Brexit deal: businesses will need an adjustment period

Statement by Employers’ Group President Stefano Mallia

EU employers welcome the Brexit deal agreed on Christmas eve and warmly congratulate the European Commission negotiating team, masterly led by Michel Barnier.  But as businesses are trying to make sense of the 1,200-page trade treaty they call for a period of adaptation to face the steep learning curve.

European employers welcome the fact that an orderly Brexit has been achieved and that the integrity of the single market has been retained. More importantly, the EU has protected the single market and its labour, social and environmental standards, avoiding the risk of potential abuses of market power and maintaining the level playing-field.

However, even if there will not be any tariffs levied or restrictive quotas imposed on goods traded, a whole series of new customs and regulatory checks, including rules of origin and stringent local content requirements will create red tape, possibly slowing down processes, and supply chains will take a while to adjust to the new reality. This is why companies need an adaptation period to comply with the changes.

At the same time, there is a clear need to go back to the negotiating table at least for three reasons:

The deal does not include the services sector, which represents 80% of the UK economy, including the financial sector. While banks had an agreement covering basic transactions, there are up to 40 treaties affecting cross-border activities in the financial services industry that need to be renegotiated. More clarity is needed.

In this context, there is no time to waste to revamp the European Union’s Banking Union and the Capital Markets Union (CMU) plans.

Secondly, ensuring the smooth flow of data between the EU and the UK is crucial to the future prosperity of both.

Last but not least, mutual recognition of qualifications is not part of the deal. There is a clear need now for qualification bodies in the EU and the UK to put forward a proposal for mutual recognition to exist in the future.

If we want Europe and the UK to remain closely linked we need to continue working on our relationship. The UK can never be just another third country. The agreement must be a solid platform for future cooperation in a number of areas that have a strong impact on our competitive environment ranging from climate change to digital transformation, research and innovation, or standards. But this deal is just the end of the beginning.

Civil society and employers in particular must fight to keep the channels of trade open and to build a sound structure that allows this to happen.