A very fluid political environment remains following the UK Cabinet meeting last night with the Prime Minster responding to questions and accusations regarding the draft Brexit deal between the UK and the EU.  The deal which is expected to be put before the House in early December, includes the amount of money to be paid to the EU, a 21–month transition period after Brexit day next March and commitments on the rights of EU citizens in the UK and UK citizens living in the EU.   

Importantly the draft deal seeks to address the insurance policy of the backstop around the Irish border, should there be no deal between the UK and EU.  There are particular areas to note within supply chain movements North South and East West but this is only in the context that the backstop will be triggered.  The situation continues to evolve with four Ministers having resigned most notably Dominic Rabb, Brexit Secretary & Esther McVey, Secretary for Work and Pensions.

The Withdrawal Agreement covers the following areas: 

• Common provisions

• Citizens’ rights

• Separation issues

• A transition period

• The financial settlement

• The overall governance structure 

• The terms of a legally operational backstop to ensure that there will be no hard border between Ireland and Northern Ireland.

• The protocol on Ireland/Northern Ireland also contains UK commitments not to diminish rights set out in the Good Friday (Belfast) Agreement 1998, and to protect North–South cooperation.

• It provides for the possibility to continue the Common Travel Area arrangements between Ireland and the UK, and preserves the Single Electricity Market on the island of Ireland.

What it means for Northern Ireland & the backstop?

• The backstop will involve, in the absence of a future deal, the whole of the UK staying aligned with the EU customs union.  See Appendix 1 for further detail on goods placed on market as a result of withdrawal deal.

• Under the backstop, the EU’s custom code will continue to apply to Northern Ireland, meaning that it can continue to export and sell products within the EU.

• The draft agreement says, under the backstop, the EU’s custom code will continue to apply to Northern Ireland, meaning that it can continue to export and sell products within the EU.

• This will ensure Northern Irish businesses will face no restrictions on their products when selling into the EU single market.

• The UK has also agreed, under the terms of this new backstop, that Northern Ireland will remain aligned with a limited set of rules relating to the EU’s single market, specifically legislation covering goods, sanitary rules for veterinary controls, rules on agricultural products, Vat, excise on goods and state aid rules.

• All this would ensure that there would be no new border checks on the island of Ireland.

• If, after the transition period, either the EU or UK believes the backstop, in whole or part, is no longer necessary, they will notify the other side. The joint committee will consider the request and may seek the opinion of institutions created under the Good Friday Agreement.

• If the EU and UK fail to agree a deal on their future relationship by December 31st, 2020 – the current scheduled end of the standstill transition period when no rules change – the backstop will apply until a subsequent agreement is in place. Alternatively, the UK can, before July 1st, 2020, request an extension to the transition period.  See appendix 2 for further detail

• The role of the European Court of Justice, which will still have jurisdiction in the UK on customs and single market rules could cause problems.

What about a border in the Irish Sea?

• The draft agreement says there is nothing that shall prevent the UK from “ensuring unfettered market access for goods moving from Northern Ireland to the rest of the UK’s internal market”.

• The deal aims to make goods moving to Northern Ireland from the rest of the UK as frictionless as possible and to minimise checks.

• A joint committee made up of EU and UK representatives will keep this “under constant review” and adopt appropriate recommendations to avoid “to the extent possible” controls at the ports and airports of Northern Ireland concerning any goods coming in from the UK.

• The backstop safety net is to ensure there is no hard border whatever the outcome of future trade talks between the UK and the EU.

• The alignment to some EU rules on things like food products and goods standards will prevent the needs for checks on goods at the Irish border, but would require some products being brought to Northern Ireland from the rest of the UK to be subject to new checks and controls.

• The backstop would also involve a temporary single custom territory, effectively keeping the whole of the UK in the EU customs union.

• This is a key issue for Brexiteers with the Dup vehemently opposed to any additional checks in the Irish Sea which they see as a threat to the integrity of Northern Ireland within the Union..

• The role of the European Court of Justice – which will still have jurisdiction in the UK on customs and single market rules – could also spark protests.

