Spring is a time of new beginnings. In this spirit, last week’s European Council summit, which allows the UK and EU to move on to discussing our future relationship, was roundly welcomed by business.
Companies are hoping for the withdrawal agreement to be signed off by the EU member states as soon as possible, by the October European Council summit at the latest. This agreement needs to happen well before our formal withdrawal from the EU, as this will provide the most legally watertight certainty for companies in terms of transition, regardless of the shape our post-Brexit relationship.
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Brexit: Business as usual for firms during transition period, says BoE
But it is also imperative we get down to detailed trade negotiations quickly. Although these discussions cannot conclude until Britain is formally out of the EU, talks on the framework for future relations should not drag on at the expense of starting on the specifics. Businesses need details to plan, not just an outline. Knowing, for example, whether new border inspection posts will be required for UK-EU goods trade, or a new British chemicals registration database is likely, are essential pieces of the puzzle for planning purposes.
Many firms, particularly small ones, are avoiding active contingency planning because they don’t know the basis on which to plan. This has a knock-on effect for larger companies who can and have done their due diligence, but who rely on these smaller suppliers. To increase preparedness, we encourage the Treasury to introduce a Brexit planning voucher scheme like the one operated by the Irish government, or make Brexit planning tax-deductible.
Communication from government departments to assist with planning is vital, especially on customs matters. Around 130,000 UK firms currently trade solely with the EU, and will have to face customs processes for the first time after Brexit. Companies need more guidance on areas such as rules of origin and trusted trader schemes. Business organisations like the Institute of Directors are playing their part to provide such guidance, but can only go so far without sufficient detail on the government's intended direction of travel.
Labour mobility is a major concern for our members. Business needs a clear and ambitious proposal from the UK on a system that can replace freedom of movement. The government should ensure access to different skills, dependent on demand from UK employers. Employers are also seeking further information on the process of EU citizens obtaining settled status in the UK.
Answers are also needed in other areas. Will Britain pursue a special VAT agreement with the EU, or will Brexit mean a shift to import VAT for EU trade? In which sectors of the economy will the government pursue mutual recognition or continued harmonisation, and where does it want freedom to diverge?
The business community wants to tackle challenges head on – but to do this successfully it needs much more clarity on the detail of the UK's objectives as we enter phase two. Without it, most business preparation can only happen when the new economic partnership has been agreed in full, which may necessitate a longer adjustment period in turn to make Brexit work as it should.
Allie Renison is head of Europe & trade policy at the Institute of Directors