The Brexit deal is done – but many crucial issues are unresolved

Downing Street’s chief Brexit negotiator, Lord Frost, exhausted from months of intense talks, could not hide his glee on Saturday as he hailed the Brexit deal struck between the EU and Brussels as “one of the biggest and broadest agreements ever”. Its effect, he said, would be to allow the UK to “set its own laws again”.

“There’s no more role for the European court of justice, there’s no direct effects of EU law, there’s no alignment of any kind, and we’re out of the single market and out of the customs union, just as the manifesto said we would be,” he declared. “This should be the beginning of a moment of national renewal for us. All choices are in our hands as a country and it’s now up to us to decide how we use them and how we go forward in the future.”

Frost was right to emphasise the importance of reaching some form of agreement. By avoiding no-deal, the two sides have ensured that trade between the UK and EU will not be subject, routinely, to tariffs or quotas, as would otherwise have been the case. The resulting higher costs to business and consumers on both sides have been avoided, though Brexit will of itself lead to more bureaucracy, form-filling and checks on goods traded, and therefore delays.

But no one should believe that this marks the end of wrangling between the EU and UK. It does not represent finality. It was, as the Labour leader Sir Keir Starmer said on Christmas Eve, a “thin deal” that leaves much not settled, struck to avoid catastrophe by kicking much down the road.

The UK under the government of Boris Johnson pursued Brexit – he always claimed – to take back control of our laws, borders and money. But even after we have left, his government still wants to benefit from European programmes, including those affecting our security, our financial services sector and our data, and to enjoy the benefits of the European single market wherever it can. Johnson wants UK professionals to be able to work freely in other EU countries, but this deal achieved nothing for them. Those arguments are to come; the tussles will go on. Toby Helm

Security

Mark Townsend
Priti Patel wasted little time in claiming the deal made the UK safer. Her assessment left most security analysts wondering what the home secretary knew that they didn’t. Few have avoided the conclusion that, in the short term at least, the deal leaves Britain less secure.

Not only are key lines of cooperation severed, but UK policing has forfeited some of its most valued tools. Chief among these is the Schengen Information System (SIS), a vast database providing real-time alerts to locate terrorists and serious criminals. On an average day, British police access the SIS more than 1.65 million times.

With no obvious sign of a substitute system, urgent negotiations are needed to agree a scheme that can fill this huge intelligence void.

Similarly, losing a seat at the EU’s policing agency, Europol, where the UK was a forceful presence, creates potential complexities with fast-moving cross-border criminal and terrorism investigations. New agreements might be required with each EU member state to restore previous relationships – again, holding out the promise of more long-winded negotiations. Extra talks will also be needed to replace the work of Eurojust, the agency responsible for judicial cooperation in criminal cases across member states.

Downing Street claims Britain had got more than it had envisaged on security and policing matters – and it is true there are some noteworthy victories, including a fast-track extradition system to replace the European arrest warrant and the continuing exchange DNA and fingerprint data. But it is also true that much still needs to be negotiated – and won. In the meantime, Britain’s law enforcement apparatus is diminished.

Data sharing

Jamie Doward
Ensuring the smooth flow of data between the EU and the UK is crucial to the future prosperity of both.

The Institute for Government notes that “volumes of data entering and leaving the UK increased 28 times between 2005 and 2015, and three-quarters of these data transfers are with EU countries. Any restriction placed on data flows would act as a barrier to trade, putting UK businesses at a competitive disadvantage.”

According to the summary issued by the UK government, “the agreement confirms strong data protection commitments by both the UK and the EU, protecting consumers and helping to promote trust in the digital economy.”

However, much has yet to be resolved. Experts say we should expect to hear a lot more about an “adequacy decision” that will relate to data transfers between the UK and the EU.

Data adequacy is a status granted by the European commission to countries outside the European Economic Area. When a country has been awarded this status, information can pass freely between it and the EEA without further safeguards being required.

This will not be sorted out quickly. The quickest data adequacy agreement between the EU and another country – Argentina – took 18 months to finalise. So, there will be an interim solution under which the UK will suspend its own data protection rules. This solution will run for a maximum of six months, according to EU sources.

For this reason there is pressure to achieve an adequacy agreement before the interim solution expires.

Cecilia Bonefeld-Dahl, the director general of Digitaleurope, a trade body representing more than 35,000 businesses in Europe, said: “The EU has yet to reach an adequacy decision regarding the UK – there is an urgent need to make progress here so that data can continue to flow between our economies and our businesses. Our recent study showed that 6 out of 10 European companies transfer data between the EU and UK.”

Services sector

Phillip Inman
The government must return to the negotiating table to secure access for services companies excluded from the “thin” Brexit deal, business leaders have urged.

Professional services firms and City banks, insurance companies and accountancy firms are among thousands of businesses that face restrictions on EU trade from 1 January unless ministers can expand arrangements in a further round of talks in the new year.

The services sector accounts for 80% of the UK economy and was largely left out of the Brexit deal, which centres on eliminating tariffs and quotas on goods shipped between the UK and EU. But while the UK had an overall trade deficit of -£79bn with the EU in 2019, it had a surplus of £18bn from the trade in services.

TheCityUK, the lobby group for the financial services industry, said that while banks had an agreement covering basic transactions, there were up to 40 treaties affecting cross-border activities in the financial services industry that needed to be renegotiated.

“We have known for some time that the services sector was going to be left out of the initial deal. The hope is that now some of the political heat has gone from the discussions, we can tackle other important issues,” he said.

EU leaders, fearing that the UK will seek to undermine regulations in the single market and customs union, have also blocked agreement on data rules that allow firms to keep information on their customers.

Brussels has indicated that, on many issues affecting services companies, it wants to wait until later in 2021 to see if the UK diverges with existing EU regulations before striking further deals.

While the EU agreed to allow business executives to move from the UK to EU countries to manage their continental operations, it remains unclear whether UK professionals will be able to do the same after professional qualifications were excluded.

Michael Izza, chief executive of the accountants’ professional body, the ICAEW, said an agreement covering legal services was welcome, but should be extended to other professions, including accountants, surveyors and architects.

Professional qualifications

Jamie Doward
From accountants to ski instructors, before Brexit the British qualifications of UK citizens who work abroad in EU countries were recognised across all member states.

Now, though, things will change and it will become harder for UK citizens seeking to work in the EU to prove that their qualifications are the equivalent of those recognised elsewhere in Europe.

This is a setback for the UK. Proposed drafts from the British side clearly show it wanted mutual recognition of qualifications.

“The UK had originally asked that the EU would agree that UK qualifications would be automatically recognised, perhaps subject to a further test if necessary,” said Sam Lowe, senior research fellow at the Centre for European Reform. “Instead, what we have is a framework that allows for qualification bodies in the EU and the UK to put forward a proposal for mutual recognition to exist in the future.”

This is similar to what the EU has permitted under other trade agreements. But Lowe is not convinced of its merits. “It relies on fairly protectionist – often private – bodies deciding to recognise each others’ ability to grant qualifications in a specific field.”

However, the UK did agree an important caveat. In the absence of an EU-wide agreement, Brussels will allow UK bodies to pursue other ways of agreeing the mutual recognition of qualifications on a bilateral basis. So, a UK-based qualification body working with its counterpart qualification body in an individual member state – say Ireland or Germany – may be able to negotiate its own agreement.

But there is no guarantee of success. These talks could be complex, protracted, and only achievable on a country-by-country basis.