Why a transition period makes perfect sense
Tony Ward is chief executive of Clayton Euro Risk
Lots of Brexit talk in the press last week, none of it particularly positive. Many references to worrying cliff edges and how to avoid them – or not, as the case may be. What I do think is becoming apparent when all this commentary is analysed is the dire lack of communication from government regarding a proper plan for Brexit negotiations.
Commentators have been queuing up to reprimand government for its lack of action. First out of the blocks was business lobby group the Institute of Directors (IoD), which urged the Cabinet to stop ‘dancing around the edges’ of Brexit. The group called on ministers to come up with a transitional agreement; it said it wanted to bridge ‘the Brexit Gap’ between leaving the EU and setting up new trading agreements, warning that without agreement, business faces ‘short-term chaotic cliff edges’. The group criticised the Cabinet for engaging in what it called ‘a range of speculative arguments over transition’. In recent weeks Cabinet members have voiced opposing views as to how long a transition period would last and what it would involve.
Now former chancellor Lord Alistair Darling has stepped into the fray. Warning of the risks, he said: “The key to avoiding the next economic crisis is a sensible, pragmatic management of Brexit. If you do that, you are in with a shout. If you don’t, you are asking for trouble.” Maintaining faith in Britain’s public finances is vital in preparing the economy for both Brexit and the risk of a future crisis, Darling argued. “What Philip Hammond needs to watch,” he said, “is to maintain confidence in the UK. That’s why him talking about a sensible transition makes eminent sense. That’s why I was a bit disturbed to see, three days later, someone jump out and say there won’t be a transition.”
Not very helpful stuff. Talk of agreeing an effective transition period to ensure a smooth Brexit has been around government for a while but nothing concrete has been agreed. And dissenting voices don’t help.
The Institute of Directors has suggested a range of options including: doing a deal to extend Article 50 negotiations beyond March 2019; joining the European Economic Area; agreeing to stay longer under the rule of EU law and creating a transitional customs agreement similar to the EU Customs Union. The IoD’s Allie Renison said: “The IoD has put forward this range of options for transition in the hope that it sparks a proper debate on the practicalities of how best to Brexit. Prioritising interim arrangements and thereby mitigating the risks of EU exit means the eventual opportunities aren’t diminished by short-term chaotic cliff edges.”
These are sensible words. Clarity, please; let’s have some clarity.
Was it really as far back as my January blog that I called for a transition period early in the Brexit talks to give the City and our businesses enough time to adapt to new working practices and regulations? Surely such a deal would smooth our departure for the EU. In my mind, there is no downside in doing this. What it will bring back is confidence – and that, more than anything, is what we so desperately need.