Jan 13, 2017 - Any âfinal dealâ to be voted on by UK & EU Parliaments ...... of the publicâ.143 The Broadband
Brexit update Briefing from Prospect
www.prospect.org.uk/europe
Updated September 2017
Contents Brexit – what is happening Key milestones The Government’s approach Issues for EU nationals in the UK, and UK nationals abroad Economic impacts Issues for key industries and sectors o
Defence
o
Energy
o
Environment and Food
o
Heritage
o
IT and Telecoms
o
Justice
o
Media and Entertainment
o
Nuclear
o
Science
o
Transport
Employment rights Issues for devolved nations What Prospect is doing Appendix: revisions to key economic forecasts since the referendum
Latest revision of this document: https://library.prospect.org.uk/id/2017/00128 This revision: https://library.prospect.org.uk/id/2017/00128/2017-09-22
Brexit – what is happening The Government has now triggered “Article 50”1 and embarked on a number of interrelated and simultaneous processes of negotiation and policy revision concerning:
The terms of the UK’s withdrawal from the EU, which must be finalised by April 2019, when UK membership will end. Key issues include outstanding contributions to the EU budget, the Irish border, and the reciprocal status of expatriate nationals.
The UK’s future relationship with the EU, which the EU says it will not begin to discuss until progress is made on the terms of withdrawal. Failing to agree a deal and/or “transition” arrangement by 2019 would mean “hard Brexit” on WTO terms.
The UK’s future relationship with the rest of the world where hitherto mediated by the EU – including trade arrangements with key partners such as the US, and those covered by EU agreements such as Israel, South Africa and South Korea.
The revision or replacement of numerous funding, regulatory and policy regimes hitherto determined by EU membership – for example, support for science or agriculture, the regulation of medicines or air travel, or competition policy in key sectors; as well as environmental and labour market regulations.
Key milestones March 2017
UK’s formal notification triggers 2-year negotiating timetable
June 2017
Formal negotiations on withdrawal agreement begun
October 2017
Subject to progress on withdrawal negoations, beginning of discussions of post-Brexit relationship
March 2018
Practical deadline for agreement of any transitional arrangements or new trading or regulatory agreements with the EU – otherwise businesses and others will need to plan for “no deal” scenario
2018/2019?
Any “final deal” to be voted on by UK & EU Parliaments
March 2019
UK membership of the EU ends Any agreed transitional or replacement arrangements take effect – or, if not, reversion to WTO rules for trading relationships
2020
EU due to set next long-term budget
March 2021
Expiry of any two-year transitional phase, if agreed
June 2022
UK General Election due, if not previously called
1
https://www.gov.uk/government/speeches/prime-ministers-commons-statement-on-triggeringarticle-50 2
The Government’s approach Many of the priorities and parameters set out at the beginning of the year 2 look less set in stone since the General Election weakened the position of the Prime Minister vis-à-vis dissident cabinet ministers, 3 backbenchers and opposition parties. But the latest statements, including the Prime Minister’s speech in Florence on 22nd September,4 suggests the Government’s position on key issues are as follows:
the Government now favours a implementation period of around 2 years during which it continues to participate in the Single Market, but gain freedom to negotiate new trade deals outside the Customs Union5
beyond any transition period the Government is still explicitly ruling out continued membership of the Single Market or Customs Union6
the Government wishes to reach a new “economic partnership” that will allow for the coordination and alignment of regulations to be maintained – more ambitious than a “Canada-style” free trade agreement but without reducing the UK to a passive “rule-taker” as EEA members like Norway are 7
there are signs Government is looking for work-around solutions (such as accepting a role for the Efta court) to continue an “indirect” role for the European Court of Justice in UK-EU relations8 – increasingly seen as a key obstacle to maintaining close ties including on regulatory issues 9
the Government has suggested it could continue to make budgetary contributions to some EU programmes “such as those that promote science, education and culture” in the long-term10
The Government says Parliament will vote on the final deal struck with the European Union – though it has not been clear whether the consequence of rejection would not be to remain in the European Union or simply to leave without a deal. The latter seems the more likely consequence. 11
2
https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-theeu-pm-speech 3 https://www.ft.com/content/06251f4e-7d1a-11e7-ab01-a13271d1ee9c (£) 4 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 5 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 6 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 7 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 8
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/639609/Enforcement_ and_dispute_resolution.pdf; https://www.ft.com/content/a21cac8c-87ec-11e7-bf50-e1c239b45787 (£) 9 https://www.instituteforgovernment.org.uk/blog/government-hamstrung-its-position-europeancourt-justice; see also https://www.ft.com/content/1bec93fc-7b53-11e7-9108-edda0bcbc928 10 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 11 https://fullfact.org/europe/what-happens-if-parliament-rejects-brexit-deal/ 3
