The ‘Plan for Britain’ Brexit model: the good, the bad and the ugly

The ‘Plan for Britain’ Brexit model: the good

An assessment of the positive and negative aspects of Theresa May’s plans for Brexit.

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On 17 January 2017, Theresa May set out her ‘Plan for Britain’, incorporating her vision for the Brexit model. The speech centred around twelve priorities for the negotiations ahead, organised into six themes which together envisage a ‘Stronger, Fairer and Truly Global Britain’. Since the vote to leave the EU last June we have spoken extensively to businesses across a range of sectors and from all parts of the UK (and indeed outside of the UK too). When it comes to the Brexit wish list, a number of key themes have emerged: certainty; continued access to international trade and markets; availability of workers with the right skill sets; and a smooth orderly transition to the post Brexit model. In this article, we assess the Brexit details provided by Theresa May with this checklist in mind.

The good:

There were certainly lots of positive messages for business to take away. Firstly, certainty: we now have confirmation from the Government of some of their ‘red lines’, and we have been told that the UK would rather accept no deal (i.e. the WTO model) over a bad deal. This means that business has a baseline case enabling them to firm up on their worst case scenario planning.

This clarity also extended to the proposals for continued access to international trade and markets. The Prime Minister confirmed that the UK will not seek membership of the European single market, and in addition, accepted that continued membership of the Customs Union is not likely to be feasible for the UK if it wishes to strike comprehensive trade agreements with other countries.  Instead, the UK will look to agree a new free trade agreement with the EU which will be fully reciprocal and mutually beneficial in terms of volumes of trade, jobs and wealth creation. Similarly, the UK will seek to enter into agreements with the wider world which facilitate trade and business in an open and ambitious manner. We expect business to welcome both the confirmation of the UK’s opening position, and its ambitions in negotiating a future deal.

Turning to our third focus area, the availability of appropriately skilled workers, many in business would certainly have been heartened to hear the various references to the desire to continue to attract the ‘brightest and best’ to work and study in Britain, but this will be a challenging balancing act, more on which below.

Finally, transitional arrangements: Theresa May’s final priority for the negotiations was for a ‘smooth, orderly Brexit’ acknowledging that it is in no-one’s interest for there to be a cliff-edge. The desire is for a further phased process of implementation after the two year Article 50 period, the specifics of which are likely to vary by issue and by industry sector. If this is indeed achievable, we predict this will be widely welcomed both here in the UK and across the EU.

The bad:

For most of the points above, there is also a flip side of which business will no doubt be keenly aware. Business will welcome the clarity provided on the UK’s starting position for the negotiations, but the reality is that real certainty will not be possible until the Brexit negotiations are nearing completion. This could be some time off, and there are many unanswerable questions: Will the EU be able to reach (broad) agreement on the UK’s proposals? What will the EU want in return? How long will it take to reach an agreement that works for both sides? The proposal on trade is essentially the Canadian model, which took seven years to agree even with both parties to the agreement sharing common objectives and levels of commitment from the outset.

On immigration in particular, we anticipate that it will be particularly challenging to reach a proposal which achieves controlled immigration from the EU and is practical to implement without undermining access to global talent for business in the UK. At the current time, there has been no indication of how the Government may achieve this.

There were also no real details on, for example, regulatory equivalence or the loss of the Parent Subsidiary Directive, but given the audience maybe this is understandable and we know work is going on behind the scenes in this respect.

The ugly:

Finally a brief word on some of the less pleasant undercurrents. Many of our EU neighbours were less than impressed by the tone of parts of the speech, in particular, the use of choice facts and figures intended to illustrate the EU’s dependence on the UK. The speech did not challenge the ugly side of the immigration debate, which has been well reported (e.g. hate crime figures rose last autumn with many blaming emotive political rhetoric). And closer to home, whilst not referred to by the Prime Minister in her speech this week, there have been various commentaries on whether the UK would cut taxes and regulation post Brexit to attract foreign investment, which some would view as a step in the wrong direction regardless of its value as a negotiating tactic.

So overall, the ‘Plan for Britain’ as it stands feels to us to take things forward decisively from the confusion of the last few weeks. However, the true test is yet to come as we enter the Brexit negotiations: will the Prime Minister be able to deliver this for business, whilst keeping the country together?

If you would like more information about the possible tax implications of Brexit, please contact Tim Sarson or your usual KPMG contact.

 

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Tim Sarson

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