Pause to consider the sheer historic weight of this event and few would doubt that we are living through one of the most significant economic, social and political events to impact this country in modern times. We leave in three weeks without yet agreeing how, let alone what our future relationship with the world’s largest trading bloc will look like. One can be forgiven for pondering how the resolution of an issue of such seismic proportions could run so perilously close to the wire.
The post-match analysis of this phase of Brexit will be long and bruising for many of the players involved. It will be contemplated not only by our generation of law makers, commentators and business leaders, but pored over in the writings of economists and political historians for generations to come. For now though, Scottish businesses hold their breath to see what will play out between now and Brexit day, and what this will mean for their people, their operations and their customers.
Nerves may have calmed a little in the knowledge that an immediate “hard Brexit” looks less likely in light of the Prime Minister’s vow to offer parliament a vote on extending Article 50 if both her own deal and no-deal being rejected next week. Parliament has already revealed its preference to oppose a hard Brexit through a non-binding vote, and there appears to be little mass-market appetite among parliamentarians to pursue a no-deal.
However, questions abound over the duration of any extension and the conditions which might be attached to it. While the EU’s agreement to such a request is widely assumed, the unanimity required from all 27 member countries is yet to be tested. If an extension is agreed, then the Brexit decision is effectively deferred and a range of outcomes, including previously discounted options such as “Norway Plus”, may come into play. In this event, businesses may wish to dust-down the scenario planning reports they prepared in 2016 in the aftermath of the Brexit referendum.
In the near term, an extension of Article 50 would afford business continuity of the present regulatory and trading regime, and avert (albeit temporarily) the no-deal “cliff edge” under which EU law would cease to apply at 11pm on 29 March – a scenario for which the country is ill-prepared.
The curious nature of Brexit politics means it is also possible that the PM may yet succeed in securing a majority for her withdrawal deal. Despite suffering a record-breaking Commons defeat in January, the political sands of Westminster may move quickly as MPs prepare for the second, and potentially final, “meaningful vote” next week. Success for the PM would depend on a shift from the European Research Group, inspired by legal concessions over the Irish backstop from the EU27, or a capitulation to favour “any Brexit” over the risk of none, that some fear an extension might bring.
If the PM’s deal passes, business will achieve some near-term clarity as the withdrawal agreement, in its current form, makes provision for a 21-month transition period under which relations with the EU would remain largely unchanged until the end of 2020.
Irrespective of the route MPs opt to take next week, businesses exhausted by Brexit and hoping Parliament will finally deliver a conclusion to the drama may be sadly disappointed. Even if a deal is passed, this is really only akin to reaching base camp. Thereafter, the UK must embark on a precarious ascent towards agreeing its future relationship with the EU, whilst also working to strike trade deals with countries around the world.
In all probability, Brexit will continue to dominate our boardrooms for years to come.
- Andrew Henderson, director of public policy at Pinsent Masons