the Government has retreated from “no deal better than a bad deal” rhetoric and its implicit threat to walk away from negotiations and aggressively undercut the EU on tax and regulation instead 12
all existing EU legislation will be transferred into UK domestic law at the point of exit under the EU exit bill now before Parliament. 13 Once enacted Parliament (or, where “Henry 8 clauses are used, Government alone) will be free to amend or repeal any element of it.14 Further Bills will be needed in areas such as immigration, customs, and agriculture and fisheries. 15
the Government has said little about future immigration and border policy, but has ruled out a points-based visa scheme, and a fixed cap on EU migrants. 16 A workpermit system is still thought the most likely option.17
The government has recently issued “position papers” and “partnership papers” which have fleshed out possible options in some relatively technical areas but for the most part these remain discursive and largely aspirational, indeed, in the view of critics simply unrealistic. The Labour Party has now said it believes the UK should remain within the Single Market and Customs Union for a transitional period of up to four years (ie till 2023 – after the next general election is due). It has also said that, beyond this, negotiating a “new single market relationship” should remain an option for negotiation, though remains committed to “more effective management of migration” than full Single Market membership allows.18
Issues for EU nationals in the UK, and UK nationals abroad EU nationals make up over 5% of the workforce in most sectors, in some areas more than 10 per cent.19 The Government has stated that until the UK does leave the EU, the rights of EU nationals working or living in the UK remain as before, including the right to gain residence after five years.20 The statement leaves open the question of how EU citizens will be treated following Brexit. Both the UK and EU say they hope to clarify the status
12
http://www.bbc.co.uk/news/uk-politics-40318674; http://www.bbc.co.uk/news/uk-politics40771900 13 https://www.publications.parliament.uk/pa/bills/cbill/2017-2019/0005/18005.pdf 14 https://www.gov.uk/government/news/government-announces-end-of-european-communities-act 15 http://www.telegraph.co.uk/news/2017/03/14/seven-new-brexit-bills-must-passed-article-50triggered-leaked/; https://www.instituteforgovernment.org.uk/sites/default/files/publications/IFGJ5347-LegislatingBrexit-IFG-Analysis-032017-WEB.pdf 16 https://www.ft.com/content/cada5830-1335-11e7-80f4-13e067d5072c (£) 17 https://www.ft.com/content/152f5154-721a-11e7-93ff-99f383b09ff9 (£); https://www.ft.com/content/cada5830-1335-11e7-80f4-13e067d5072c (£) 18 https://www.theguardian.com/commentisfree/2017/aug/26/keir-starmer-no-constructive-ambiguitybrexit-cliff-edge-labour-will-avoid-transitional-deal; https://www.ft.com/content/47f88262-8afd-11e79084-d0c17942ba93 (£) 19 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/economicaffairs-committee/brexit-and-the-labour-market/written/69152.html 20 https://www.gov.uk/government/news/statement-the-status-of-eu-nationals-in-the-uk 4
and rights of UK and EU expatriates by October 2017 as part of the current negotiations on the withdrawal agreement. There appears to be movement towards substantive agreement that the 3 million EU nationals in the UK would be granted a right to remain and “right of return” allowing them to come back if they leave for more than two years, in exchange for 1.2 million UK nationals in the EU retaining the right to move freely between EU member states. Obstacles to agreement include the UK’s wish to impose tougher rules on family reunion rights and grounds for deportation on EU nationals now in the UK, the possibility of a pre-Brexit cut-off date, and procedural issues such as the role of the European Courts in overseeing the rights of expatriates under resulting settlement 21 - on which the Government has now proposed that UK courts will “refer directly” to the agreement and “take into account” European judgements.22 The Government has now suggested that during the two year “implementation period” it has proposed, EU citizens will be able to continue coming to live and work in the UK but will be covered by a registration process as part of the preparation for the new migration regime to follow.23
21
https://www.ft.com/content/acae75f0-6d5b-11e7-bfeb-33fe0c5b7eaa (£) https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 23 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 22
5
After the UK leaves the EU, the Government will be able to put new immigration rules in place, and movement between EU nations and the UK is likely to become more difficult, which will have implications for those with family dependents resident in EU countries. There has been some indication that freedom of movement could be retained for certain groups of “highly skilled” workers, but it remains unclear how far that could go. 24 The Government has ruled out a points-based visa scheme but not outlined a preferred alternative. One possibility thought to be likely is a “two-tier” system of work permits and new automated security checks — similar to the US visa-waiver programme — for EU citizens travelling to Britain. 25 This might mean work permits being available to any EU citizen with a job offer, or could be restricted by allocations to sectors according to the Government’s assessment of labour shortages or skill gaps.
