agree the changes. And they are busy. Over the next 11 months, there’s scarcely a gap in the calendar, with an Italian referendum and French and German general elections in the diary. Arguably, our fate is not as high on Europe’s agenda as we would like to think.
Anyone contemplating a significant investment or simply keeping their business running can’t just press pause for that length of time. I sympathise with decision makers who are going to have to make a judgment with imperfect information. And it is no wonder then, that businesses are starting to create their own versions of what Brexit will mean.
So we have a new lexicon. We have heard commentators talking about ‘soft Brexit’ or ‘hard Brexit?’ for months now. But pessimists go beyond hard Brexit and talk about ‘dirty Brexit’ – in which the divorce is acrimonious to the point of harming trade relations. Or ‘car crash Brexit’, if the unstoppable force of British demands meet the refusal to compromise on four freedoms from the EU27. Both hope the other will blink and swerve….and yet we end up not only in a WTO deal, but worse, we end up there by default, with no time to adjust. Then there are the ultra-pessimists who talk about ‘rock hard Brexit’, where the UK fails to even get into the WTO - although most think this is very unlikely.
But this column always endeavours to look for upsides. What can the optimists offer us? There are those who advocate ‘soft Brexit’, in the hope of continued free market access, and others wishing for a ‘tomorrow Brexit’ (the one that never comes). But also those who look for upsides in hard Brexit; as we pivot towards the rest of the world and pick up trading relationships we have perhaps neglected in recent decades. They talk about ‘Bre-entry’ or even a mercantile UK trade ‘Brenaissance’.
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My favourite is ‘Bitesize Brexit’. Instead of doing the whole deal in one go, waiting to the end, unveiling with a flourish and risking brinkmanship and last minute challenges, we agree the deal in stages. Why wouldn’t we, where there’s unanimity between both sides, sign that deal, and move onto the next issue? Across the UK and the EU, businesses can put that in the bank and plan some of their affairs with confidence.
After all, as I said in this column at the beginning of the month, trade deals take a long time. The Canada deal took seven years to seal – and that’s fine when you have the luxury of time. We don’t. We have existing supply chains and business models to consider.
So what can all of us agree on first? Well what about EU citizens who came to the UK before the vote and now find themselves worrying about whether they will be able to stay post-Brexit. Theresa May’s position is that “we will guarantee the legal status of EU nationals in Britain as long as British nationals living in EU countries have their status guaranteed too.”
Francois Hollande was the first EU leader to offer such a guarantee. If other EU leaders support such a move, then why not seal a deal on this matter, right away? Surely, we don’t need to wait until the end of the Article 50 process to get an agreement in principle? But if we could agree, millions of British and EU citizens will get the certainty they need two years earlier than expected, and businesses will have some much needed stability to plan ahead and keep things going today.
Such an agreement would send a message to the world that this divorce might not be as acrimonious as they fear. That must be positive for both the UK and the EU. That’s why I call for a 'Bitesize Brexit'.
Brexit: A catalyst for businesses to reset their futures.
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.