Brexit: Deal Or No Deal, Time Is Running Out

This month saw an interesting dance playing out in Brussels, with United Kingdom Brexit Secretary Dominic Raab making a last minute and unexpected trip to Brussels. Many suspected that this was a sign of a breakthrough in negotiations, hopes that were quickly dashed over the cause of Sunday evening.

While this whole song and dance was very amusing, it does not appear to actually do much to get the deal over the line. It does, however, show how close to the edge everyone involved in the negotiations is over the impending soft deadline to get this deal done. The soft deadline is the last possible date that the EU and the UK can agree on a withdrawal and transition deal and still get it signed off in time for the stated departure date of March 29th 2019. However, the scale of the problem should not be understated, politically or practically.

Realistically any deal needs to be signed off within the next month, as it will need to be agreed on by all the remaining EU nations in time for March. While it may seem like sufficient time remains, this is not the case. First off the deal won’t be signed off by the EU even in part until the October or November summits. If the October deadline is missed it will be mid-November before it can be agreed upon. That already leaves a whole month possibly out of the equation.

Secondly, no Government is going to be able to consider these proposals seriously over the Christmas break. The sheer scale of Brexit means most governments will need to devote a significant portion of their high-level civil servants to peruse the documents and agreement. Like many businesses, governments have great trouble actually getting any significant work done over the Christmas period due to the breaks and holiday festivities. As a result, most governments won’t see any serious work done on the issue until late January.

This brings us to the final straight from late January to late March where all aspects of the agreement must be signed off on. At that point, it will be too late for major changes to the agreement.

The damage may already be done to the British economy at that point. Many of the major financial institutions will need to have to move assets and hire staff in other jurisdictions long before this final straight. Most have already begun the relocation process, though it has not yet reached the heights proposed by the worst case scenarios that the Remain side discussed in the referendum. Given the British Government’s heavy reliance on these financial institutions to provide tax revenue, even a small departure of these businesses could cause a significant loss in revenue.

The same effect is playing out across all other areas of industry as well, as more and more businesses realise that it may be too late to just wait and see if a deal will be struck, and are acting.

The real question that is left is how can this problem be resolved? The obvious solution is for someone to compromise their positions, by the EU and its tight grip to single market rules or the UK shifting on one of its red lines. However, both of these require massive political shifts and there isn’t much time for those to happen.

Realistically given the power disparity between the two negotiating parties it is more likely that the UK will end up giving ground, or that would be the case if these negotiations were taking place in a rational manner. Instead, we are seeing the UK political system essentially remain paralyzed by the inability to reconcile the promises it made to itself, and the reality it is finding itself in. This is perhaps best being shown through the ongoing civil war in the Tory party, who insist to themselves they can still have the best of both worlds.

The other major issue at play is the Northern Irish question and how the UK can reconcile its commitments under the Good Friday Agreement and the promises it has made to itself in the course of the Brexit referendum. The question of how Northern Ireland is going to fit into the wider Brexit picture is still the biggest sticking point in the withdrawal agreement.

So with major sticking points, the economic damage starting to hit, the UK seemingly paralyzed by indecision and finally a shrinking timeline, the outcome doesn’t look good. The best case scenarios remain someone compromising their position and a deal being stuck. Failing this no deal will be stuck in time to save the UK for the economic damage that will be inflicted, and the more damage is done to the British economy the more the political hardliners will see compromise, to damage their nation.

Deal or no deal time is running out, and this timeline is most likely harder to extend than actually striking a deal is.

 

By Aaron Bowman – CoEditor

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