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A deal is done and, despite rumblings of discontent among Conservative backbenchers about the time allotted to scrutinise it, Parliament will ratify it. Equally, ratification on the EU side seems a foregone conclusion.

And so, UK-EU relations will be based on a detailed agreement that regulates many – though by no means all – elements of their collaboration.

The very fact of having agreed a deal is no mean achievement. The pandemic has made the negotiations more difficult than they otherwise would have been.

For a while, negotiations were carried out virtually – hardly the optimal way to build relationships and create trust. On neither side were leaders focusing enough on the political trade-offs that would be needed to close a deal.

Artificial deadlines came and went – and it was only the final real deadline of 31 December that enabled Brexit to break through the Covid fog and focus minds on the need to settle.

That these trade-offs were ultimately made is a tribute to both sets of negotiators. For a number of months, it appeared as if the incompatible principles on which each side based its approach to the talks would render any deal impossible.

The fact that a deal has been agreed significantly reduces the uncertainty and disruption that the end of the transition period on 31 December will imply.

Quite apart from the fact that the deal means that businesses do not have to prepare for the prospect of tariffs and quotas, the fact that the talks ended in success also means that the UK and EU can begin this new chapter of their relationship anxious to make their agreement work, rather than at loggerheads about their failure to secure one.

In areas such as security, the agreement does far more than most observers would have predicted. Whilst UK access to databases will be neither as quick nor as easy as was previously the case, the two sides have come up with a deal that ensures they will be able to continue to collaborate on security matters.

And yet the deal will still have significant economic consequences. On the spectrum of hard to soft Brexit, this agreement is located very much at the former end.

The indisputable ‘wins’ that the British government secured – notably on exports of electric vehicles – must be weighed against a series of more damaging economic consequences. Service providers will face serious impediments in accessing the European market – not least securing visas and ensuring the acceptance of professional qualifications.

The Prime Minister himself acknowledged that, on financial services, the deal ‘perhaps does not go as far as we would like.’

Meanwhile manufacturers will face increase paperwork in the form not only of customs declarations but also the need to ensure certification of their products within the EU. In short, trading with the European Union will become more difficult and more expensive, which is why reputable economists insist that, deal or no deal, Brexit will have significant economic implications – estimated in our modelling to take around 6.4% off our GDP over a decade.

And of course, while the formal negotiations may be over, the notion that Brexit is now ‘done’ is somewhat fanciful for at least three reasons. First, there is unsettled business.  Decisions from the EU on data adequacy and financial services equivalence are yet to come – though there is a six months temporary arrangement in place on the former.

In other areas there are future negotiations – not least as it will be back to the drawing board on fish in five and a half years’ time.

The UK still has to meet some of its commitments – establishing a new state aid regime and setting up its new environmental enforcement body – and over time we will see how often the EU seeks to invoke its right to challenge UK decisions on subsidies or other parts of the level playing field.

Add to that some future decisions on the functioning of the Northern Ireland protocol – and the need for the UK to ensure that NI stays aligned with EU rules on goods.

Second, the broader consequences of Brexit are far from having worked themselves through the UK system.

Most obviously, renewed calls for a second independence referendum in Scotland are intimately linked not only to the outcome of the 2016 referendum but also to the form of Brexit ‘imposed’ (as the SNP would have it) on Scotland. Brexit will figure prominently in the elections to the Scottish parliament in May.

And finally, there is the Brexit project writ large. Leaving the European Union was a means to provide the UK with the flexibility to do things differently.

We have already seen this with the introduction of the much-touted ‘points-based immigration system,’ and we will see more in areas such as agriculture and fisheries – and the looming debates about the direction of UK trade policy.

More broadly, Brexit has been the catalyst for a debate about ‘levelling up’ that, whilst made more difficult by the economic impact of leaving the customs union and single market and the pandemic, might yet come to be the metric by which Brexit itself will be judged.

Brexit could usher in a new domestic debate about two very different visions of post-Brexit Britain, both represented in the Conservative Party and its new coalition of voters: Brexit as the route to significant deregulation versus Brexit as paving the way to a much more interventionist state.

That is a debate that will work itself out in the months and years to come.

For the moment, with a deal signed, and ratification all but assured, the Prime Minister will want to make the most of claiming to have ‘got Brexit done.’ And Covid will ensure that the UK’s relationship with the EU will quickly cease to dominate the headlines.

Yet, for the foreseeable future, the changing nature of that relationship and its implications will continue to shape much of what happens in our country.

By Anand Menon, director of UK in a Changing Europe.


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