20 March 2020

UK in a Changing Europe: Covid-19 and the need for a longer transition

Extending the transition should no longer be a question – it has become a necessity, given the impact of COVID-19. The UK government must now recognise that it is in everyone’s interest to prolong the transition period, with the EU being as accommodating as possible, argues Fabian Zuleeg.

Disrupted negotiations

The current crisis is already having a major impact on the negotiations. With travel being restricted, it is hard to see when full negotiation rounds can be resumed.

Remote facilities cannot replace the multiple exchanges that take place during a negotiation round, let alone replicate the personal relationships that make a negotiation work.

That is particularly crucial in this case, where the timetable is already tight. The UK government’s hope that it will be clear by June 2020 whether there can be an agreement is no longer ambitious, just plain unrealistic.

There will simply not be any bandwidth to focus on the negotiations, which require a delicate balance of give and take. [...]

An overwhelming economic rationale

This is not only a technical or practical consideration. Brexit implies an economic shock on both sides of the Channel, potentially as early as in the middle of the year.

It will certainly come before the end of the year if the current timetable is adhered to, which would be extremely reckless.

When faced with such an enormous challenge as the current pandemic and its economic impact, an extension of the transition to delay the inevitable shock is the only acceptable response.

Postponing the end of the transition by a year, to the end of 2021, also implies that the UK would still be part of the European system, with effective cross-border coordination benefiting both the UK and the EU27.

It would mean that the UK could still benefit from any temporary exemptions to current rules and restrictions (on state aid, for example) that the EU decides to implement to deal with the crisis.

Financial implications of remaining in EU programmes

If the transition is extended, the UK will continue to be part of the EU and participate in all relevant EU programmes, such as on research funding. This would provide stability and a positive stimulus to many organisations across the UK. But it would require that the UK accepts EU financial obligations for a further year.

This is potentially complex. 2021 is already part of the Union’s next Multiannual Financial Framework (MFF). However, no agreement has been found on the next MFF, and member states appear to be far from reaching a consensus. [...]

Wanting a deal?

The actions of the UK government in the coming weeks will demonstrate whether Boris Johnson is able to act as a statesman, recognising that in the current circumstances an extension to transition is the only way forward, regardless of his long-term intentions for the UK-EU relationship.

To willingly and deliberately cause another economic shock in such a crisis moment would be reckless.

The situation will be even worse if there is no deal, especially if this already happens by mid-June. At that point, the economy will be extremely fragile, and another shock could not only further fuel the downward spiral but also trigger a full-blown financial crisis.

An extension to the transition is thus not only in the EU27’s interest but is also a contribution to the overall stabilisation of the global economy. Given the asymmetric nature of the negative impact of Brexit, delaying it will, of course, also be of disproportionate benefit to the UK itself. [...]

Full analysis

© UK in a Changing Europe