My crystal balls are useless

I collect glass balls – paperweights mainly.  Some are crystal, but they are totally ineffective when it comes to looking into the future.  Especially so when I am asked by clients trading internationally where the UK is headed with Brexit.
March 2019 is not a long way away and in business planning terms 2021 is pretty close too.  If you were planning to build a factory to service the European market you’d like some idea as to where best place it.  And I now know that the UK is not necessarily ruled out by the prospect of Brexit, but that it is an important factor.

Part of my problem with Brexit is that the politicians keep blowing with the wind and stabbing each other in the back – on both sides of the English Channel.  In the UK, we don’t know at all what the Government’s Brexit will look like or when it will really be implemented.  And whilst I have had complaints about the political nature of some of my articles, politics is at the heart of this issue and taxation is never divisible from politics.  VAT in the UK was a consequence of the British political decision to join the European Community, as we then called it.  Even more appropriately, looking back, it was introduced on April Fool’s Day 1973. Hence some political awareness is necessary to try to divine what might happen.

Right now, the UK has asked the EU for a two-year implementation period, although nobody has told us what is to be implemented.  Of course, the EU could just say “no”, except we know the western Europe’s states have similar problems to the UK in that, for example, they do not have a Customs infrastructure to cope with Brexit at March 2019. The French for example are relying on a new Customs computer system, which the UK will use too, being delivered on time (work on it started way before the referendum but not in anticipation of the result). Somehow the French must recruit, train and house about 5000 extra customs staff, as we do. And then a similar number of customs agents will need to be recruited and traditionally they have come from National Customs services. So, it is going to be very hard for all states with an active border with the UK.

The UK has also suggested to the EU we stay in the Customs Union and the Single Market until Spring 2021 i.e. no change until 2021.  Provided that the remaining EU member states agree this proposal.
My best guess is that is exactly what will happen until 2021. The EU has as much chance of being ready by 2019 as does the UK. We could all be silly and wreck trade between the UK and the rest of the EU, but that would do as much economic damage to France, Germany and Holland as would be inflicted on the UK. In my opinion, the EU budget could not stand that, leaving the remaining member states in crisis.

After that is more difficult because politically the current UK Government must take the UK out of the Single Market and the Customs Union at that stage. It must abandon other trade structures such as EFTA and EEA because it has managed to mix them up in the public’s eye as being the EU. But it now knows the UK would be in a trade wilderness if we did that. And the UK could have had at least one change of Government along the way.

We have heard the UK politicians telling us that what will come will be different but have the same benefits. I think the EU politicians know what this means too.

I think the UK will seek to create a free trade area including the EU and countries like Norway, Switzerland and Iceland. It won’t be called the EEA because that is politically bad, it will be “new” but the same. I think that the Customs barrier will sit outside this new free trade area just as it does now. I can also see that within the new free trade area we will find harmonised indirect taxes which look remarkably like those of the Single Market, but it will be new and the UK will have a big say, just like it does now, but it will be different and better because it is not called the Single Market.

I think this brand new and much better body will negotiate trade deals with third countries just as the European Union does now, but it will be better allowing the UK to trade freely with the rest of the world, just as it does now (check out the tables published by the BBC recently).

I think this new world will take at least seven years to be agreed between the parties. In the meantime, the UK will blame the EU for terrible delays, the EU will blame the UK for not doing its homework and they will all agree to extend the implementation period which is not a transitional period.

So, nothing will change for seven years, but then it will be different but the same.

Of course, these new bodies will have to have their administrations somewhere else, possibly Madrid because the weather is so much better there.
And sadly I am not joking. The EU does not want the UK out and that body understands the art of compromise and finding solutions. Within seven years the UK may have once again found that art.

In the meantime, I suggest you read Machiavelli (the machinations), Nineteen Eighty-Four (the art of Newspeak and “Oceania”) and 1066 and All That (for the logic), and you’ll be as enlightened as any Government minister as to what is really happening.

You may gather that I am very cynical. I also do not believe I will be far off the mark.  But bear in mind that my crystal balls are useless.