Parliamentary scrutiny highlights continuing Brexit uncertainty for business and citizens in Britain and Northern Ireland

Michael Gove, MP – in his role of the Government Minister with overall responsibility for delivering a smooth Brexit on 31 December 2020 – was the sole witness to be interviewed in a two-hour meeting of Parliament’s European Union Select Committee last week.

This scrutiny session addressed the outcomes of ongoing negotiations between the UK and EU on the relationship from 1 January 2021, together with outcomes of the first formal meeting between the UK and EU focussed on the unique position of Northern Ireland.

Throughout the meeting, Gove made it clear that he was ‘not in a position’ to give definitive answers to the questions posed – peppering his responses with phrases such as “it is to be hoped…”, and “we can expect…” – a point picked up and criticised, politely but firmly, by the Committee towards the end of the meeting.

His overall message was the UK would need to concede to the EU ‘red-lines’ on a number of issues in order to secure a Brexit ‘deal’, such as: “we seek zero tariffs and zero quotas – but if we pay small number of tariffs, ‘there you go’.”

He also – as we forecast in our recent insight posting – confirmed that the price of a Brexit deal will mean that Northern Ireland becomes a separate trading area from the remainder of the United Kingdom – with different rules and reporting, and restrictions to the free movement of goods between Northern Ireland and mainland Britain.

Gove on Northern Ireland under a Brexit ‘deal’

Under the Northern Ireland Protocol, the province will effectively operate travel and trade as if were to remain in EU membership – following all the EU rules, regulations and operating procedures laid down in Brussels.

Questioned on Boris Johnson’s often repeated promise that Northern Ireland remains an integral part of the UK – with “unfettered access for goods” travelling between Great Britain and the province – Gove anticipates that ‘unfettered’ will not mean ‘free’ movement of goods.

All businesses – British and Northern Irish – trading into or out of the province will need to register on order to continue to trade. There will be reporting and physical checks – especially on animals and animal products – so called SPS checks – before or during shipment, or on arrival. Tariffs will be payable on any and all tariff-rated goods landed in Britain or Northern Ireland that originate from, or the end-destination is – or could be – Ireland.

Gove “hopes” that there will be a “light touch” in these new protocols – but that the: “proof of the pudding, is in the talking”. He was unable to say when guidelines for any new arrangements – or the new infrastructure for reporting of goods movements – will be available in order to for businesses to prepare. He committed to: “close engagement” and a public information campaign for business and citizens in Northern Ireland.

Gove was “not able to say” how Government might deal with increases to the cost of living in Northern Ireland. The NI Protocol is subject to agreement – and so the UK now finds itself: “waiting for agreement with the EU”.

Gove on EU and UK relationship under a Brexit ‘deal’

A number of Committee members addressed concerns that had been raised by EU chief negotiator, Michel Barnier’s statement at the end of the second round of EU-UK Brexit negotiations between officials. The suspicion in Brussels appears to be that the UK is ‘selectively negotiating’ – dragging its heels and refusing to engage in areas where it doesn’t want to compromise – such as access to UK fishing grounds and maintaining a ‘level playing field’ in future regulations on competition.

Gove confirmed the EU perspective and agreed that: “fisheries, the level playing field, governance, and Northern Ireland remain areas of dispute”.

Gove was closely questioned on whether the UK would apply for an extension to the Brexit ‘transition period’ – as allowed for in Article 218 of the EU Treaty – given that political leaders across Europe are fully focussed on dealing with coronavirus at the moment, and likely to be so until the end of Brexit transition at midnight on 31 December 2020.

When asked: “what if EU asks for extension due to Covid”, Gove said he: “cannot imagine anything but us saying no.” He explained the difference between a “real-time pandemic that is developing every day, compared to choosing a scenario from those already in place, for example, between the EU and the rest-of-the-World”.

He referred to the clause included in the Withdrawal Act that sets “in law” the end date of transition as 31 December 2020. Gove commented that: “deadlines concentrate minds” and that to: “perpetuate negotiations and maintain transition, means we [continue to] pay into the EU.” Furthermore: “as Europe exits the Covid, we will want UK to go its own way.”

The Committee expressed its disappointment at the Government’s intention of sticking to the date come what may – especially as Parliament granted exceptional powers to deal with Covid-19 – and felt that the Government should not dismiss ways of mitigating a “second overlay shock” for businesses and citizens.

