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Breakthrough Brexit deal offers hope to agri-food sector – but fears still persist

Failure to approve the deal would once again raise the spectre of either a no-deal Brexit on October 31, or a politically fraught bid for a further limited extension of the UK’s EU membership

The United Kingdom has finally reached agreement with the EU on revised terms for its departure from the Union, and on the basis of its subsequent future partnership. But as things stand, there is still no certainty as to whether any of the provisions agreed will actually come into effect as planned at the end of this month – or at all.

Britain’s parliament now faces (at last) its ultimate moment of truth, as it has to decide whether or not to approve the deal reached early on Thursday morning by UK and EU negotiators. They have until the end of Saturday to give their assent to the new agreement, and thereby trigger the process of orderly withdrawal.

If they decline to do so  – whether because the deal ties the UK too closely to the EU’s sphere of regulatory influence post-Brexit, or because it does not tie the UK in closely enough (and both points of view are being expressed by different parliamentary factions) – then a further period of chaos and uncertainty beckons.

For the agriculture and food sector, an agreement this weekend would allow trade between the UK and EU27 to continue as at present until the end of 2020 in a post-Brexit transition period – and potentially until the end of 2022, if both sides agreed to invoke a clause permitting an extension of this period of up to two years. During that time, the terms of a future trading relationship between the two sides are due to be thrashed out.

Focus shifts back to London

But failure to approve the deal would once again raise the spectre of either a no-deal Brexit on October 31, or a politically fraught bid for a further limited extension of the UK’s EU membership.

The House of Commons has passed a law forcing the prime minister to seek an extension if a deal has not been adopted by October 19 (i.e. this Saturday). But it remains unclear how legally watertight this  requirement is, or indeed whether, and on what terms, the EU27 would agree to what would then be a third extension of the Article 50 Brexit negotiating period.

Prime minister Boris Johnson has an effective parliamentary ‘majority’ of minus 45, following a spate of recent expulsions and resignations, but those opposed to the current government are divided over whether to push for a general election to bring about a change of government, or to seek another referendum on the terms of the deal now concluded.

Northern Ireland to straddle two customs zones

This week’s deal between EU and UK negotiators has been facilitated, above all, by new plans for the status of Northern Ireland. Under the terms of the agreement, Northern Ireland would not be part of the EU Single Market, but would remain aligned with EU laws to facilitate trade in agri-food and other goods, as well as complying with EU food safety and animal and plant health rules. This would enable cross-border trade in Ireland to continue essentially as it does today.

More contentiously, Northern Ireland would, in effect, be within both the UK and EU customs territory.

Goods entering Northern Ireland from the British mainland would be liable for UK rates of duty, unless these goods were “at risk” of entering the EU's Single Market (i.e. being transported to the Irish Republic). In that eventuality, EU tariffs would be payable on the products in question when they entered Northern Ireland.

This will put agri-food and other manufacturing businesses in Northern Ireland in a unique position post-Brexit.

For example, in the event that the UK did a future trade deal to allow duty-free imports of beef from (say) Brazil, Northern Irish businesses would have access to that tariff-free beef.

But if any of that beef were then to be processed into a product which was then sold in Ireland, the manufacturer would have to reimburse the difference between the relevant UK and EU tariffs.

The deal would thus simultaneously offer Northern Irish producers both a big advantage over their Great Britain counterparts – i.e. continuing tariff-free access to both the UK and EU markets – and also a serious headache, in the form of significantly increased level of bureaucracy.

The fact that it has been necessary to develop such a convoluted solution shows the extent to which Brexit is essentially incompatible with the politically-enshrined notion of an open Irish border. But, as Commission chief negotiator Michel Barnier said today in his post-announcement press conference, Northern Ireland “is in a unique situation, so it needs exceptional solutions.”

UK seeking future FTA with EU

Meanwhile, today’s agreement also amends the Political Declaration on the future relationship between the UK and EU – another element of the original November 2018 Brexit deal.

The key change is language which specifies that the UK is seeking a free trade agreement (FTA) with the EU, rather than allowing for the possibility of some kind of customs union – in line with the Johnson government’s more distant stance towards the EU.

As with the November 2018 accord, the two sides specify that they are seeking a deal which involves no tariffs or quotas of any kind on goods.

But the language in the earlier text which gave the UK the option of maintaining close regulatory alignment with the EU has been dropped, in favour of an assertion of the fact that both sides have will regulatory autonomy.

This could make it harder to do a deal which keeps trade ‘friction’ between the two sides to minimal levels, as the agri-food sector on both sides of the Channel have been lobbying for.

However, the two Parties have at least agreed that the future relationship “should be approached with high ambition with regard to its scope and depth”, and they recognise that “this might evolve over time.”

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