Government shows its Brexit hand

I think businesses now have as much certainty as they can realistically expect.

It has stated its preferred options, both of which are ambitious, because they are far from the EU’s stated position thus far. They essentially propose the UK have the benefits of being inside the Customs Union, along with the benefits of being outside the Union.

The Government has conceded the EU may not agree to the terms and has said that, in this eventuality, it will take a standalone approach, imposing customs, duties etc upon imports to the UK from the EU from Spring 2019. It is to be assumed that the EU would do likewise to UK imports to the EU.

Again, in terms of businesses planning ahead, there is not much ambiguity here.

One caveat is that the UK has outlined its desire for a transition period to help companies adjust. Implicitly, this may also be used to prolong negotiations.

I think the Government's 'have its cake and eat it' approach – while infuriating to many at the EU – is not as unrealistic as it appears to be at first. In my opinion, the Government's business as usual option on trade (option 1) is fairly likely to come to pass, not because the EU will love it, but because it puts the onus on the EU to change the trading arrangement if it dislikes it. Having not asked for this situation, the EU is unlikely to take the initiative. It will most likely be forced to act only when events push it to do so. What we have seen so far from the EU is that it will be slow, reactive, and measured. Probably. The situation is volatile and things may change quickly, but if Option 1 is de facto accepted by the EU, at least for an interim period, it will be work well for businesses currently trading within the EU.

You can read the full paper here.