Economic impacts Sterling fell sharply in the immediate aftermath of the referendum and its value against most major currencies has remained between 10 and 20 per cent below its prereferendum value since. This is feeding through into import prices and is expected to increase overall inflation in 2017. Other than this the referendum result did not result in the financial market instability or immediate downturn in economic activity that some warned of – partly due to early action by the Bank of England to maintain market and business confidence, and partly due to unexpectedly resilient levels of consumer spending. Official growth forecasts from the independent Office for Budget Responsibility (OBR) 26 published in March 2017 were less pessimistic than those published in November but still lower than those published before the referendum in 2016. This is based on an assumption that uncertainty over the negotiation process and outcomes will weigh on business investment, and that consumers will feel the effect of this as well as the squeeze of higher prices. Since March 2017 independent forecasts have moved in a more pessimistic direction regarding growth in 2017 and 2018, 27 which may be reflected in the revised official forecasts due to be published alongside the Autumn Budget in November. The Government now expects to borrow more than previously planned over the next five years – partly because of the impact of slower growth on tax revenues and benefit spending, but also because of a decision to increase planned public investment in future years. The Government has formally abandoned its previous aim of achieving an overall budget surplus by 2020 and set itself a much looser target of achieving surplus “as early as possible in the next parliament”. Forecast average earnings growth across the economy (including private and public sectors) has been revised down since before the referendum. When increases in forecast inflation are taken into account, this means that against RPI average earnings will fall in real terms in 2017, and by 2020 will still be below their 2015 value.
24
http://www.telegraph.co.uk/news/2016/09/08/european-bankers-will-be-exempt-from-migrationcurbs-after-brexi/ 25 https://www.ft.com/content/031d6ae6-dbf2-11e6-9d7c-be108f1c1dce (£) 26 https://library.prospect.org.uk/id/2017/March/8/Spring-Budget-2017-initial-briefing 27 https://www.gov.uk/government/statistics/forecasts-for-the-uk-economy-september-2017 6
Revisions to economic forecasts on growth, investment, public borrowing and average earnings since the referendum are shown in the appendix at the end of this briefing. The longer-term impact of Britain’s exit from the European Union on the UK’s growth, public finances and living standards into the 2020s and beyond is even more uncertain and contested. The Office for Budget Responsibility’s broad assumption is that it is likely to result in lower migration and slower growth in trade and investment. Much will depend on the Government’s priorities and success in negotiations (with the EU and other trade and investment partners), and its strategies to support and strengthen key sectors such as those discussed in following sections of this briefing. It is increasingly understood that the economic and industrial ramifications of Brexit turn not only on trade and tariffs but also on regulatory frameworks that shape investment decisions and can have knock-on effects on trade (for example, customs inspections are likely to increase where there is uncertainty over regulatory alignment across borders). 28
Issues for key sectors and industries
Defence
Many have suggested that Brexit increases the importance of Britain’s defence capabilities and industrial base to the country’s global standing and influence. 29
Brexit could be seen as an occasion for a more global posture, or for reinforcing commitments to collective defence in Europe. The Prime Minister’s “Article 50” letter was explicit in linking prospects for economic and security cooperation between Britain and the EU,30 and has now proposed a new “security partnership” between Britain and the EU. 31 It has been reported that “officials in Whitehall in the context of Brexit trading have referred to Britain’s skills and capacity on defence and intelligence issues as a ‘security surplus’”, though other experts warned against using this as “as a bargaining chip that could be ‘traded’ in return for commercial concessions in the post-Brexit settlement with the EU”. 32
