Brexit transition deal is "now urgent", government warns

The Treasury Committee has published a unanimously-agreed report arguing that an agreement between the UK and EU27 on ‘standstill’ transitional arrangements "is now urgent".

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Rozi Jones
14th December 2017
euro, eurozone, flag, ecb
"Many businesses will begin to prepare for a ‘no deal’ outcome – moving jobs and activity, and incurring potentially unnecessary expenditure – early next year."

The Committee supports a time-limited ‘standstill’ transition arrangement after the Article 50 negotiations conclude and says the transition must be simple enough to “negotiate within a matter of weeks”.

The Committee says there are just two broad possiblities, a 'no deal' or a 'standstill transition' and says there would be a “dramatic” difference between the two in terms of economic impact.

The report says it is "highly likely" that for certain sectors, including financial services, the ‘standstill’ transition period will have to be followed by an adaption period, once the terms of the future relationship become clear.

It added that firms are starting to take action to prepare for a ‘no deal’ scenario, and "this will gather momentum over time".

The Committee believes it will be “very challenging” for the terms of the ‘bespoke’ free trade agreement envisaged by the Government to be fully agreed within the Article 50 process.

The report concluded: "If it expedites the negotiations, the Government should not rule out a transition arrangement that encompasses EU rules beyond those pertaining to the Single Market and Customs Union, and retains, on a temporary basis, the principles of direct effect and supremacy of EU law. Visible disagreement between the parties on these points of principle would lead to a loss of confidence among businesses, and diminish the value of whatever is eventually negotiated."

Nicky Morgan MP, Chair of the Treasury Committee, said: “The Treasury Committee, a cross-party group consisting of Members with a wide range of views on Brexit, is unanimous in its view that an agreement between the UK and EU27 on ‘standstill’ transitional arrangements is now urgent.

“The consequences of failing to reach an agreement are dramatic and damaging. Many businesses will begin to prepare for a ‘no deal’ outcome – moving jobs and activity, and incurring potentially unnecessary expenditure – early next year.

“Transitional arrangements must therefore be straightforward enough to negotiate in a matter of weeks.

“Speed is of the essence. Delays to agreements caused by arguments over arcane points of principle could damage the economy. The Government should be prepared to accept the terms on which transition is offered by the EU27.

“This may well include accepting EU rules beyond those of the Single Market and Customs Union; and it is likely to involve retaining, on a temporary basis, the jurisdiction of the ECJ, and the direct effect and supremacy of EU law. That is a price worth paying for stability and certainty after 30 March 2019.”

John Mann MP, Chair of the Treasury Sub-Committee, added: “The difference between a ‘no-deal’ scenario and the temporary preservation of the status quo is dramatic. A ‘no-deal’ scenario would be damaging to both sides; a ‘standstill’ transition is in the interests of both the UK and the EU27.

“In particular, a ‘standstill’ transition would mitigate the major risk that HMRC’s Customs Declarations Service is not ready in time for 30 March 2019.

“If this project were to fail, the Committee remains to be convinced that contingency plans exist to avoid the severe disruption to goods that would occur in an unplanned ‘no-deal’ scenario.

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