Chapter 3
IN THIS CHAPTER
Understanding that the withdrawal deal only secures the terms of exit
Introducing the main players on both sides of the negotiations
Exploring the key areas of the withdrawal agreement
Getting the agreement signed off by the UK Parliament
In June 2017, following the 2016 Brexit referendum result, the United Kingdom (UK) and the European Union (EU) formally began negotiating the terms of the UK’s exit from the EU. This was a smooth, swift process where everyone got along brilliantly and unanimously agreed on what was best for both sides. I’m kidding, obviously. The discussions went on for almost 18 months and were hindered by several changes in personnel on the UK side.
In this chapter, I briefly set out who was responsible for negotiating the deal and break down the key terms of the withdrawal agreement. I also look at the painful process of trying to get the UK Parliament to approve the withdrawal agreement. But first, it’s important to be clear on what I mean by “withdrawal agreement.”
The objective of the withdrawal agreement is to “ensure an orderly withdrawal of the United Kingdom from the Union.” In order words, it only covers the Brexit process itself, including the following:
I talk more about these terms in the section “Exploring the Draft Withdrawal Agreement” later in this chapter.
So, when you hear people talking about Brexit exhaustion, and being sick of hearing about ”the deal”, you may want to break it to them (gently, maybe from a safe distance), that post-Brexit negotiations will probably go on for many years. As an example, Canada’s trade deal with the EU took seven years to complete. Everyone hopes that the UK–EU trade deal will be wrapped up quicker than that, but there are no guarantees.
Finally, although the long-term relationship between the UK and the EU hasn’t formally been agreed yet, it’s worth noting that the two sides have come up with a non-binding political declaration that outlines (in vague terms) how they would like to see the relationship develop. You can read more about this declaration in Chapter 4.
Boxing had the “Thrilla in Manila” and “Rumble in the Jungle.” Brexit had the equally exciting (if you like political negotiations, that is) “Tussle in Brussels.”
In this section, I take a look at the British and European teams charged with negotiating the UK’s exit from the EU, and highlight some of the key things they said before, during, and after the difficult negotiating process.
Remain-supporting Theresa May managed to cling to her role as prime minister throughout the withdrawal agreement negotiations, but there were a number of changes to the UK negotiating team.
Here are the major players on the UK side:
The UK’s Brexit secretaries came and went like buses, but the EU’s negotiating team remained as steady and constant as the sunshine in Tenerife. Let’s look at the key players on the European side:
Other EU representatives, including Guy Verhofstadt and Antonio Tajani, received little press coverage during the negotiations.
After lots of back and forth (and, presumably, lots of Eurostar sandwiches), the negotiating teams concluded their discussions, and the withdrawal agreement setting out the UK’s “orderly” departure from the EU was published in November 2018.
At almost 600 pages, the withdrawal agreement makes a great doorstop, but not a very quick read! In this section, I pull out the most relevant details of what was agreed between the UK and the EU.
In the early days of the Brexit withdrawal negotiations, much of the focus and anger within the UK revolved around the so-called “divorce bill.” As negotiations wore on, and especially after the draft agreement was published, attention switched largely to the Irish border issue (which I get to later in this chapter).
No specific figure appears in the withdrawal agreement, but the divorce bill is expected to be around £39 billion, payable over a number of years. In fact, the Office for Budget Responsibility estimates that the UK will be paying this until 2064, although most of it will be paid off by 2021. Part of this divorce bill will cover the UK’s financial contribution to the EU budget during the transition period. (I talk more about the transition period next. Circle back to Chapter 2 for more about EU budgets and the UK’s financial contribution.)
I know what you’re thinking — £39 billion is quite an expensive divorce, right? It is, especially when you consider the schools budget for 5- to 16 year-olds in England in the fiscal year 2017–18 was also budgeted at £39 billion. (Remember: That’s one year, though, whereas the UK will be paying the divorce bill over several years.)
When the UK finally exits the EU, the idea is it will enter a transition period, and this transition period is a key part of the withdrawal agreement. (If the UK leaves the EU without signing off on the withdrawal agreement — otherwise known as a no-deal Brexit — there will be no transition period at all.)
Especially with the UK’s exit being delayed from March 29, 2019, until October 31, 2019 (more on the delay coming up later in the chapter), there’s a strong chance that the transition period may also be extended. Many people agree that the proposed transition period probably won’t be nearly long enough to negotiate a UK–EU trade deal, let alone other key aspects of the future relationship). If the UK and EU agree, the transition period could be extended until December 2022. This is one of the many as-yet-unresolved issues surrounding Brexit (turn to Chapter 12 to read about other unresolved Brexit issues to keep an eye on).