The Government has embarked on a “refresh” of its Strategic Defence and Security Review.33 Some had argued that a new SDSR was needed, given that the last exercise assumed UK membership of the EU and participation in its Common Foreign and Security Policy.34
The Chancellor has said he will stick to spending totals set out in the 2015 Spending Review – which may mean Britain exceeds its commitment to spend 2% of GDP on defence, because GDP will be lower in future years than expected in 2015. However imported equipment will become more expensive – adding £700m to total
28
https://www.adsgroup.org.uk/blog/no-deal-mean-trade/ ‘UK must boost its defence role after Brexit’, Tom Tughendhat, https://www.ft.com/content/e41b2efc-c7b1-11e6-9043-7e34c07b46ef (£) 30 https://www.ft.com/content/7c4ad152-1490-11e7-80f4-13e067d5072c (£) 31 https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-andpartnership-between-the-uk-and-the-eu 32 https://rusi.org/sites/default/files/201701_bp_uk_foreign_and_security_policy_after_brexit_v4.pdf 33 https://www.gov.uk/government/news/strategic-defence-and-security-review-implementation 34 https://rusi.org/publication/briefing-papers/SDSR-Brexit; http://www.publications.parliament.uk/pa/jt201617/jtselect/jtnatsec/153/153.pdf 29
7
costs, according to one estimate – further squeezing the equipment procurement budget.35
Leaving the EU will require a new UK relationship with the European Defence Agency (EDA), which promotes European defence cooperation, stimulates defence research and works to strengthen the EU defence industry. Retaining membership, or shifting to associate membership, may be options worth pursuing if the UK is to retain influence over European defence industry consolidation. 36
Hitherto much UK defence procurement has involved cooperation with European partners – though joint acquisition has tended to be ad hoc rather than through organisations like the EDA or OCCAR. 37 One expert has commented that “Brexit could lead to increased cooperation in this domain, but risks to defence projects must be recognised from the manner in which the negotiations on the UK’s separation from the EU are conducted.”38
There are some signs that Britain’s exit from the EU could accelerate moves toward closer defence integration within the EU, which the UK has tended to resist, 39 with proposals for a new EU military technology fund that would develop military prototypes such as drones or robots. 40
Defence and aerospace group ADS has stressed the need to avoid new tariff and non-tariff barriers to exports, as the Government has committed to for the automotive industry, and the value of remaining within the European Aviation Safety Agency.41 According to another analysis, “UK defence firms are less vulnerable to major financial losses compared to other sectors in the event of a ‘hard Brexit’, given that EU sales account for only four per cent of turnover.” 42 The Government has suggested that Brexit can be used as an opportunity to build UK shipbuilding through increased exports. 43
35
https://rusi.org/commentary/MoD-post-brexit-spending-power-assumptions-numbers-calculationsand; https://dspace.lib.cranfield.ac.uk/bitstream/1826/11332/1/Brexit%20and%20Future%20UK%20Defen ce%20Acquisition%20%28DPI%29%20v1.pdf 36
https://www.rand.org/content/dam/rand/pubs/research_reports/RR1700/RR1786z1/RAND_RR1786z1. pdf 37
https://dspace.lib.cranfield.ac.uk/bitstream/1826/11332/1/Brexit%20and%20Future%20UK%20Defen ce%20Acquisition%20%28DPI%29%20v1.pdf 38 https://www.contracts.mod.uk/do-features-and-articles/brexit-what-will-it-mean-for-the-defenceindustry/ 39
https://dspace.lib.cranfield.ac.uk/bitstream/1826/11332/1/Brexit%20and%20Future%20UK%20Defen ce%20Acquisition%20%28DPI%29%20v1.pdf 40 https://www.ft.com/content/c149c4b4-3891-11e7-821a-6027b8a20f23 (£) 41 https://www.ft.com/content/de671b3c-9f62-11e6-86d5-4e36b35c3550 (£) 42
https://www.rand.org/content/dam/rand/pubs/research_reports/RR1700/RR1786z1/RAND_RR1786z1. pdf 43
http://www.heraldscotland.com/news/14933611.Brexit_could_boost_Clyde_shipbuilding_to_make_Brit ain_a_leading_producer_of_ships__says_Fallon/ 8
