Institute of Directors offers its ideas on navigating Brexit

‘Move your head office to Edinburgh and apply for Scottish citizenship for you and all your employees’ is not one of the recommendations for tackling Brexit made by the Institute of Directors’ latest policy report, Navigating Brexit, but with independence now looming, it may become one.

The IoD conducted two comprehensive surveys of its members in October and November across a range of issues and policy areas relating to the U.K.’s EU withdrawal help to inform the report. Among those findings were that almost two-thirds thought that Brexit would have a negative effect on their business and that almost half thought it would be a threat to their business. Very few are considering moving their businesses. The referenda also found that the most negative factors were:

U.K. economic conditions

Uncertain trading status with European Union

Global economic conditions

Skills shortages/employee skill gaps

Compliance with Government regulation

Business taxes

While the prime minister is right to assert that negotiations will ideally yield a “bespoke” agreement that is not completely analogous to other existing “off the shelf” models, she should consider that this constrains the ability of businesses to comprehensively scenario plan for how Brexit might impact their operations.
Allie Renison IoD Head of Europe and Trade Policy and report author

Over half felt that it was important for the government to secure transitional provisions for the period between Brexit negotiations and when new arrangements for U.K.-EU trade come into effect and almost two-thirds feel that negotiating a new EU trade agreement is the government’s most important priority.

The box below and to the right summarises the IoD’s main recommendations. In more detail, these include recommendations on timing, communication, labour movement, customs agreements, guarantees for U.K. employees working in the EU and EU employees working in the U.K., several options for trade agreements under existing relationships and a guarantee from all the political parties that there will be no second referendum or cancelling of Brexit, not because the IoD thinks that Brexit is a good idea, but just for the sake of public confidence and the reduction of uncertainty for businesses.

The IoD’s position at a glance on seven crucial Brexit issues

ONE: That members’ confidence took a knock immediately after the Brexit vote but has since regained most of its lost ground.
TWO: The issues considered of greatest importance to IoD members when it comes to the areas of Brexit and trade. 
THREE: Why leaving without a trade deal and reverting to World Trade Organisation rules would be hugely disruptive to business. Government should be prepared to extend trade negotiations if necessary.
FOUR: Why the government should consider re-joining the European Free Trade Association (EFTA) as a useful step to accessing existing trade agreements with non-European markets. 
FIVE: Understanding why, after triggering Article 50, the exit process could well take longer than two years. 
SIX: The IoD’s priorities for a deal, including tariff-free trade, minimising both customs delays for goods and bureaucratic hurdles for European employees, and continuing joint scientific research projects. 
SEVEN: Why the Government’s first move should be ensuring negotiations for the exit deal and the future trade arrangements take place in parallel, to make the process of Brexit is as smooth as possible.
Source: IoD Press Release

The report says that there should be “no uncertain vacuum period” between an agreement to withdraw and the introduction of a “new framework covering relations between the European Union and U.K.” It also claims that a two-year negotiating window is unlikely to be adhered to and that an agreement to extend it if necessary should be immediately put into place.  Areas of ongoing cooperation, such as participation joint scientific research programmes, should be announced as soon as possible so that uncertainty surrounding these can be closed.

There are also several recommendations on how the Government should communicate about negotiations. There should either be gradual announcements, and, where this is not possible, guidance should be offered. There are three million EU citizens living in the United Kingdom and 1.2 million British citizens living in other EU countries. The IoD requests that the Government announce quickly that EU citizens will be able to stay in the United Kingdom after Brexit, and that “a similar deal will be sought to protect the status of U.K. citizens” in Europe.

Another issue raised is: “Ensuring regulatory stability and predictability for businesses with respect to continuity of EU law through the Great Repeal Bill ...” Of course, the Great Repeal Bill is now coming under a substantial amount of criticism because, as a House of Lords Select Committee on the Constitution warned last week that it will “involve a massive transfer of legislative competence from Parliament to Government.” It added that “this raises constitutional concerns of a fundamental nature, concerning as it does the appropriate balance of power between the legislature and executive.” The Great Repeal Bill will prevent the country from grinding to a halt when the Government repeals the European Communities Act which will effectively remove the approximately 20,000 EU legislative actions from the U.K. statute book. The Bill is basically a copy of all existing EU laws that transfers them over to U.K. law where they can later be amended or scrapped.

This sounds like a legislative nightmare, and concerns have also been raised because there isn’t time for all of these laws to be reviewed by Parliament, so the Government intends to do it through the use of delegated powers and statutory instruments, giving the potential for unlimited power to the Government and removing it from Parliament. To guard against this, the IoD wants “any changes in the short term to be gradual and kept to a minimum.”

The IoD accepts, like the Government, that the United Kingdom will not retain membership of the Single Market, but it calls for “quality and content [to be] the top priority for an agreement, not simply speed” and wants it to work the EU and national governments to “maintain liberal economic principles which the United Kingdom fought to establish. Also, part of the negotiations should be to maintain robust rules on non-discrimination and national treatment which go beyond the EU’s commitments in the General Agreement on Trade and Services (GATS). Despite the Great Repeal Bill, provisions for cross-border enforcement of court judgements and dispute resolution should be maintained.

“Tariff-free, quota-free trade in goods (including in agriculture)” is also a key principle espoused by the IoD, as well as a sensible agreement on labour mobility which allows continuing movement of labour between the U.K. and the EU even where controls are introduced. This should include general visa-free travel for visitors and travelers from the U.K. to the EU and vice versa. As well as setting up a customs union, a joint EU–U.K. customs committee should be set up, and the U.K. should join the Common Transit Convention, preferably through membership of the European Free Trade Association (EFTA). A customs union would expedite the physical movement, release and clearance of goods across borders and could be maintained through membership of the World Trade Organisation.

Finally, the IoD is proposing the extension of existing EU trade agreements with ‘third’ countries which the U.K. has preferential access to through existing EU trade agreements. The Government should identify prospects for either “grandfathering or renegotiating such agreements [with] post-Brexit terms of application.”