Should the negotiations fail to reach agreement on a Brexit ‘deal’, Gove remains: “confident that business will be prepared” – as they are: “already dealing with and adjusting supply chains” due to the Covid crisis. Further, there is a: “strong incentive for EU to maintain an open flow” of goods and services. He views ‘no-deal’ as “no jeopardy” with “no let or hinderance to, for example, pharmaceuticals and essentials – and we’re building capacity now”.

The UK Government is concerned that should the UK continues in transition – and, thus, under EU jurisdiction it would be subject to the next 6-year ‘Multi-annual Financial Framework’ – the next medium-term budget-round that comes into effect on 1 January. The UK would have “no voice” and, thus: “no idea of what the bill would be – and no say over it.”

Furthermore, the UK would have no say in how EU might change its laws in order to deal with outcomes of Covid-19 – but would “be bound to follow it” – cutting down the UK’s freedom to respond in any way we might need.

Although there had been some discussion about an ‘assembly’ to oversee future relationship, the UK Government would not accept this – preferring to have a number of ‘committees’ instead.

On the issue of safeguarding the rights of UK citizens living and working and across the EU, Gove anticipates that the European Commission will: “talk to member states” and it will be raised by the UK as an open issue at next joint committee.

Addressing concerns raised by a number of business sectors about the shape of a potential Brexit ‘deal’, Gove said that the UK was: “not looking for a bespoke arrangement – rather a series of off-the-shelf arrangements – for instance, Canada-EU for trade; Norway-EU for fisheries” and so forth.

Fisheries is where, said Gove, the: EU’s ask is most ambitious”. The EU cannot continue to access as they do under the common fisheries policy – which, in any event: “hasn’t been successful” in addressing either “economic or environment” issues. The UK will now be free to: “do something that addresses both issues – as an independent coastal state”.

With or without a ‘deal, the issue of ‘internal security’: “may not have fully concluded by 31 December – it now depends on EU.” It is, said Gove within the “EU’s gift on Schengen – but only if we bow to the European Court of Justice”. He hopes that we can conclude arrangements for mutual data exchange – but that this is a decision for the EU.

The Banking and Insurance financial sector – key to the UK economy – has been asked for open access to continue to work and trade with Europe. To do so UK regulation and standards for the industry must be equal to – or higher than – EU requirements. EU law allows countries to be granted ‘equivalence’. Asked whether the EU will grant ‘equivalence to the UK by 31 December” Gove thinks that: “It should do”. He sees it as “relatively straight-forward” given that the we are starting from the same position today. If not granted, he commented that the: “EU lose access to UK capital market and its interest rates” which he considers would be an ”own goal.” He acknowledged that it would be “sub-optimal” for the UK. However, he is confident that the UK can manage future divergence in the finance sector that is: “used to adapting”. For instance, the UK did not enter the euro – which was: “thought by some to be a mistake – but proved not to be so – due to the alchemy” of the City.

Gove feels the: “chances are small” that the UK will share a common set of rules with the EU on ‘state aid’ – rather that: “we will be WTO compliant. We will not accept EU supervision of our state aid. We retain right to intervene – witness what we did regarding Covid.”

Asked about why the UK had requested that the existing EU Office in Belfast be closed, he said that as an independent state, it now fell to the UK alone to govern.

As the UK becomes a ‘third country’ on 1 January, policing and justice will increasingly be “different to the EU” and it was inappropriate to continue using the EU ‘off-the-peg’ model. Gove accepted the challenge of the Committee and acknowledged that we are in a short time scale but assured them that “we are making provisions” to protect UK and its citizens.

Gove was challenged on his repeated use of: “I would hope so…” on so many areas. He was asked that mitigation was planned if there were no agreement – and reminded that safety of citizens is crucial. “We do not want a no-deal cliff edge…it is not good enough to ‘hope’ and ‘use best endeavours’. He noted that the border-force may need to be: “stepped up”.

Further, that had already been: “some exchanges outside EU structures”, for example, on Anti-Money-Laundering where the UK relies on both EU and wider international information exchange.

Asked about progress on ‘third country trade deals’, Gove said that: “given goodwill, there is no reason not to expect a good outcome – for example, the US ‘agri-food’ industry needs to export to UK.”

Drawing the meeting to a close, Gove was questioned on who the Government was accountable to – and specifically on how Parliament was going to be able to scrutinise them in the restricted timescale of the negotiations and decision making, Mr Gove committed to providing progress updates. He acknowledged that statements are not scrutiny, and said that the process was: “inevitably imperfect!”