UK manufacturers and defence workers could benefit from the more competitive exchange rate, as well as UK Government freedom from EU procurement rules.44 The latter is not currently expected to result in major changes, 45 though defence was mentioned in the Government’s Industrial Strategy Green Paper as an area “where Government’s role as customer provides unique opportunities to achieve wider benefits through procurement”.46 According to one account both industry and the MOD see EU procurement rules “as at best, a delay in the procurement process, and at worst, a barrier to UK industry winning defence work”. 47 Some have suggested that international suppliers such as Boeing may be induced to commit additional investment in the UK in return for maintaining orders. 48
The UK defence and aerospace sector welcomed announcement of new R&D funding in the November 2016 Autumn Statement, including an “Industrial Strategy Challenge Fund” modelled on the USA’s Defense Advanced Research Projects Agency.49
If, as some have suggested, Brexit increases the chances of Scotland becoming independent of the UK at some point in the medium term, the implications for the defence sector would be significant, with large scale disruptions and reconfigurations of the existing capabilities and industrial base a likely consequence.
Major firms like BAE systems and Babcock International expressed confidence in continuing growth despite uncertainty over the long term effects of Brexit. 50 Babcock also expects to benefit from the pressure that Donald Trump’s election will put on European governments to increase defence spending. 51 There are however concerns about the impact of Brexit on the aerospace sector, especially smaller suppliers. 52
Prospect has argued that Brexit should be seen as “an opportunity to safeguard and expand” the British defence industry through a re-evaluation of Britain’s defence strategy and a robust industrial strategy for the sector. 53 In evidence to the Defence Select Committee, it emphasised need for the UK defence industry to retain access to the single market and for procurement policy to provide better support for UK manufacturing jobs; and the need for a review of Britain’s defence industrial strategy in light of its changing global position post-Brexit.54
44
http://www.express.co.uk/news/uk/649112/MoD-Brexit-weapons-procurement http://researchbriefings.files.parliament.uk/documents/CBP-7213/CBP-7213.pdf; https://www.rand.org/content/dam/rand/pubs/research_reports/RR1700/RR1786z1/RAND_RR1786z1. pdf 46 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/586626/buildingour-industrial-strategy-green-paper.pdf 45
47
https://dspace.lib.cranfield.ac.uk/bitstream/1826/11332/1/Brexit%20and%20Future%20UK%20Defen ce%20Acquisition%20%28DPI%29%20v1.pdf 48 https://www.ft.com/content/2f901aac-3c50-11e6-8716-a4a71e8140b0 (£) 49 https://www.ft.com/content/a32d37e8-b198-11e6-9c37-5787335499a0 (£) 50 https://www.babcockinternational.com/~/media/Files/Investor-files/2017/Babcock-InternationalAGM-Trading-Statement-21-July-2016.ashx?la=en; https://www.ft.com/content/c4ad5574-54e1-11e6befd-2fc0c26b3c60 (£) 51 https://www.ft.com/content/84a4f5c8-b08e-11e6-9c37-5787335499a0 (£) 52 https://www.ft.com/content/77e6e934-c571-11e6-8f29-9445cac8966f (£) 53 https://www.prospect.org.uk/blog/index/2016/August/26/Brexit-brings-opportunities-UK-defencesector 54 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/defencecommittee/defence-acquisition-and-procurement/written/40656.html 9
Energy
The Government has highlighted energy as one of three “UK-wide network industries and associated services which interact extensively with the EU”, noting that “EU legislation underpins the coordinated trading of gas and electricity through existing interconnectors with Member States”.55
The CBI has said that “continued smooth cross-border trade of energy is vital” for the sector and warned that “uncertainty is high in the energy industry, therefore clarity on domestic policy trajectories will be important throughout the negotiation process.”56
The European Internal Energy Market (IEM) facilitates trading of and investment in electricity and gas across the continent. Prior to the referendum one report estimated that exclusion from the IEM could result in £500m a year of higher costs. 57 The Government has said it is “very much” in the UK’s interest to continue to “participate”,58 though continued membership could be ruled out by the Government’s commitment to end the jurisdiction of European courts in the UK. 59 The industry broadly favours continued participation, though there are some concerns in the industry about being bound by rules the UK would no longer have a share in deciding,60 as well as a view that leaving the IEM could make it possible to address “competitive discrepancies” arising from the fact that “power traded over the interconnector does not pay network charges or some policy costs, such as the Carbon Price Floor”. 61
