The United Kingdom will have a new Prime Minister by this evening and, presumably, a new cabinet by the end of the week. The nine weeks’ vacuum has been lifted, allowing the machinery of government to take valuable steps to ensure that the UK has prepared its negotiating objectives once Article 50 is triggered.
Theresa May has said that she would not trigger Article 50 until the United Kingdom’s negotiating strategy has been finalised; therefore she does not envisage it being triggered before 2017. There should be no general election until 2020 and a normal Autumn Statement is expected for 2016 – providing us with a further steer as to the direction of policy.
Such certainty is to be welcomed. It should help reassure the markets and businesses.
Once Article 50 is triggered, the negotiations that follow will define future trading arrangements with other Member States (and the wider global stage). How the UK-EU negotiations will pan out is less than defined. Whilst the chances of extending the two-year negotiating period are very slim, the possibility of transitional arrangements exits. To what extent the law will defer to politics remains to be seen.
The final withdrawal agreement will be crafted in a way that seeks to satisfy the interests of the UK and the remaining Member States. Therein lies the tension, predominately between the political class view of free movement of people and single market access. For businesses, the spotlight will remain on the single market: passporting rights, equivalence, and trading options will be vital terms. The City of London and non-financial services businesses alike, therefore, have a vital role to play in ensuring that the UK’s economy is well represented when decisions are made on the future EU trading relationships.
It is likely that a unique deal will have to be struck between the UK and remaining EU Member States. The ‘Swiss model’ consisting of numerous agreements is unsustainable, and the British public will not accept the open borders and regulation that comes with joining the EEA. Given the existing trade of goods and investment in establishing services in each other’s jurisdiction, both sides may seek equivalency and non-tariff regulatory agreements, but the free movement of people will be a huge obstacle in achieving any deal.
While it is evident that a political and industry determination exists to ensure Britain confronts whatever comes from a position of strength, the reality is that it will not be plain sailing. It is inevitable that the economy will have to adjust. In turn, those in the insurance world must be ready for both the risks and opportunities that will follow.
To that end, Kennedys is committed to helping its clients navigate Brexit. Having published an insights based report to ensure the insurance industry was given a voice before the referendum; we will again seek to bring important business voices to the table in discussions with government. In the meantime, we recognise that businesses must now address some key questions as they progress their contingency planning. We provide those questions here and we will continue to work with our clients in order to formulate the answers as the UK prepares to settle its future relationship with the EU.