Key Dates:

  • 11-15 May: Third round of UK/EU negotiations on the future relationship.
  • 1-4 June: Fourth – and final – round of UK/EU negotiations on the future relationship.
  • June: UK and EU high level conference to take stock of the progress of the future relationship negotiations.
  • 1 July: Deadline for the Joint Committee to decide if the transition period should be extended.
  • 31 December 2020: Date in law for the end of the transition period.


Questionable whether British businesses will be ready for Brexit on 31 December – and situation even worse for Northern Ireland

Just 878 firms have received assistance with preparing for Brexit – out of the Government’s estimate of 250,000 businesses that need to make changes if they are to continue to trade with the EU – from 1 January 2021 to trade between Britain and Northern Ireland, and vice versa.

The British Chambers of Commerce says the government has “not invested enough” in training for companies faced with new customs requirements and paperwork to complete.

Companies presently trading outside the EU will have some experience of completing the regulatory checks, reporting requirements and, where necessary, the dealing with payment of trade tariffs. HMRC estimates, however, that between 150,000 and 250,000 companies who presently trade only within the EU will be filling in customs forms for the first time.

Planning for Brexit is “not possible” at the same time as navigating the coronavirus crisis according to Alex Veitch, head of international policy at the Freight Trade Association. Jobs which are crucial to preparing Brexit have been furloughed.

Liam Smyth, director of international trade at the British Chambers of Commerce: “Whilst traders are focussed on survival and working out how to deal with the impact of coronavirus, the problem of making millions more customs declarations at the end of the transition period has not gone away.” Traffic will grind to a halt if goods cannot clear by new customs requirements.

For a fee, businesses without in-house capacity to fill in customs paperwork may use an ‘intermediary’ to help them after the end of the transition period. 403 of the 878 companies to have received assistance to date are customs intermediaries. Brexit Minister, Michael Gove, endorsed a suggestion that the UK could well need a further 50,000 customs agents.

Meanwhile, with just 8 months to go until Brexit, the first meeting of the joint UK and EU committee on implementing a Brexit deal in Northern Ireland has been held. Northern Ireland will operate under different trade regulations to other parts of the UK. The UK has said that this approach “will be focused on protecting the Belfast/Good Friday Agreement and gains of the peace process” – while preserving Northern Ireland as an integral part of the United Kingdom.

At the end of the Brexit ‘transition period’ on 31 December, the England, Wales and Scotland will leave the EU’s customs union. Northern Ireland, on the other hand, will continue to follow EU rules on agricultural and manufactured goods – and will also continue to enforce the EU’s customs code at its ports. This effectively sets up a new customs frontier for all good moving between mainland Britain and Northern Ireland – and vice versa.

If there is ‘no-deal’ between the UK and EU, a ‘hard’ border for goods will need to be established between Ireland and Northern Ireland. People may still be able to travel across the border under the ‘Common Travel Area’ arrangements set up in 1922.

We reported in a previous article that the EU has expressed concerns that the UK is not moving quickly enough to prepare for new checks. Michel Barnier: “The exchanges in the specialised committee now urgently need to be followed up by tangible measures”.

The outcomes of the Joint EU-UK Committee meeting were subject to Parliamentary scrutiny on 30 April by the Northern Ireland Affairs Committee. MPs called on industry experts and HMRC to give evidence. The two-hour detailed session highlighted the fact that there are many key issues need to be resolved by Government if internal flow and trade between Northern Ireland and the rest of Britain is to continue anywhere near as freely as it does today.

This throws doubt on the Prime Minister’s and Michael Gove’s repeated assertions that there would be “unfettered access” inside the United Kingdom.

The committee looked at customs arrangements for goods moving in both directions between Northern Ireland and Great Britain under the revised Northern Ireland Protocol. This includes:

  • import-export requirements and customs checks, processes and declarations;
  • whether the revised Northern Ireland Protocol will allow goods produced in Northern Ireland unfettered access to the rest of the UK internal market;
  • what customs checks, processes, declarations and infrastructure improvements will need to be implemented under the revised Protocol by businesses and customs authorities in Northern Ireland mainland Britain in order to export goods between Northern Ireland to Britain and vice versa;
  • whether the UK has sufficient customs agents, customs officials, and veterinarians to facilitate the new customs arrangements;
  • what effect the new customs arrangements will have on the volume and profitability of trade between Northern Ireland and Great Britain and vice-versa;
  • what potential economic effects the revised Protocol will have on Northern Ireland; and
  • any other issues and challenges arising from the implementation of the Northern Ireland Protocol.

It was clear that witnesses agreed with EU’s chief Brexit negotiator, Michel Barnier, that with Northern Ireland being at he same time part of EU Customs Union while also part of UK customs area is “very complex” from Customs point of view.

