Florence and the Magic Roundabout

I’m not talking about the Magic Roundabout, albeit there are similarities, as you will see, but the speech of the UK Prime Minister in Florence, Italy on Friday 22 September 2017.

For our clients doing business in the EU there was some good news and a big lump of no news.
Just to put this note in context, I am talking solely about UK proposals made by the Prime Minister in a speech and not even put to the other EU member states. This is not therefore agreed, but is well placed to be acceptable to the other EU member states.  If you are following Brexit from outside the UK, you may ask why we are unable to provide some clear messages.

There are three main reasons:

  1. In fifteen months, nothing has been agreed between the EU and the other member states except that the UK is leaving the EU.  This does not mean the UK must leave the Single Market (the free trade area) or the Customs Union (the trade barrier around the EU).
  2. The UK has only published position papers, proposals, which have little detail, and none of which have been agreed with the other EU member states; and
  3. UK Government ministers do not sing from the same hymn sheet, leaving the Prime Minister constantly undermined, and business having no certainty where the UK is headed.

The good news was simple:

  1. The United Kingdom accepts that it will not be ready for Brexit by the end of March 2019 (when it is due to leave the EU).  This will not come as a surprise to businesses, as the mountain to be climbed is huge, but it is very unusual for a politician to be so frank.
  2. The UK would like an “implementation period” of two years to get itself ready to leave.  This would mean leaving in 2021.  From what I can gather an “implementation period” is the same as a “transitional period”, which has previously been dismissed, but is more acceptable to the UK as it is our own idea.
  3. The UK would like to stay in the Single Market during the implementation period.  This is a change of heart as ministers had previously been adamant the UK would leave at the end of March 2019.  Massive credit again to politicians willing to be so frank.
  4. The UK would like to stay in the Customs Union during the implementation period.  This is also a change of heart.
  5. The UK would permit some interference from the European Court during this implementation period.  This too is a change of heart, but there is no detail as to where the UK would seek to curtail the court’s remit.  It is possible that the UK may decide not to curtail the court’s remit or even that the UK will have left by the time it makes a decision.
  6. The UK would continue to permit free movement of people during the transitional period, but may introduce a registration scheme which is already permitted within the EU and used in some member State.  There is no infrastructure for such a registration scheme in the UK. Quite when such a scheme will be ready, if ever, is anyone’s guess.
  7. The UK is now welcoming workers from other member states who are already in the UK and no longer has any intention other than to treat them exactly the same as they were treated before the referendum.  The implication is that they will not be thrown out of the UK, which is good news for the UK given the tens of thousands of EU workers who have left since the referendum.  Perhaps the UK may be able to attract some of them back as their loss has put particular strain on hotels, catering, agriculture and, most notably, the National Health Service.  Clearly acceptance of the remit of the European Court of Justice during the implementation period is essential to maintain the UK’s obligations.
  8. The UK will continue to honour its financial obligations to the EU during the implementation period.

So, this is all good and, to be fair both what business has asked for and, given the admission of being unable to meet the original Brexit deadline, common sense.  However:

  1. These are the UK latest set of proposals are nothing more than that.  Yet M Barnier, if not at least one of his senior contemporaries, seems to have seen it as a move in the right direction.
  2. Whilst the “implementation period” is proposed, just what will be implemented has not been set out.  We have various visions from leading ministers, some of which are conflicting, but no hard proposals.  We do not know what Brexit Britain will look like.  However, the frankness of the UK Prime Minister means that we do at least have an extra two years to find this out.  So, whilst Brexit means Brexit has not really changed, because we never knew what it did mean, clearly the rules we are playing to have at least been modified.

I also pay attention to language.  “Transition period” is a term used by the EU.  “Implementation period” may well be the same thing, but changing its name means it is part of Brexit.  We now know that eventually the EU is to leave the Single Market and the Customs Union, but we have heard previously that what replaces them will also be very similar, but will have different name.  And that may also be true of the name of the governing court or courts.  So maybe we’re on the threshold of the UK moving away from the EU political and Economic Union, but staying in a newly named free trade zone which includes the EU member states and other nations such as Switzerland and Norway.  It might look quite similar to what we currently have, but without the UK having any direct political and economic say within the EU.  It may mean that.  It could of course just be political posturing, which is not good for business.
In the meantime, assuming that a deal can be done for an implementation period, I do have some VAT and Duty questions, which some may say are silly.  However, those of us long in tooth know that silly questions sometimes get silly answers:

  1. Are we still leaving the EU at the end of March 2019?  We’ve indicated we will probably be staying in the Single Market and the Customs Union, but they are not the same as the EU.  Leaving the EU means losing political and economic decision-making power, but still having to abide by any new rules brought in place regarding the Single Market and the Customs Union amongst other things.  Leaving the EU may mean losing some of the benefits and rights of EU membership.
  2. Will UK firms be able to trade freely with the remaining member states and vice versa?  Will the non-discrimination laws continue to apply?  Will a UK company doing business in Germany still be treated the same as a German company trading in the UK, and vice versa?
  3. Will all the current VAT simplifications for intra community trade continue to apply?
  4. Will we still have European Sales Lists?
  5. Will VAT fraud information still be shared with member states, and vice versa?
  6. Will we continue to complete intrastat returns?  Will they continue on the same basis or do we fear greater reporting obligations against smaller thresholds for example?

I’d like to assume that the answers to all those questions and more will be that we continue as we are after the end of March 2019.  However, you can see why I’m asking.
So following Florence, the Brexit Magic Roundabout will continue to turn.  Florence will still look to lead whilst she seeks to find her way.  Presumably Mr Davis will crank Mr Rusty’s organ. The whole lot will continue to take what Dylan does, man, whilst the process continues to move at Brian’s pace.  As for Dougal, he seems to have dropped out of sight with Ermintrude after that article she wrote in the Telegraph a little while ago.
For my French friends, please feel free to substitute your own names, bearing in mind that the UK version had a different storyline to the pictures which you produced.  Plus ca change!
Time for bed said Zebedee.