• Mrs May says she does not want to have to use the backstop at all – and the withdrawal agreement says the UK and the EU will resolve to ensure it is not necessary by coming up with alternative arrangements.

• They could also extend the transition if there is no long–term solution in place by July 2020 – but only once.

What have Northern Ireland businesses said?

• There has been a cautious welcome from the sector with some business representative groups stating that the potential for Northern Ireland to benefit from UK trade deals and EU trade being a significant opportunity.  The potential for this, is perceived as giving Northern Ireland a competitive advantage over regions such as Scotland. 

Seamus Leheny, Freight Transport Association:

“Our first reaction is relief – we feel that the government have actually listened to us.”

“We set out proposals two years ago about what we needed to keep the UK and Northern Ireland goods flowing freely and this, although it’s not perfect, ticks a lot of boxes.

Stephen Kelly, Chief Executive Manufacturing NI

The EU has made important concessions which would help NI businesses if the backstop is ever implemented.

“The fears and risks flagged by business seem, so far, to have been addressed.

“The issues of VAT remains a HMRC responsibility and there will be no quotas, origin rules nor tariffs between Britain and Northern Ireland.”

Aodhan Connolly, Director, Northern Ireland Retail Consortium

“The deal provides solutions to customs, tariffs and an innovative solution on VAT.

“However, there is some work to be done by both the Westminster government and the EU on the checks and administration for goods coming into Northern Ireland from GB.

“This will need to be light touch and be mitigated in further agreements, hopefully to an absolute bare minimum.

“We have always said the backstop is better than no deal.”

Political Response in Northern Ireland

What happens next?

• An emergency EU summit will be held on 25 November, where EU leaders are expected to sign off on the withdrawal agreement and future relationship declaration.

• The fight to win the vote in the Commons will be hard fought which is expected to take place around 7th December.  The impact that the flurry of resignations within her Cabinet, most notably Dominic Rabb, will have on this remains to be seen.

• Conservative MPs, Labour MP, the SNPs and the DUP will vote against the deal.  Many commentators do not believe this deal can be carried.

• Downing Street is pinning its hope on this deal being the only choice presented to MPs with the alternative being no–deal.

Can Teresa May survive?

• If she loses the Commons vote, it is uncharted territory. She may seek to renegotiate with the EU but most expect her time in No 10 to end. There could be a general election and/or a new prime minister.

• There is also the potential for the Tory Party’s 1922 committee to trigger a leadership challenge if there if there are 48 letters (15% of MPs) requesting that the Chair of the Committee Sir Graham Brady implements this.  This will not, however, be a trigger for a general election, only a Tory party leadership challenge.  Were she to lose this she would have to stand aside and the deal would effectively be redundant.

Appendix 1

Key points for business

Goods placed on the market

The Withdrawal Agreement provides that goods lawfully placed on the market in the EU or the UK before the end of the transition period may continue to freely circulate in and between these two markets, until they reach their end–users, without any need for product modifications or re–labelling. 

This means that goods that will still be in the distribution chain at the end of the transition period can reach their end–users in the EU or the UK without having to comply with any additional product requirements.

Ongoing movements of goods from a customs perspective

For customs, VAT and excise purposes, the Withdrawal Agreement ensures that movements of goods which commence before the UK’s withdrawal from the EU Customs Union should be allowed to complete their movement under the Union rules which were in place at the start of the movement. After the end of the transition period, the EU rules will continue to apply for cross–border transactions that started before the transaction period in terms of VAT rights and obligations for taxable persons, such as reporting obligations, payment and refund of VAT.

Appendix 2

Transition period? 

The Withdrawal Agreement provides for a transition period until the end of 2020. The continued application of EU law during this period will give time to national administrations and businesses to prepare for the new relationship. It will also provide the EU and the UK with time to negotiate the future relationship.

The transition period is set to end on 31 December 2020, taking into account the initial request from the UK for a transition period of around two years, and making it coincide with the end of the current long–term EU budget (the Multiannual Financial Framework 2014–2020).

During this period, the entire Union acquis will continue to apply to and in the UK as if it were a Member State. This means that the UK will continue to participate in the EU Customs Union and the Single Market (with all four freedoms) and all Union policies.