Business faces a huge challenge and a long period of uncertainty.
Theresa May delivered her long awaited Brexit speech yesterday, presenting her Government's 12 objectives for the negotiations ahead. The UK will leave the Single Market, the Customs Union and just about everything else.
What does this mean for UK business? In a nutshell, all existing provisions, rights, recognitions, memberships and agreements are effectively off the table, and controls on immigration may limit access to workers from the EU.
So almost all the existing relationships, such as tariff free access to the Single Market, participation in the European Agencies, mutual recognition of professionals, access to trade agreements with 50 non EU Counties and participation in EU funding and research programmes, will cease to apply. May said 'we do not seek to hold on to bits of membership when we leave.' That seems clear and looks like a very hard Brexit for business.
However, it's not clear at all because she then went on to say the UK will seek what I would describe as a 'Trade Deal Plus' relationship, and will aim to hold on to at least six important bits of EU membership in areas of particular relevance to business. If she was successful this would indeed represent a significant softening of Brexit:
• First, a 'new partnership' with the EU built around a Free Trade Agreement, that may include 'elements of current Single Market arrangements in certain areas.' Here May gives the example of automobiles and financial services
• Second, 'a customs agreement with the EU' with the aim of facilitating tariff-free trade and making it as frictionless as possible
• Third, an agreement on 'science, research and technology' initiatives
• Fourth, appropriate contributions into the EU budget in order to participate in specific European programmes
• Fifth, a phased process of implementation, which might include 'customs systems'
• Sixth, maintaining 'The Common Travel Area with Ireland'
Given it is not clear what business sectors will be included in the 'Free Trade Agreement', the 'phased process of implementation', the 'new partnership', any 'science, research and technology initiatives' or 'specific European programmes', we simply do not know what the Brexit plan for business is.
Moreover, May's 'Trade Deal Plus' will require the unanimous support of all EU Member States, National Parliaments and in some cases Regional Parliaments such a Wallonia. Given the desire by the UK to control immigration, and reach agreements on much of this in two years, this will not be easy.
The reaction in Brussels and Berlin has been brutal and swift.
Guy Verhofstadt, the European Parliament's chief negotiator, said Britain has chosen a 'hard Brexit' and whilst he welcomed the 'clarity' he underlined that 'the days of UK cherry-picking and Europe a la carte are over', giving a clear signal he will oppose any deal that allows the UK to hold on to bits of membership when it leaves. The EU chief negotiator Michel Barnier said an 'agreement on orderly exit is prerequisite for future partnership', signaling the 2 year timeframe outlined by May is unrealistic.
And in Berlin some leading commentators welcomed the 'clarity' of the speech, but described it as 'provocative' and 'blind to reality'. The German Foreign Ministry also welcomed the clarity, but stressed the priority was protecting the EU 27 and the 'integrity' of the Single Market, in other words no sectoral deals.
Given a 'Trade Deal Plus' will be negotiated sector by sector, and nothing will be agreed until everything is agreed, business faces a huge challenge and a long period of uncertainty.
Mark Watts is Director of the IDA Group and former British MEP.Suggest a correction