It will have to operate two sets of standards in parallel – especially onerous for food, chemicals and animal related products under ‘Sanitary and phytosanitary’ (SPS) requirements. There is clear evidence that the additional costs of dealing with regulations will drive up costs – in a region where the general population has a lower disposable income compared to the remainder of the UK. Goods moving for retail sale accounts for 70% by value of goods entering Northern Ireland.

The impact was illustrated by taking a lorry heading to a supermarket at random – and looking at its manifest. There were 1392 products on board.

As far as declarations and paperwork are concerned, in extremis, each will need a separate ‘export declaration’ which presently costs between £15-£56 per item. Of the 1392 items, 500 were of animal origin, requiring an SPS based ‘export health certificate’ – presently each costing around £200.

As far as trade tariffs are concerned, items fell into many different WTO ‘tariff codes’ – payable by the importer at the point of entry – and not, as with some other taxes, paid at the point of sale – resulting in a significant cashflow issue.

In addition to certification costs, many more staff are needed to complete the paperwork. The additional new costs will mean goods becoming unprofitable.

The UK Government’s mixed messages are creating confusion – several references were made to the Prime Minister’s repeated assurances of “unfettered access”. The reality is different – no clear indication as to how the new regime will work, not how the additional costs might be met. There has been little engagement with the trade bodies in Northern Ireland – and none with UK businesses trading with the Province according the MPs on the scrutiny committee. Discussions have been kept within the civil service and what information has been forthcoming about how future arrangements might look was said to be “bureaucratic and civil service heavy”.

There was reference to responding to Covid-19, necessarily, taking up all available energy and focus, “an interrupt to preparations”.

HMRC reported that they were aiming for “minimum intervention”. The Protocol allows them to grant ‘unfettered’ movement of goods providing it is intra-UK and with an end destination of Northern Ireland. However, they conceded that there is no way to know this from looking at the outside of a wagon. They will need at least some ‘basic data’ in order to make a judgement. As the end destination is immaterial within EU at present, there is no recorded data to that might help assess the extent of future reporting requirements.

HMRC conceded that as present, there were no thoughts yet on how “Red” and “Green” lanes will operate in ports on either side of the Irish Sea – ‘procedurally, legally or practicality’.

There was speculation as to whether the ‘Trusted Trader’ scheme could be used – although it was pointed out that this a costly process and registration can take up to a year.

Good in transit between the UK and Ireland often use the shorter crossing between the mainland and Northern Ireland. Any additional burdens of costs and delays will drive transport towards direct crossings to Ireland and impact on the Northern Ireland ports and economies. Additionally as the UK begins to conclude trade deals beyond the EU, there will be a requirement for proof of origin in order to comply with WTO rules.

Chair of the Committee, Simon Hoare MP, noted the heartfelt “cri-de-coeur” for information from all sides.

There was no witness able to represent the Northern Ireland Fishing Industry which the Chairman noted as a gap to be addressed.

It was clear that the revised ‘Protocol’ of October 2019 – with its promise of ‘unfettered access’ – may have to begin operation ‘working by exception’ in January 2021 – allowing free movement of good unless HMRC have a specific reason to believe it is not an intra-UK movement – albeit that there is not yet a published list of what will comprise a reportable product.

There was an acceptance that the Protocol as part of an overall UK and EU Brexit ‘deal is better than a ‘no-deal’ scenario – but not much better.

‘No-deal’ means that the Protocol won’t apply. This will mean implementing a ‘hard border’. A number of observations on the UK stance – as viewed from outside the negotiating team – felt like the UK Government was “running down the clock” on reaching a deal with the EU. There were stark warnings that the socio-economic impact of a no-deal Brexit will “hit the people of Northern Ireland hardest”.

There was unanimity that Brexit must not carry a “penalty for being a citizen of Northern Ireland – effectively a ‘tax on citizenship’.

There was doubt expressed that there is time to recruit and enough vets and customs officers before the end of the year. And the inevitable conclusion drawn between more officers meaning more bureaucracy leading to more costs. In 8 months. Trade that is not ‘unfettered’ means the process has failed.

The impact of Covid-19 should not be ignored nor underestimated: it has demonstrated the ‘fragility of supply chains and consumed resources needed to prepare for Brexit. The impact will not be evident by December, nor yet will we know the ‘new normal’. The Northern Ireland economy is “about slots on boats, and a missed boat isn’t only cost – it’s about broken supply”.


Figures obtained by the BBC under freedom of information show 878 firms have received assistance with preparing for Brexit.