STATE OF PLAY

On Thursday, President of the European Commission Ursula Von Der Leyen told EU leaders that the UK exiting the transition period without a trade and security deal is now the most likely outcome.

Making similar comments, UK Prime Minister Boris Johnson said that “looking at where we are”, it was vital the UK prepares for the “Australian-style option” of not having a free trade deal with the EU. 

The downbeat assessment came after Johnson and von der Leyen failed to find a compromise during a face-to-face meeting on Wednesday. While they agreed to continue the negotiation until Sunday, in a joint statement followed the meeting they said that “very large gaps remain and it is still unclear whether these can be bridged”. Eleventh-hour Brexit talks between David Frost and Michel Barnier’s team are now underway, but UK officials have so reported “no movement” so far.

Amidst significant uncertainty whether a deal will be in place on 1 January 2021, the EU has now published emergency plans “to mitigate some of the significant disruptions” in the event that trade talks fail.

The plans contain contingency measures ensuring air and road connectivity between the EU and the UK and fishing access. The offer would depend on the UK providing “fair and equal opportunities” and continuing to apply “sufficiently high and comparable standards.” 

In the UK, a unit in the Cabinet Office is also increasing preparations for a reasonable worstcase scenario, which, as outlined in leaked documents from the Cabinet Office, could see medicine shortages, public disorder and reduced food supply in the UK if an agreement is not reached.

In a letter to Cabinet Office Minister Michael Gove, the Lords EU committee concluded that the UK is not ready in a practical sense for the end of the transition period, listing a number of concerns including issues related to the IT systems for customs declarations and for accessing Kent.

The warning comes as UK ports are struggling to process a surge in imports under Covid-19 restrictions, which are holding up crucial deliveries before the end of the Brexit transition period.

The logistics industry has now written to the Department for Transport calling for it to help clear port backlogs, with one freight director describing the UK’s ports as ‘broken’. 

In more positive news

Cabinet Office Minister Michael Gove and Commission Vice-President Maroš Šefčovič announced on Tuesday that the EU-UK Joint Committee, the body responsible for the implementation of the Northern Irish Protocol and Withdrawal Agreement, had reached an “agreement in principle on all issues”.

Under the agreement,‘trusted traders’ in the food sector will be able to move goods from Great Britain to Northern Ireland without additional checks for an unconfirmed number of months after December, even if there is no trade deal.

Other businesses will, however, be required to fill out additional paperwork when moving goods from Great Britain to Northern Ireland. The paperwork will reportedly be ‘minimal’ and involve exit declaration forms as part of the safety and security certification system the EU requires for all goods leaving the bloc into a third country. 

As a result of the agreement, the UK Government withdrew controversial clauses from its Internal Market Bill which would have allowed Ministers to override the Northern Ireland protocol which was agreed with the EU as part of the Brexit Withdrawal Agreement. 

OTHER KEY DEVELOPMENTS 

  • A report by the trade body Logistics UK has found that the number of lorry drivers in the UK has decreased as EU nationals head home, threatening further disruption at backlogged UK ports amid Brexit. Alex Veitch, head of global policy at Logistics UK, said the fall in EU numbers was due to a combination of factors including Brexit and the Covid-19 crisis.
  • The Chairman of Tesco, John Allan, has said that the supermarket chain has stockpiled longlife goods in preparation for possible supply disruption at the end of the Brexit transition period. He also said that Tesco has spread imports across UK ports to avoid reliance on a few points of entry amid warnings of long freight delays. 
  • British people will likely be barred from entering the EU from 1 January when pandemic safety rules that allow free travel within the bloc cease to apply to the UK. The European Commission explained that the end of the Brexit transition period means that the UK will be subject to a system that only allows non-essential travel from a handful of non-EU countries with low coronavirus infection rates. 
  • The British Retail Consortium (BRC) has warned that a ‘no-deal’ Brexit could cost supermarkets and their customers £3.1bn in tariffs. 
  • Morgan Stanley plans to move about €100 billion of assets from London to Frankfurt. The US lender expects to transfer the bulk of the assets in the first quarter of next year. 
Other trade deal

– The UK has secured continuity trade deals with Singapore and Vietnam. The deals roll over the terms of the existing agreements between those countries and the EU when the Brexit transition period ends on 31 December 2020.