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UK Government publishes Brexit white paper

The UK Government published its Brexit white paper on 2 February 2017.  

Although the paper runs to 77 pages, there is little if any new policy that wasn’t included in Prime Minister May’s speech  – indeed the forward has simply been lifted verbatim from that speech.  It is also fair to say that there is interesting new factual data to support the UK Government’s position.

The paper is structured in twelve substantive chapters, one for each of the twelve principles that the UK Prime Minister outlined.  Points to note include:

  • The paper outlines the unique relationship and economic ties between Ireland and the UK and makes a commitment to maintaining the strong and historic ties. This includes protecting the Common Travel Area (CTA) that currently exists between the UK, Ireland, the Isle of Man and the Channel Islands, and has existed before Ireland and the UK joined the EU.
  • The paper demonstrates how the UK and Irish economies are deeply integrated, through trade and cross-border investments, as well as through the free flow of goods, utilities, services and people. Annual trade between the UK and Ireland stands at over £43 billion, while around 60 per cent of Northern Ireland’s goods exports to the EU are to Ireland.  Cross-border movement of people is an important part of this economic integration.  The paper states that over 14,000 people regularly commute across the border between Northern Ireland and Ireland for work or study.
  • The devolved administrations in Wales, Scotland and Northern Ireland will continue to be consulted about Brexit.  No powers currently devolved to them will be removed, and some new powers that currently reside with the EU may come to vest in the devolved administrations.  Interestingly, the paper states that there will be “as seamless and frictionless a border as possible between Northern Ireland and Ireland” – a move away from previous assertions that there would be no border or, at most, a ‘digital border’. 
  • The paper makes clear that the UK Government will consult on the Great Repeal Bill and the UK’s approach to EU legislation brought onto the UK statue books through the Bill’s application.  The fact that the UK and EU’s regulatory regimes are currently entirely converged makes it significantly easier for the two to negotiate a best in class Free Trade Agreement (FTA).  As a general rule, the further the UK’s legislation diverges from Europe’s – in fact or in expectation - the more complex the FTA negotiation process will be.  Encouragingly, the paper confirms “any significant policy changes” will be underpinned by primary legislation, allowing the UK Parliament to scrutinise the details.
  • The paper acknowledges that the UK needs highly skilled migrants and students.  The White Paper confirms that the UK stands ready to give certainty regarding the outcomes for EU nationals current residing in the UK provided that a reciprocal deal can be reached regarding UK nationals currently residing in the EU.  However, the UK Government has made no commitment regarding entry into the UK for unskilled and semi-skilled migrants. As an aside, a graph shows that approximately half of all migrants to the UK come from outside the EU. The White Paper does not comment on whether restrictions on EU migration might also change non-EU migration.  
  • The paper observes that the UK has a £89 billion deficit in trade in goods deficit with the EU; but the UK also runs a £29 billion trade surplus on trade in services. It is therefore critical that the FTA with the EU makes proper provision for services, which make up 80% of the UK’s overall economy.  It is also worth bearing in mind that just under half of the UK’s exports go to the EU but only 5% of the EU’s exports go to the UK. 
  • On the EU Budget, the paper states that on leaving the EU the UK will no longer be required to make vast contributions.  However, the UK will face possibly significant ‘break costs’. It is also the case that EU contributions are agreed on a multiple year forward basis. 
  • There are fairly detailed analyses of trade with the EU for certain sectors in Chapter 8 of the paper.  Aside from these sectoral analyses, trade in services gets little attention.  There is no detail at this stage on how the UK Government envisages that a Customs Agreement (as opposed to a Customs Union) might work.   Customs brokers estimate that even in a zero tariff environment, the additional administration costs might run to £25-50 per shipping container, an additional admin cost that very quickly adds up to material sums.  There is also the issue of goods potentially taking longer to clear customs.
  • Of course whatever the UK’s aspirations it must negotiate a settlement with the other EU-27. There will inevitably need to be compromise in some areas.  

Please contact David Carson, Partner and Brexit Lead if you have any questions or comments.

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