The Government has said that Ofgem and National Grid should seek to retain membership of the European Network of Transmission System Operators for Electricity (ENTSO-E), and the European Network of Transmission System Operators for Gas (ENTSOG), which set operational rules (or European Network Codes) for gas and electricity interconnectors, as well as the Agency for the Cooperation of Energy Regulators (ACER), as a way to maintain some influence of the development of the internal energy market and its rules. This is widely supported in the industry. 62 UK Transmission System Operators may be able to continue participation in ENTSO-e and ENTSOG though with curtailed voting rights. 63
55
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 56 http://www.cbi.org.uk/index.cfm/_api/render/file/?method=inline&fileID=304BB095-03A0-4B639877A999AF6B3F5F 57 http://www.vivideconomics.com/publications/the-impact-of-brexit-on-the-uk-energy-sector 58 https://twitter.com/CommonsBEIS/status/854621707755192320 59 https://www.herbertsmithfreehills.com/brexit-energy-regulation 60 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf 61 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46070.pdf 62 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46070.pdf; http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/44587.pdf 63
http://data.parliament.uk/WrittenEvidence/CommitteeEvidence.svc/EvidenceDocument/Business,%20 10
Energy UK has said “there is a high risk that restrictions on trade and movement of labour could increase the costs of essential new infrastructure developments.”64 There have been some reports that fear of additional tariffs that could follow exclusion from the IEM are already affecting plans for investment in new interconnectors. National Grid acknowledged that the French energy regulator had taken extra time to consult on the implications of Brexit for one of its projects, known as IFA2, though remained confident that IFA2 and its five other projects would go ahead.65 EDF is reported to be “concerned that Brexit will make it harder to import skilled EU nationals to build Hinkley.” 66 There has been one suggestion that uncertainty could reduce inward investment in UK energy infrastructure by 10 per cent.67 The UK has fallen from 8th to 14th in Ernst and Young’s “Renewable energy country attractiveness index”, with “uncertainty caused by Brexit” cited as a key reason.68
Financing for energy infrastructure projects could also affected by reduced availability of funding from the European Investment Bank and European Fund for Strategic Investment,69 and investor uncertainty around moves towards more political oversight of foreign direct investment in “critical national infrastructure” already seen in the delay to Hinkley Point C. 70
Firms that are headquartered on the continent – which include EDF Energy, E.on, ScottishPower and RWE npower - could be affected by restrictions on the movement of their people.71
Currently EU energy efficiency standards regulate the sale of household appliances and light bulbs. These have been targeted by a widely backed Telegraph campaign for post-Brexit deregulation. 72 The cross-party Business, Energy and Industrial Strategy Committee has highlighted a “risk that the UK could become a dumping ground for energy inefficient products “ if these are significantly departed from, and recommended that “the Government retains or mirrors European energy product standards for the immediate future at least and should also, as far as possible, maintain routes to influence their development, for example through active
Energy%20and%20Industrial%20Strategy/Leaving%20the%20EU%20energy%20and%20climate%2 0negotiation%20priorities/written/44493.html 64 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46070.pdf 65 https://www.ft.com/content/d513185a-d29e-11e6-9341-7393bb2e1b51 (£); http://www.powerengineeringint.com/articles/2017/01/brexit-uncertainty-affecting-interconnectorprospects.html; https://www.theguardian.com/uk-news/2017/apr/05/uk-energy-projects-hinkleypoint-threatened-brexit-experts-warn 66 https://www.theguardian.com/uk-news/2017/apr/05/uk-energy-projects-hinkley-point-threatenedbrexit-experts-warn 67 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46734.html 68 http://www.ey.com/Publication/vwLUAssets/EY-RECAI-48-October-2016-index-at-aglance/$FILE/EY-RECAI-48-October-2016-index-at-a-glance.pdf 69 ttps://www.herbertsmithfreehills.com/brexit-energy-regulation 70 https://www.ft.com/content/773a9770-8e34-11e6-8df8-d3778b55a923 (£) 71 http://pwc.blogs.com/energy_spotlight/2016/03/how-might-brexit-impact-on-the-electricity-andgas-industry.html 72 http://www.telegraph.co.uk/news/2017/03/27/cut-eu-red-tape-choking-britain-brexit-set-country-freeshackles/ 11
