The Government’s White Paper - the way forward?

The UK Government has today released the long awaited detail of its vision for the future relationship between the UK and the EU following Brexit.

Introduction

The UK Government has today released the long awaited detail of its vision for the future relationship between the UK and the EU following Brexit in its White Paper entitled “The future relationship between the United Kingdom and the European Union” (“the White Paper”).

The White Paper

The paper, described by the UK Government as “a principled and practical Brexit”, contains five key objectives covering the economy, the union, democracy, communities and the UK’s place in the world.

It is no surprise that free movement of people, one of the four freedoms derived from membership of the EEA, will end although plans to allow EU citizens visa-free travel for tourism, study and business purposes are to be revealed later this year. The migration/immigration proposals are also awaited although detail is unlikely to be released until the Migration Advisory Committee delivers its final report in September 2018.

The future for trade is presented as having a free trade area for goods (not services) which would provide frictionless border access and would also protect the Northern Ireland peace process and avoid the need for a hard border. The UK Government believes this could be achieved by the UK and EU entering into a facilitated customs arrangement and becoming a combined customs territory. If agreed, EU tariffs and trade policies for goods intended for the 27 remaining Member States would be applied by the UK. However, domestic tariffs would apply for goods entering into the UK.

Fundamentally, in relation to services, it is well established that financial services passports will cease post Brexit. The White paper proposes a new economic and regulatory arrangement with the EU, providing autonomy for both the UK and EU remaining Member States in providing access to their markets, but supported with a bilateral framework of Treaty-based commitments. The UK Government’s proposal is based on an equivalence model and calls for reciprocal recognition of equivalence under all existing third country regimes to take effect at the end of the implementation period, but acknowledges that such arrangement cannot replicate the passporting regime. Whilst autonomy would remain with individual states in relation to equivalence, the bilateral framework would provide for common principles for the governance of any such relationship with regulatory and supervisory dialogue and transparent, predictable and robust processes.

Comment

Whilst the UK Government is using the White paper as a starting point for negotiation with the EU about the future relationship, time will tell whether both sides will compromise to achieve that much desired deal. Whilst clarification on the UK Government’s intentions is to be welcomed, quite where financial services sits remains unanswered, which can only heighten concern within the financial services sector, particularly as the Brexit date is only eight months away. The negotiations will commence in earnest next week between the new Secretary of State for Exiting the European Union, Dominic Raab, and Michel Barnier. We will be reporting further as the negotiations unfold and further detail is available.

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