The deadline for UK-EU trade talks is fast approaching. And while COVID-19 understandably continues to dominate the headlines, there is a growing sense – both among businesses and within government – that Brexit is a mounting priority.
The transition period, which began when the UK formally left the European Union on 31st January 2020, comes to a close at the end of the year. As of 1st January 2021, the UK will be cut free from the EU’s single market – without a new trade deal in place by this date, the two powers would trade on less-than-favourable WTO terms.
With the pandemic already proving highly challenging, the lack of progress in post-Brexit trade talks will be an additional frustration to many business leaders. In fact, in a new poll of over 530 decision-makers within UK companies commissioned by One World Express, 45% said Brexit poses a more significant threat to their business than COVID-19.
It is a telling statistic and a timely reminder of how much is at stake over the coming three months.
There is reason for optimism, though. David Frost and Michel Barnier – the chief Brexit negotiators for the UK and EU respectively – have said this week that there are spaces for compromises and that negotiations are moving forwards. Michael Gove, meanwhile, has put the chances of a Brexit deal at 66%.
Frost has said that a new trade deal between the UK and EU is “eminently achievable”, which is important because Prime Minister Boris Johnson has purportedly said that if an agreement looks unlikely by mid-October, the UK would be prepared to walk away from the negotiating table.
“My job is to get as far as we can before 15th October,” Frost said after the latest round of trade talks. “Then I’ll have to advise the PM as to whether the conditions for an agreement, the basis for an agreement, are in place at that point.”
The importance of a UK-EU trade deal should not be understated. First and foremost, the EU is the UK’s largest trading partner. To put the matter into context: in 2019, the UK’s exports of goods and services totalled £700 billion and imports totalled £724 billion, according to government data. The EU accounted for 43% of those exports and 51% of imports.
But stalling talks with the EU are also a barrier to further negotiations with other global powers. The UK is intent on signing free trade agreements (FTAs) with other major economies around the world – this was, of course, at the heart of Brexit’s appeal. Without a smooth transition out of Brexit and a demonstration of competency when it comes to devising fair, compromised deals with other trading blocs, there is unlikely to be a queue of nations keen to commence talks with Britain.
The coming three months will do much to shape the UK’s medium- and long-term trading future. Talks with the EU are evidently coming to a head in the next week or so; if a deal can be struck, it would likely have a significant impact on the UK’s chances to sign FTAs with its main trading partners. Failure to do so risks rubbing salt in the wounds that COVID-19 has already opened up in British businesses.