UK participation in European standards bodies”. 73 The independent Energy and Climate Intelligence Unit has said that abandoning such standards could drive up domestic energy use and household bills. 74
There are a range of views on whether the UK should seek to remain part of the EU Emissions Trading System.75 Energy UK has suggested the UK should explore opportunities to remain within the EU ETS scheme “providing it can still influence decision-making and elements of scheme design”.76 The Government has highlighted the need for the ETS to be reformed, whether or not the UK remains a member.
After Brexit the UK will no longer be subject to EU targets for reductions in emissions, use of renewables, or EU directives on industrial emissions. It remains to be seen whether this will lead to large changes in government policy. The energy industry has expressed support for continued drive to reduce carbon emissions. 77 A media campaign has begun to end Government subsidies for renewable power sources such as wind, solar and biomass power plants ascribed to the EU renewable energy directive. 78
There are some suggestions that the UK could have more scope to support investment in energy research, innovation and infrastructure outside EU state aid rules.79 One analysis has suggested this could allow the UK to “provide state support for energy projects on their social and strategic merits”, enabling “a swifter decarbonisation agenda at lower cost to consumers”, by providing direct Government finance to new projects in nuclear, tidal lagoon generation, transport decarbonisation, large scale energy storage, and a restarted carbon capture and storage programme. 80 An IPPR report has suggested that a “long-term industrial strategy” around clean growth “could receive greater support from an increased sovereignty over state aid”.81
The chief executive of National Grid has said he is hopeful that “open access to energy” would be preserved after Brexit. 82 Elsewhere National Grid has called for “retaining access to the IEM, in its current form” whilst retaining “the ability to influence further development of the rules governing the IEM to ensure that UK requirements are fully reflected and the current benefits are not eroded.” 83
73
https://publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf http://eciu.net/assets/Reports/ECIU_Appliance_Report-FINAL.pdf 75 https://publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf 76 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46070.pdf 77 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/46070.pdf 78 http://www.telegraph.co.uk/news/2017/03/27/cut-eu-red-tape-choking-britain-brexit-set-countryfree-shackles/ 79 https://publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf, para 27. 80 https://www.herbertsmithfreehills.com/latest-thinking/strong-currents-navigating-the-post-brexitenergy-market 81 https://ippr.org/files/2017-08/1502811953_netf-impact-of-brexit-in-the-north-august-2017.pdf 82 https://www.ft.com/content/d513185a-d29e-11e6-9341-7393bb2e1b51 (£) 83 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/44587.pdf 74
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EDF has stressed the need to mitigate uncertainty for investors by assuring “continuity of UK energy and climate change policy and, in particular, commitment to the EMR [Electricity Market Reform] framework, including Carbon Price Support, Contracts for Difference and the Capacity Market”, and said it may be necessary to “leave the existing framework for UK participation in the Internal Energy Market in place” as a transitional arrangement until the detail of any new long -term relationship can be developed.84
The Chief Executive of UK Power Networks has said investment has been unaffected by the referendum result. “Our investors … see the UK market, from a regulator perspective, as having the best in class regulatory regime. It’s consistent, it’s predictable, it’s independent. That’s what you want. Brexit hasn’t changed that. In some ways, it’s probably made it even better because we’ve got control of that.” 85
