Brexit and the year ahead in 500 words

It’s 2018 and it’s going to be hectic year with ongoing Brexit negotiations! Here’s a quick overview explaining what still needs to happen, how it will affect retailers and what to watch out for…

Firstly, arrangements must be made for the so-called ‘transition phase’ - the period immediately after the UK formally leaves the EU and before any long-term arrangements take effect. The UK wants a transition period that maintains the existing open trading relationship with the EU. Fortunately, the EU wants the same, but has stated it depends upon whether the UK agrees to follow EU rules during the transition. The two sides hope to wrap up negotiations before Easter.

Watch out: Some minsters (particularly Michael Gove) do not want to follow EU rules during transition. In areas where UK and EU regulation diverge there is also a strong possibility that customs duties will be introduced.

Secondly, the UK and the EU will need to knuckle down to the serious business of agreeing their long-term trading relationship. The two sides hope that discussions regarding this future relationship will commence as early as Easter, with the UK having earmarked the end of the year for wrapping up negotiations. The EU however, feels that talks will need to continue into the transitional phase.

Watch out: As with the transitional arrangements, there is likely to be a strong correlation in the final deal between free and open trade on the one hand and alignment of regulation on the other hand. In other words, the further the UK intends to diverge from EU rules, the higher the barriers to trade are likely to be. Food and drink are likely to bear the brunt of any new tariffs.

Thirdly, as soon as the UK leaves the EU it will no longer be party to the EU’s bilateral trade deals with other countries. If British businesses are to continue benefiting from these agreements, then the UK will need to renegotiate or replicate them with the countries in question. The most significant agreements are with South Korea, Mexico, Japan and Vietnam but there are others in the pipeline. 

Finally, the UK will need to establish itself as an independent member of the WTO. This includes setting its “Most Favoured Nation” tariff rates, putting in place preferential arrangements for imports from developing countries and setting up a national trade defence (anti-dumping) regime. Crucially, this all needs to be in place by the time the UK formally leaves the EU. The work is being systematically carried forward, facilitated by the Customs Bill as well as the Trade Bill - both introduced into Parliament just before Christmas. 

Watch out: The following explains an area which offers the greatest and immediate opportunity for retailers who import. The government will adopt the EU’s existing MFN “schedules”. Consequently, UK tariff rates will stay the same as they are now generally speaking. Additionally, the government might make it easier to access preferential rates for imports from developing countries in concert with trimming the list of products that are subject to Anti-dumping measures. The latter could mean lower customs duties on a range of products (e.g. bicycles, ceramics, DIY products), especially from China.