The obvious upside of the transition period is that it buys everyone time to prepare and paves the way for a smoother exit (as opposed to a cliff-edge, no-deal Brexit). It also gives the UK continued access to the single market and customs union for the duration of the transition period, and ensures that the UK has continued access to key European databases that are vital for security and law enforcement purposes. However, critics are quick to point out that it ties the UK to EU control for several more months, and possibly even longer than that.
For these reasons, the transition period raised alarm among hardline Brexiteers, who were quick to point out that, instead of “taking back control” the UK government was still ceding control to Brussels.
The fact that the UK will have to abide by all EU laws for the duration of the transition period was one of the more eyebrow-raising issues of the withdrawal agreement (the divorce bill and Northern Ireland backstop being other key bones of contention).
One potential problem arising from the transition period is that UK businesses may have to abide by a lower value-added tax (VAT) threshold, if proposed EU VAT changes come into force during the transition period.
This is just one example of the disadvantages the UK faces during the transition period by not having a say on EU rules and regulations. As a member of the EU, the UK was always able to block proposed changes in the VAT threshold. This veto — indeed, any meaningful role in decision making — will be lost on the day the UK exits the EU.
Around 3.8 million EU citizens live in the UK, and around 1.3 million Brits live in EU countries. For those European citizens living in the UK and Brits living in Europe, Brexit has brought a lot of anxiety; people who have built lives for themselves in a new country were understandably worried about their right to stay on after Brexit.
Establishing citizens’ rights was one of the top priorities for both the UK and EU teams — and, broadly speaking, was one of the easier things to agree on. In simple terms, the EU agreed to offer UK citizens the same rights as the UK offers to EU citizens. Quid pro quo.
Read more about settled status, citizens’ rights and how they relate to employing EU citizens in the UK in Chapter 7.
What’s not yet clear for UK citizens living in an EU country is what happens if they later decide to live and work elsewhere in the EU. For example, a UK citizen living and working in Germany will retain the right to stay on in that country. But what happens if he wants to move to Spain in 2025? His German residency doesn’t guarantee him the right to live and work elsewhere in Europe — that’s reserved for EU citizens only.
Free movement of people is one of the key principles of the EU, guaranteeing that any EU citizen has the right to live and work in any other EU country. In practice, this meant that the UK accepted workers of all skill levels from the EU. Meanwhile, workers from outside the EU are accepted based on their skills. Some saw this as preferential treatment for EU citizens, resulting in too many unskilled workers coming to the UK — which is perhaps why free movement became such a critical part of the referendum campaign (see Chapter 2).
So, free movement as we know it will come to an end after Brexit (well, after the transition period, assuming there is one) but the specific terms of this arrangement — how it’ll work in practice in the long term — have yet to be negotiated.
That’s all well and good, but what about UK industries and businesses that rely on unskilled labor from the EU? In December 2018, the government released its post-Brexit immigration plans, and these included a special exemption for low-skilled workers from “low-risk countries” (which is likely to include EU countries).
Under this “temporary worker” scheme, low-skilled workers will be able to live and work in the UK for up to 12 months without having to apply for a visa. These temporary workers won’t be able to bring their family members to live with them, access public funds (such as benefits), or apply for permanent residency while they’re working in the UK.
The government also said it would be testing a specific scheme for agricultural workers in 2019, although there are no further details on this at the time of writing.
So, what happens with trade, I hear you ask? This is the area that many UK businesses want clarity on, yet it remains one of the biggest uncertainties. Because the withdrawal agreement only covers the UK’s exit from the EU, nothing concrete has been agreed on for trade beyond the transition period.
This gives businesses some sense of stability and allows them time to prepare for future changes … when those future changes have been agreed upon.
How did the UK get to the point of exiting the EU without any firm agreement on how it would trade with Europe? The short answer is, the UK didn’t want to. Here’s the slightly longer answer: Initially, the UK government was hoping to tie trade negotiations in with the withdrawal agreement. The EU, however, always saw withdrawal and future trade as two separate agreements. In other words, the EU said (and I’m paraphrasing here), “Nuh-uh, first you leave, then we talk trade.”
In Chapter 12, I highlight trade as one of the key developments to keep an eye on as Brexit unfolds, and set out some potential scenarios for the UK’s future trading relationship with the EU. You can also read more about the impact of Brexit on importing and exporting in Chapter 5.
