A Florentine glide path
We described in our Practical Roadmap to the Negotiations the three possible scenarios: Cliff Edge, Cliff Hanger and Glide Path. Whilst Downing Street's rhetoric has consistently set its preference against the prospect of a Cliff Edge, Florence presents us with an unequivocal preference for the Glide Path:
- an early commitment from all sides to a period of implementation (or, if you prefer, transition), measured in years not weeks
- acceptance that, during that period, current EU arrangements will continue to apply to the UK, in large part unchanged
- a declaration that the starting point for the future UK/EU relationship is EU membership implying that the future should represent a modification of current close ties not start a blank page as other trade negotiations do.
What does it mean for business?
If Theresa May secures agreement in Brussels and key EU capitals to this approach this side of the New Year it will represent a significant step forward for business:
- businesses would be able to plan on the basis that the default position from April 2019 will be little or no change at least for a period of many months. The need to turn attention early in 2018 to preparing for worst case scenarios, or even starting to implement changes that a Cliff Edge might imply, would be significantly reduced
- the declared intent that the position following implementation should, in many areas, reflect modifications to the current regime rather than an entirely fresh start, would provide confidence for many businesses that they can continue to plan and invest without regarding Brexit as a fundamental game changer
- the implication that, in many areas, the UK and EU will remain largely aligned suggest that changes would be more about how that alignment is achieved – the means rather than the ends. This would point in the direction of business being able to look at Brexit not as strategic challenge but as largely a technical matter, albeit an important one, capable of being handled by lawyers, accountants and their operation teams.
In short, if accepted by the EU, the Florence proposals would significantly reduce the degree of business risk and distraction which Brexit currently carries. That is, however, a very big if. The tone of Theresa May's speech suggests she has been listening to business. As our work with The Council of British Chambers of Commerce in Europe (COBCOE) shows European businesses are clear that all of Europe needs a good deal and a smooth transition. Theresa May has been listening. Now is the time for business to redouble its efforts in in Brussels and EU capitals as well as in London.