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Need To Know

The State of Brexit

Worried about the effects of Brexit on business? Feel like your views are being ignored? Harry Mottram says Brexit will not happen—at least not in the way it was proposed

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The European Parliament in session, where British MEPs will no longer take their seats after Brexit

Brexit, but not as we know it

When Theresa May emerged triumphant from the post-Brexit referendum Tory leadership battle, she declared that ‘Brexit means Brexit’. It has been her mantra ever since following the decision by her Government to trigger Article 50 to signal that the UK would leave the European Union (EU) and begin negotiations. In late April 2017 all seemed secure and only a matter of time before the country negotiated its way out of the European club. Yes there were concerns, and the 48 percent who had voted to remain in the EU voiced their anger. They pointed out that Scotland, Northern Ireland, and London voted to stay in the EU, and there were concerns over the economy in the short- to medium-term as the Pound fell against the Euro.

David Davis, Britain’s Brexit minister alongside the EU’s man Michel Barnier during talks



Then came the June general election when the Government lost its overall majority and the Prime Minister was forced to make a deal with the Democratic Unionist Party (DUP) in order to remain in power. Since then the problems for number 10 Downing Street increased to the point to which there were doubts that the Prime Minister could remain in office much longer.

That was until the first week of December last year, when after a marathon session, and an early morning press conference in Brussels, it was announced the EU and the UK had reached a deal in the first phase of the Brexit talks. Sufficient progress had been made to move discussions onto other matters including trade and the transition to a post-Brexit world.

Divorce bill

The industry breathed a sigh of relief as it meant clarification of how trade would be affected might be revealed in the forthcoming talks. However, the deal to move to trade talks involves Britain paying a ‘divorce bill’ of around £35 to £39bn, the avoidance of a ‘hard border’ between Northern Ireland and the Republic of Ireland; and it also provides reciprocal protection for EU citizens and their families in the UK and the EU, as well as the European Court of Justice continuing to oversee the rights of EU citizens in the UK for eight years after Brexit.

Before Christmas 2017 the Government was defeated in the House of Commons by members of its own party joining the opposition in voting through an amendment to the Brexit bill, which will give MPs the final say on the deal. Some feel this throws the eventual deal into doubt, as no one will accept a ‘no’ deal. So could this spell the end of Brexit if the Commons cannot accept the final settlement? Indeed, is it really going to be worth it if the economy takes a hit? After all, when it comes to industry, it really is all about a genuinely ‘strong and stable’ economy.

The British Chambers of Commerce’s (BCC) Dr Adam Marshall, director general, comments: “The bigger picture is one of slow economic growth amid uncertain trading conditions.” And more damning he continues: “Even the best possible Brexit deal will not be worth the paper it is written on if the Government fails to address the many long-standing and well-known barriers to growth here at home. Ever-rising upfront costs, a labour market at capacity, growing pressure on land use, and a physical and digital infrastructure in need of investment and expansion, all prevent UK firms from reaching their potential.”

Worried industry

The wider graphic arts industry also has some real concerns at the state of the economy, as Charles Jarrold of the British Printing Industries Federation (BPIF) observes. In particular he is concerned about the hike in exchange rates. He says: “The immediate short-term impact has been an exchange rate-driven-increase in costs of paper and board—now consistently a ‘top three’ concern as shown in our quarterly survey. Longer term, access to labour is an increasing concern—many companies have seasonal and short-term peaks in work, seasonal for instance in the run up to Christmas, and outside that, needs to meet particular client requirements—for example on a major promotion.

Charles Jarrold of the BPIF has concerns about labour shortages


“The UK economy has high employment, and short-term needs are being met by employing EU workers. Our members are concerned that this availability may change. We measure sentiment towards Brexit on a quarterly basis—with the slow progress on the negotiations, and opacity about the details of the final destination, it is not surprising to report that sentiment about the impact of Brexit on the sector has become increasingly negative. Going forward, the sector wants to see greater certainty about what the actual destination is, we want to see continued good access to EU markets, and, ideally, the adverse impact of the decline in sterling fall away.”

Health and safety

The more statements that are made from the industry, the more the same worries about Brexit are aired. That £39bn divorce bill, the slide of the Pound against the Euro forcing up prices, fuelling inflation, and the concerns over what sort of trade deal will be struck.

The much talked about transition period will see the UK disentangle itself from the other 27 members over a period of a few months with the likely end date of December 31st 2020. During the transition the UK will have to accept the full jurisdiction of the European Court of Justice, and all four freedoms, including the freedom of movement of people. The EU says the UK will remain in the single market and the customs union during a transition, while the UK insists that it will leave both on Brexit day—giving rise to a potential road block in negotiations.

No one can say with 100 percent accuracy what the trading terms will be after 2019


There are also other factors in the agreement so far that could bring the whole thing to an impasse including the ‘full alignment’ over the Irish border. Nobody appears to agree what this means in practice, while the concern over the border is linked to the leverage the Democratic Unionist Party has over the Government. Their veto almost put a kibosh on the deal in the first place and the Irish Government could still veto any planned settlement if it felt it would lose out. Manufacturers on both sides of the border do not want physical barriers, or tariffs and red tape that will add costs to production—with many businesses crossing the border with deliveries several times a day.
 