Of course, one of the major stumbling blocks in delaying trade negotiations until after the UK has exited the EU is the impact this may have on the border between Northern Ireland and the Republic of Ireland. Which brings me to the next section… .
If you’re living in the UK, you heard a lot about Northern Ireland and the “backstop” during the negotiations. In fact, the backstop became one of the major sticking points when the withdrawal agreement went before UK Parliament for approval. (See “Getting Parliamentary Agreement on the, er, Agreement,” next in this chapter.)
But what is the backstop, and what does the withdrawal agreement mean for the frictionless border between the Republic of Ireland and Northern Ireland? Before I get to that, let’s have a super-quick history lesson.
Signed in 1998, the Good Friday Agreement (also known as the Belfast Agreement) helped to bring about peace on the island of Ireland and end what was known as “the Troubles,” a decades-long conflict between the Unionists/Loyalists (who wanted Northern Ireland to remain part of the UK) and the Nationalists/Republicans (who wanted Northern Ireland to join a united Ireland). There was a whole lot of religious disagreement mixed in there, too — Unionists were mostly Protestant and Nationalists were mostly Catholic.
After decades of violent conflict (which spilled over into the Republic of Ireland and the island of Great Britain), the UK government, the Irish government, and various parties from Northern Ireland signed the Good Friday Agreement. (The United States also played a key role in the discussions.) This agreement created a devolved government in Northern Ireland (called the Northern Ireland Assembly), with the Unionists and Nationalists governing together in a power-sharing arrangement.
It wasn’t all plain sailing from there; the Northern Ireland Assembly was suspended in 2002 for five years, and the power-sharing arrangement broke down again in January 2017, resulting in the Northern Ireland government being dissolved. At the time of writing, in April 2019, the two main parties in Northern Ireland had yet to reach an agreement and form a new government.
However, this lack of border caused a major problem in the UK–EU negotiations. Why? Because no physical border between Northern Ireland (which is part of the UK) and the Republic of Ireland (which is part of the EU) means no border between the EU and a non-EU country. The UK and the EU had to find a way to overcome this hurdle, without jeopardizing peace and stability on the island of Ireland.
Various solutions have been proposed, including a border down the middle of the Irish sea, effectively separating Northern Ireland from the rest of the UK — an idea that angered the Democratic Unionist Party in Northern Ireland, prompting Theresa May to reject the proposal. The EU also proposed that Northern Ireland become part of a “common regulatory area” with Ireland, which would mean Northern Ireland being subject to different regulations than the rest of the UK — an idea also rejected by the UK government.
Until we know what the UK’s future trade relationship will be with the EU, it’s impossible to find a permanent solution to this problem. The border issue will, therefore, form part of ongoing negotiations between the UK and the EU.
The backstop arrangement is as follows:
You can see why the border was one of the toughest parts to negotiate in the draft agreement. And when the agreement was published, and people began to fully understand what the backstop might mean, that’s when the fun really began. The backstop became one of the biggest talking points as the UK Parliament came to vote on the withdrawal deal.
As an aside, Gibraltar also briefly received a lot of attention when the withdrawal agreement was published. To find out why, check out the sidebar “What’s going on with Gibraltar?”
Although the Brexit withdrawal agreement was smoothly approved by the leaders of the EU27 (the 27 countries remaining in the EU), Theresa May faced an uphill battle getting the withdrawal agreement signed off by the UK Parliament.
At the time of writing, this battle is still ongoing and there’s very little clarity on whether the UK Parliament will approve the withdrawal deal. This leaves the UK in an interesting position, because the EU has been very clear that it won’t reopen negotiations on the withdrawal agreement — the deal on the table is the only deal on offer, so to speak. But let’s take a look at Theresa May’s efforts to get parliamentary approval on the withdrawal agreement she spent almost 18 months negotiating with the EU.
In the first instance, a House of Commons vote was scheduled for December 11, 2018, to approve or reject the agreement. But the day before the vote was scheduled to take place, May postponed the vote because it was becoming glaringly obvious that the deal would be rejected by a large margin.
The backstop arrangement was a significant factor in Members of Parliament’s (MPs’) dislike of the withdrawal agreement, so, as the clock ran down and the leave date of March 29, 2019, fast approached, Theresa May repeatedly went back to the EU to try to secure legally binding assurances that the backstop wouldn’t apply indefinitely. The EU was unwilling to put a time limit on the backstop or allow an exit clause for the UK to leave the backstop without EU approval.
