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Summary
- The failure of Brexit deal would hinder the tariff-free movement of goods across borders as they did before the UK parted ways with the European Union
- The EU-UK deal is important for businesses from both sides to ensure that the competitive landscape across the continent is maintained and they can compete with other geographies
- The post Brexit- trade deal talks which were scheduled to have been completed by the end of this year, were hampered due to the Covid-19 pandemic
Emerging out of the latest round of talks, negotiators from both the British as well as the EU side have expressed their disappointment at the progress made so far. The post Brexit-trade deal negotiations which had been stalled recently because of major difference on both sides had restarted this month with high hopes that some headway could be made on the thorny issues that had been stalling the talks time and again. There have been several critical issues on which both sides are not seeing eye to eye upon including the role of the European Court of Justice, fishing rights, and the rules regarding state aid. Last month the EU side had softened its stand on the issue of state aid to ailing businesses, leading the UK to consider expanding its coronavirus loan programme to companies left out previously because of the EU regulations. The successful conclusion of the agreement with a deal is also essential for businesses and the governments on both sides as they will be saved from massive cost on account of new tariffs that could go online post 31 December 2020.
The consequences of a no deal Brexit on businesses on both sides
There were several businesses in the United Kingdom and the European Union who would see their revenues cut down sharply in the event that no headway is made by negotiators on both sides. Particularly at risk would be, the retail industry, the Automobile industry and the hospitality industry. Through the combined European Union years, these supply sources have helped the British car industry to produce vehicles cheaply and become internationally competitive. The British automobile industry is highly dependent on the imports of components from other EU countries who are able to produce them economically and of higher quality than they can be produced domestically.
Should a new tariffs regimen go online from 1 January 2021 then there would also be several implied cost that would have to be borne by both sides. The critical amongst these implied costs would be the infrastructure set up, and the additional customs personnel that will be required on both sides leave alone the mountain of paperwork that would need to be processed on a daily basis. This will implicitly add significantly to the cost of businesses and the administrative setup and will push up the cost of doing business significantly.
The Brexit deal journey so far
When the 2016 referendum in the United Kingdom decided its fate with the European Union, the scope of the massive economic fallout that would ensue had been fully comprehended by many. On both sides, there were several businesses who had expanded their operations in other countries within the Union and had expanded their business very rapidly over a period of forty-seven years the UK had been part of the EU. To break away after so long being together would not be that easy without bringing about massive economic damages on both sides. Thus soon after the Brexit decision was reached in 2016 leaders from both sides lobbied hard with their governments to negotiate a deal so that most of the current tariff structures remain intact and there should be the least amount of disruption of business activity. The negotiation process, however, took way too long and until 2019, it had been stalled many times before the Incumbent prime minister Boris Johnson came assumed the charge. In his poll promises, he had promised the people a withdrawal with or without a deal. Accordingly the process of withdrawal was completed on 31 January 2020, but additional time was allocated to negotiators on both sides to complete the negotiation process by the end of the year, i.e. 31 December 2020, after which the new tariffs would be put into place.
The pandemic, lockdown and other reasons that slowed down the negotiations
Though the year 2020 started on a positive note for the United Kingdom, but by the time March arrived, the threat of the pandemic had spread over the world. When the pandemic actually hit the country, and a lockdown had to be imposed to contain its spread, almost all government work got severely impacted, including the Brexit deal talks. The continent of Europe had come to a grinding halt, and most governments were now handicapped in terms of how they operated, and most of their resources and thought process were directed towards protecting their people and their economies. On the Brexit negotiators front, however, skipping a few scheduled engagements both sides continued their talks via teleconferencing and have been continuing to so engage till now.
There have a lot of other issues as well other than the pandemic, that had been become hurdles in the trade deal on which the negotiators were not able to agree upon. These issues which are core to the business interest on either side were forcing the negotiations to stall time and again, leading to top leaders of both sides directly speaking to each other to break the deadlock. The present delay of talks has come despite the pressure on the negotiators to arrive at an agreement to avoid the imposition of new tariffs, which will be detrimental to both sides.
Conclusion
There is still one round of negotiations left for both sides to arrive at a Brexit deal in time before the 31 December 2020 deadline arrives. The continuity of business as usual is of great importance for businesses as well as the government to concentrate more of their energy and resources in the fight against the pandemic. The entire European continent is in dire economic distress right now, anything that will add to the costs of the businesses will only make the survival of the businesses much more difficult.
