2Withdrawal Agreement
Overview
7.Given the choice between the Withdrawal Agreement and no deal, businesses overwhelmingly favoured accepting the deal.7 Industry argued that although it fails to address all their concerns about the future relationship, it would deliver certainty for the moment and take the UK further away from a no deal Brexit and its associated “chaos”.8 All businesses were united in saying that, from an industry perspective, the Withdrawal Agreement offers a scenario inferior to the status quo of full membership of the EU.9
8.The overarching view was captured by Paul Everitt, Chief Executive of aerospace trade body ADS Group, who told us that the Withdrawal Agreement “definitely does not take us back to business as usual.”10 Instead, he viewed it as “not as good as it is today and it will never be as good as it is today, but it is an awful lot better than the chaos that we would have […] leaving the EU without a deal”.11 Similarly, Ian Wright, Chief Executive of the Food and Drink Federation, stated: “We like what we have now. No deal is infinitely worse than anything we could imagine. Therefore, the deal on the table is better than no deal infinitely, but it is not as good as the status quo.”12
Providing certainty and averting a no-deal
9.In relation to the Withdrawal Agreement, we were told that “there are lots of positives about what we have on the table”.13 The benefit most strongly emphasised was that the Withdrawal Agreement would help businesses and its customers avert the “calamitous” consequences of leaving the EU without a deal and thus provides “some welcome respite”.14 Businesses stressed that the transition period is essential.15 By allowing for frictionless trade, resolving questions on the border between Northern Ireland and the Republic of Ireland, and providing clarity for their workforces, the Withdrawal Agreement sets a trajectory for the interim period that the sectors could work with.16
10.The aerospace industry stated that the deal is not perfect, but the longer it takes to gain certainty the more likely it is that investment decisions will go against the UK.17 Airbus signalled that if the Withdrawal Agreement is in some way successful the company would consider unlocking new investment in the UK.18 This could end the current freeze that Airbus has placed on investment in the UK as a result of Brexit uncertainty.19 Katherine Bennett, Senior Vice President of Airbus UK, stated that the company has been “in a holding pattern” over the past year with “nothing new” invested.20 Similarly, for the automotive sector, senior policy manager at the Society of Motor Manufacturers and Traders (SMMT), Sydney Nash, told us that mounting uncertainty surrounding Brexit had left “investors sitting on hands”, and that 12.4 per cent of member companies had already relocated some of their operations to continental Europe.21 A 115,000 drop in vehicle production is anticipated for this year, representing a 6.8 per cent fall from 2017.22
Ambiguity and influence
11.Despite supporting the Withdrawal Agreement, a series of concerns were expressed by businesses regarding the future relationship. For example, Diageo raised the ambiguity over the future status of the third country Free Trade Agreements (FTAs) that the UK enjoys via its EU membership.23 Dan Mobley, Corporate Relations Director at Diageo, noted that the European Commission has asserted that third countries should treat the UK as if it were a member through the transition period, but that this requirement is not legally binding.24 Consequentially, the company does not yet know whether the FTAs will apply to the goods they ship from the UK to countries including South Korea, Colombia and Mexico.25 If tariff barriers are raised, they would weaken the competitive edge against both local producers and exporting European companies still covered by the FTAs.26
12.Most sectors viewed the loss of “rule making” influence within regulatory regimes during the transition period as regrettable but not disastrous.27 However, this was a concern for the pharmaceutical sector. Mike Thompson, Chief Executive of the Association of the British Pharmaceutical Industry (ABPI), referred to the Withdrawal Agreement’s provision for the UK’s Medicines and Healthcare Regulatory Agency (MHRA) to have observer status—rather than membership—in the European Medicines Agency (EMA) during the transition period as “a really significant step back for us.”28 He also warned that by no longer having a role in designing new scientific programmes as part of EU funding, the attractiveness of the UK for exemplary scientists would be diminished:
“If you have world-leading scientists in your universities, as we do, they are not going to stick around if all they can do is essentially be a trial site. They clearly want to be driving the thinking forward. They want to design the programmes of the future.”29
13.While welcoming the time the Withdrawal Agreement would offer for the final structure of our relationship with the EU to be worked out and accepting that “ambition tends to take time”,30 there was concern over whether a deal would be reached early enough to enable businesses to sufficiently adapt their systems for any new arrangements.31 Tony Walker CBE, Deputy Managing Director at Toyota Motor Europe, stated:
“We would strongly ask that the transition period does not become the negotiation period and we would strongly ask that we do not end up at three or four months to go, a bit like we are this time, with another cliff edge giving us a very short time to implement.”32
Pinder Sahota, General Manager of pharmaceutical company Novo Novodisk UK, told us similarly that “a long transition period where we do not have active involvement will not be great for us.”33 The aerospace sector asserted that the supply chain would “prefer to know exactly what the new conditions are and then have a two-year plus period to adapt to them.”34 ADS Group welcomed the opportunity to extend the transition period but recognised that it “is a political issue over which we have little or no control.”35 When looking to the end destination of the transition period, Food and Drink Federation members are questioning “what it is a transition to.”36 Businesses noted that the Withdrawal Agreement can only be extended once legally, and with no guarantees that a deal will be reached, queried whether the transition period will in the end just act to defer the “chaos” of no deal and by the end of December 2020 the UK might be at the same cliff edge.37
Published: 10 December 2018