These discussions went right down to the wire, as a second House of Commons vote to approve or reject the withdrawal deal was set for March 12, 2019 — just 17 days before the UK’s original planned departure date of March 29, 2019. Talk about cutting it fine!
Immediately after postponing the vote in December 2018, Theresa May survived an attempted leadership coup by hardline Brexiteers. Although more than one-third of Tory MPs voted “no confidence” in her leadership, she won enough support to stay on as prime minister.
Then in January 2019, a day after the delayed withdrawal deal vote took place (and the deal was rejected), the opposition Labour Party mounted its own challenge to the government and tabled a “no confidence” motion (the first against a UK government for more than 20 years). This was rejected by 325 votes to 306, meaning the Conservatives clung on to power, just about.
With rumors of key cabinet ministers resigning over the impending prospect of a no-deal Brexit, Theresa May was forced to soften her stance and offer MPs the chance to vote on a no-deal Brexit and the option to delay Brexit, as well as voting on her withdrawal agreement for a second time.
Theresa May refused to give up on her withdrawal deal, even though MPs had already rejected it twice. But her plans to bring the deal back to Parliament for a third vote were hampered by John Bercow, speaker of the House of Commons, who, with just 11 days to go until the original exit date, refused to allow another vote on her deal, unless the deal itself had materially changed since the last time MPs voted on it (of course, it hadn’t changed). This plunged the UK government into constitutional chaos, with no clear way forward in sight.
Meanwhile, the government and businesses around the UK were spending a fortune preparing for the potential chaos of a no-deal Brexit. Because, even though MPs had rejected the idea of a no-deal Brexit, a no-deal Brexit was the legal default scenario if the withdrawal agreement wasn’t approved.
MPs then held a series of votes in an attempt to find some sort of consensus. By this point, oddly, everyone had stopped talking about the withdrawal agreement, and had jumped ahead to debating options for the UK’s future trading relationship with the EU, even though the EU had said trade could not be negotiated until after the UK had actually left the EU … which it couldn’t do until it approved the withdrawal agreement. The UK had effectively become stuck in a Kafkaesque nightmare of fairly meaningless and repetitive votes, while the British public, and the EU, looked on in horror.
Basically, Parliament held a lot of votes, and none of them got anywhere. It seemed politicians would never reach a consensus on how to “do” Brexit.
Theresa May did, in the end, get to bring her withdrawal agreement back to Parliament for a third vote — although the result was the same. On March 29, 2019 (the day the UK was originally supposed to be leaving the EU), MPs voted for a third time to reject the withdrawal agreement. This time the margin was much smaller — just 58 votes — but it was still a humiliating defeat for May, especially because she had promised to resign and give Conservative hardliners what they wanted (a new leader) in return for backing her deal. They still rejected it, leaving many unsure whether (or when) May would step down.
MPs then held a second round of votes on their own options, including the customs union, common market 2.0, and the second referendum. All options failed to gain a majority. Once again, all were rejected.
Labour is in favor of joining a customs union with the EU, which would make UK–EU trade easier in future but would limit the UK’s ability to do trade deals with non-EU countries. Theresa May, however, has been against the idea of joining a customs union with the EU. Labour’s official policy supports the idea of a second referendum (even if Corbyn himself isn’t personally that bothered about holding a second referendum). May, meanwhile, would face another revolt from her own party if she agreed to hold a second referendum. It seems unlikely that the Conservatives and Labour can reach an agreement on Brexit anytime soon.
At an emergency EU summit on April 10, 2019, two days before the revised Brexit date of April 12, the EU27 met to decide just what to do about the UK — the country that had been desperate to leave the EU for years but couldn’t quite figure out how to do it.
This extension was absolutely necessary to avoid the potential chaos of a no-deal Brexit. But it meant the UK would be forced to participate in EU elections, scheduled for May 23, 2019. At the time of writing, the UK was preparing to take part in EU elections, and elect Members of European Parliament (MEPs).
Good question! No one really knows how Brexit will play out from here — whether May will ever get approval of her withdrawal agreement, whether the UK will decide to join a customs union with the EU, whether Brexit will end up being delayed again… .
Here are some potential outcomes that may happen before October 2019:
One thing is sure: It’s going to be an interesting time as the UK prepares for the new exit date of October 31, 2019! And if none of these options happen, and no consensus is reached on a way forward, there’s a very strong chance that Brexit will be delayed again.