This week’s Brexit transition agreement has brought two things to UK and international businesses: much-needed stability and a clear time frame.
Reaction within the UK trade sector has been generally positive, with industry experts calling the move a step in the right direction for commerce. Overall sentiment amounts to “cautious optimism”, says Jeremy Cook, chief economist at international payments provider WorldFirst.
Now that the UK’s Brexit secretary David Davis and the EU’s chief negotiator Michel Barnier have shaken hands over immediate terms of a transition period, business leaders can breathe a sigh of relief as the UK has taken a decisive step back from the economically rocky cliff edge.
However, the question of the Irish border stirs lurking doubts over the concreteness of the deal.
Commenting on the agreement, Ross Denton, a trade partner at law firm Baker McKenzie, says “businesses should welcome this agreement as a step in the right direction, as it affords them more time after the UK leaves the EU to make the crucial preparations for what comes next”. Yet Denton also notes there is no provision for extending the agreement if necessary and urges businesses to lobby for this before the package is finalised.
Signed off at the European Council summit on March 23, the Brexit transition period will last 21 months, starting on “Brexit Day” March 29, 2019 and ending in December 2020.
For British exporters, the transition deal represents “a huge opportunity to do things differently”, says Nick de Lisle, bid manager at NMS International, a UK-based company which manages design and development projects in a range of industries.
Geoffrey de Mowbray, co-chairman of the British Exporters Association (BExA), agrees, identifying the announcement as “the beginning to a greater sense of certainty”, meaning “planning can be done”.
A major win for trade is that the agreement permits the UK to strike trade deals outside of the EU, although they can only take effect after Brexit. This presents renewed opportunities for a company like NMS International, which mainly exports to Africa. De Lisle cites the burgeoning African economy – projected to grow to a total of US$30tn by 2050 – as a particularly appealing export market.
At a little over a year until the March 29 Brexit deadline, the transition agreement affords actors throughout the supply chain a renewed sense of certainty, de Lisle says.
A report published by HSBC this week finds that such a transition deal would likely have “limited” immediate impact on UK trade. The research finds European firms outside of the UK are generally “unalarmed” about Brexit-related risks, with 62% of respondents expecting either no impact or a positive impact on their companies over the next two years. Globally, the proportion of optimists rises to 75%, according to the report.
Yet murmurs of doubt persist over the reliability of politicians’ promises, with last year’s VAT rise – contrary to a 2015 manifesto pledge – fresh in the memory. Nevertheless, the UK’s international trade secretary Liam Fox remains upbeat regarding the opportunities afforded by Brexit; in a speech to the British-American Business Council (BABC) on Tuesday, Fox hailed the forthcoming “independent trade policy that we can shape to meet the needs of our businesses and those of our partners operating on UK soil”.
Last month Fox appointed trade commissioners for North America, South Asia and China to champion British trade after Brexit. As part of this, the minister emphasised that trade between China and the UK is at a record high, with current export levels up 60% from 2010.
UK government is “all ears” on trade policy
Westminster is currently seeking input from the private sector on its provision for exporters, yet concerns swirl that industry professionals are not well enough informed about the ongoing consultation.
Baroness Fairhead, the UK’s minister for trade and export promotion, issued a final call for businesses, industry, trade associations and representative bodies to submit their views on what the government can do to lift barriers to export.
Commenting on the consultation, which is not centred around Brexit, de Mowbray says “the government is very open and keen to get everyone’s contributions. I would say its businesses’ responsibility, if not obligation, to contribute to this because this is our near-term chance to shape what we need to export.”
For de Mowbray, “people are key” in the path to growing British trade. Though politics makes a difference, “attitude is the biggest challenge”, standing in the way of UK export growth. Factors such as complexity and the cost of entering markets can also put off potential exporters.
Explaining his vision for stronger British trade, de Mowbray tells GTR: “There needs to be a solution that can’t be achieved by government, where there are champions of export who have the understanding and appetite to go out and win deals abroad, and then backfill them into UK suppliers.”
Separately, the UK government’s trade bill, which will facilitate post-Brexit trade and establish an authority to stave off unfair trade practices, is approaching its third reading in the Commons.