Glass half empty or half full?

Any trade deal the UK thrashes out with the EU may take longer than expected to agree on with potential vetoes from any one of the member countries. One thing most agree on is it will be more expensive to trade with the EU after 2020 and there lies a problem for many. Business it seems is lukewarm about Brexit because of the financial implications.

So far, so pessimistic. How about a bit of optimism? The CBI obliges as Josh Hardie, deputy director general, comments: “It is now time to focus on the true prize of a new relationship and a deal that starts from 40 years of economic integration. With the same willpower shown today and jobs and living standards at the heart of every negotiating objective, these talks can set the UK up for the next 40 years of close alignment.

“There are two things that are top of the list. First is the final step for those EU citizens working here, and UK citizens abroad. It must be unequivocal that they are welcome, whatever the final deal. This cannot be their second Christmas where their rights are dependent on negotiations. Next is transition. Concrete assurances will build confidence and help firms across the UK and Europe to pause their contingency planning.”

O Factoid: The UK faces a so-called ‘divorce bill’ of up to £39bn from the EU. O


However, his colleague Paul Drechsler is not so positive and is unimpressed by Theresa May’s bickering cabinet members. He says: “Can you imagine running the board of a company, you evaluate a big investment decision, your board walk out of the room and then they all tell a different story? You could not run a business that way, and you certainly cannot lead the most complex, challenging commercial negotiation ever taken on unless there is one voice behind that negotiation.”

Labour in waiting

Another more obvious critic of the Government is the Labour Party, which could conceivably be in power before the nation leaves the EU if things go awry in 10 Downing Street. Shadow business secretary, Rebecca Long-Bailey, says: “If we crash out of the EU without a deal, it will destroy what remains of our industrial base, and fire the starting gun in a race to the bottom on wages and workers’ rights.”

That sounds like they might tear up any agreement and start again, with Sir Keir Starmer as their negotiator already hinting at a possible second referendum on the final deal. Labour’s vision could not be more different from the Conservative Party’s plans for the economy with their National Transformation Fund. Pumping money in building council houses, opening new railway lines and roads, and injecting cash into the NHS and schools would be welcomed by everyone in the print and signage industries, although there is a doubt as whether it would happen. But Theresa May, for all her Corbyn baiting, is not against borrowing ideas from Labour.Indeed, if the economy remains robust, the EU does agree to everything she demands, and the Conservatives see a poll bounce, then Brexit could happen without too many tears.

Labour’s Sir Keir Starmer has already hinted at having a second referendum if his party take power


 
Kick it into the long grass

The industry is clearly worried about the present situation, the low growth expectations, and rising inflation. If the economy was to slide badly this year then some in business would not object if the Government pulled the plug on the whole thing, kicking project Brexit into the long grass until things improve. A run on the Pound, a hike in interest rates, and inflation hitting double figures could change everything.

A seasoned observer of the machinations of Government and the way things pan out for the economy over decades rather than months is Sidney Bobb of the British Association for Print and Communication (BAPC). He comments that when Brexit eventually happens our industry will adapt: “It will be a while before we are affected and whatever advantages Brexit throws up we will make the most of them.

Sidney Bobb of the BAPC is relaxed about Brexit and believes printers will adapt to whatever happens as they have done in the past



“The print industry is reactive rather than proactive and so we will wait and see what happens first. It may not even happen in which case we will react to that. If there is a downturn in the economy then the print industry is one of the first sectors to be affected, but it is also the first out when things pick up. Prices will rise whether we stay in or come out, but in my view the printing industry has seen worse times than this and the culture of the industry has changed so much.”

Bobb says compared to the slumps of the 1970s, the early 80s and 90s, and the credit crunch of 2008, the concerns over Brexit should not be exaggerated.

If Brexit does go ahead, somehow Theresa May stays in post to see the whole thing through, and even wins the next election, she will inherit the Margaret Thatcher prize for political achievement—but not everyone will be applauding her. The arch Brexiteer and arguably one of the most influential politicians of our age, Nigel Farage, will not be impressed. He has already called the current negotiations and concessions ‘a betrayal.’

The Prime Minister Theresa May had a tough 2017 but could still see Brexit through as planned



Following the December breakthrough in talks he denounced the Prime Minister at the European Parliament: “Now we enter into what perhaps may be the biggest deception yet played on the British public. Theresa May is seeking a transition phase and there are one or two comments here about whether the Brits will get that phase. Well, of course they will, because we are volunteering to go on paying the membership fee to accepting all the existing rules, all the new rules. We will effectively, once transition is granted, have left the European Union at the end of March 2019 in name only.”

In other words it is Brexit, but not as we know it, or were promised it. Or even no Brexit at all if the ill winds of politics conspire to blow the whole thing off course.


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