Brexit delayed - so what happens now?
Every outcome from Withdrawal Agreement approval to EEA membership is still in play
Agriculture and food businesses in the UK, or with UK trade connections, still have virtually no clarity over future arrangements, following this week’s EU Summit meeting in Brussels.
Although the agreement reached by EU leaders late on Thursday has removed the risk of the UK crashing out of the EU without a deal next Friday (March 29) - as may well have happened otherwise - the formula agreed in Brussels simply pushes the Brexit ‘cliff-edge’ back by an additional two weeks, to Friday April 12.
By then, the UK Parliament will need to have decided whether to endorse the negotiated EU-UK Withdrawal Agreement – already twice rejected by the House of Commons – to allow the UK to leave without a deal, or to indicate an alternative “way forward” (to use the language of the official Summit conclusions).
The UK and EU plans for a no-deal Brexit, including the emergency schedule of UK import tariffs set out by London on March 13, remain poised for possible implementation in the meantime.
With a March 29 ‘crash-out’ from the EU now off the table, the remaining Brexit options are as follows:
Approval of the Withdrawal Agreement
This is the solution for which most voices in UK and European agribusiness have been lobbying, as it would offer a roadmap for a managed UK exit.
If the Withdrawal Agreement is approved (finally) by the House of Commons next week, the UK would remain an EU member state until May 22, the day before elections to the European Parliament begin. It would then enter a transition period lasting until December 31 2020, during which time the UK would remain within the Single Market and Customs Union, and during which time a plan for a future trade relationship between the UK and EU would be finalised.
The problem is that this deal has already been rejected twice by the House of Commons, by huge margins, and observers presently see little chance of prime minister Theresa May being able to win the third vote which is to be held next week. This would set the UK on course either to leave the EU on April 12 with no deal, or to pursue alternative courses of action.
A ‘No Deal’ Brexit
The UK parliament has twice voted against leaving the EU with no deal, most recently last week – but a No Deal Brexit would nevertheless happen on April 12, by automatic application of the EU’s Article 50, unless the UK opts to re-set the Brexit process and seek alternative solutions (see below).
A No Deal Brexit would lead to serious disruption of integrated EU-UK agri-food supply chains, and would probably cause EU prices of products like milk, pork and poultrymeat to fall sharply. Retail food prices in the UK, meanwhile, are likely to increase, despite the UK government’s radical contingency plans to suspend import tariffs for most agri-food products.
The trading conditions created by a No Deal Brexit would remain in place until such time as the UK and EU managed to negotiate a full bilateral free trade agreement, given that the UK, having ‘crashed out’ of the EU, would no longer have the option of ‘crashing back in’.
A change of plan
A third Parliamentary defeat for the Withdrawal Agreement next week would mean that the UK would have to decide on an alternative course of action by April 12. There is widespread expectation that prime minister May would resign rather than request another Article 50 extension, so this could herald new leadership and a possible fresh approach.
As EU Council President Donald Tusk said on Thursday: “The UK Government will still have a choice of a deal, no-deal, a long extension, or revoking Article 50.”
The EU is adamant that if the UK wants to extend its EU membership beyond May 22, it will have to participate in the European elections, which in the UK would be held on Thursday May 23. This would be politically embarrassing for the UK’s ruling Conservative Party, but may nevertheless be an inevitable side-effect of any further Brexit delay.
Any extension beyond May 22 would require a redoubling of efforts within the UK to find a consensus approach to Brexit which would secure Parliamentary support.
This re-opens the door to possible options like UK membership of the European Economic Area, under which the UK would remain embedded within the EU Single Market. It would allow the UK to pursue an independent trade policy, but that would in turn mean continuing problems in resolving the dilemma of the Irish border.
Revocation of Article 50 – in effect, cancelling Brexit – is seen as unlikely, as it would contradict the result of the June 2016 referendum. However, any new prime minister attempting to ‘reset’ the UK’s Brexit strategy would probably want to seek a public mandate for such action, either via a general election, or perhaps a new referendum.
Thirty-three months after the initial Brexit vote, therefore, literally all options currently remain open.