The Department for International Trade has pointed to several energy projects among major private sector investments confirmed since the referendum including investment by DONG energy in offshore wind towers in Scotland and a recycling and energy plant in Cheshire, an MGT Power investment in a large biomass plant in Teesside, and a joint venture involving SSE to regenerate a former Power station plant in Yorkshire,86 though some of these had been announced previously. 87
Wood Group’s agreed takeover of Amec Foster Wheeler has been seen as part of a trend of UK companies combining to cut costs in the face of “Brexit uncertainty”. 88 Wood have said they plan to make savings through measures such as cutting senior management roles and closing offices, 89 though the deal is thought “unlikely to affect Amec's Cumbrian operations, which deal mainly with nuclear projects, including in Sellafield and Barrow”.90
GazProm is reported to be considering relocation of its trading and marketing operations from London to retain access to the IEM. Its Manchester-based subsidiary which sells gas to UK clients is not thought to be affected. 91
Environment and Food
Environmental regulation, monitoring and enforcement has hitherto been deeply embedded in EU frameworks. The Environment Secretary has argued that Brexit creates “an historic opportunity to review our policies on agriculture, on land use, on biodiversity, on woodlands, marine conservation, fisheries, pesticide licensing,
84
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/44579.pdf 85 http://www.energylivenews.com/2016/11/16/brexit-hasnt-affected-investment-says-uk-powernetworks-boss/ 86 https://www.gov.uk/government/news/dit-secures-over-16bn-of-foreign-investment 87 https://www.ft.com/content/0f276426-d67b-11e6-944b-e7eb37a6aa8e 88 https://www.ft.com/content/258d2b18-0896-11e7-97d1-5e720a26771b (£) 89 https://www.ft.com/content/43edabf4-19e0-11e7-a266-12672483791a (£) 90 http://www.newsandstar.co.uk/news/business/Losses-grow-at-Amec-Foster-Wheeler-ecde37245476-4403-b4fc-40f735d8010b-ds 91 https://www.ft.com/content/4224a61a-1869-11e7-a53d-df09f373be87 (£) 13
chemical regulation, animal welfare, habitat management, waste, water purity, air quality and so much more.” 92
EU environmental directives such as the Birds and Habitats directives should initially be transposed into UK law under the “Great Repeal Bill”. The cross-party Environmental Audit Committee has called for a separate new Environmental Protection Act to ensure transposed directives do not become “zombie legislation” that is “no longer updated and which can be eroded through statutory instruments with minimal parliamentary scrutiny”. 93 The Environment Secretary is reported to be hostile to the habitats and birds directives. A widely backed Telegraph campaign has targeted the protection for green-crested newts in the habitats directive. 94 The National Farmers Union has called for rules on pesticides, nitrate fertilisers and crop diversity to be rewritten. 95
A key issue alongside the future of environmental regulations is the need for institutions needed to monitor and enforce them. A cross-party House of Lords committee has stressed that an “effective domestic enforcement mechanism, able to sanction non-compliance, will be necessary to ensure that the objectives of environment legislation continue to be met in practice.”96 According to one report “it is unclear which watchdog will monitor air pollution in the UK” and that “enforcing EU laws on water quality, wildlife habitats and other issues presents a huge challenge.”97 The Environment Secretary has said “we have an opportunity, outside the EU, to design potentially more effective, more rigorous and more responsive institutions”, and in doing so “create an economic asset for the country … We already have much of the infrastructure in place in our universities and our learned institutions, in our NGOs and NDPBs”.98
Academics have highlighted the mutual dependence of the EU and Britain for expertise and institutional capacity in the areas of food safety and security. One has argued that ““the UK’s world-leading scientific research laboratories have made vital contributions to the development of public and animal health management capacities in several Member States… EU institutions need UK expertise on health security matters. This knowledge and expertise (or soft power) is likely to help the UK’s position in the negotiation processes.”99 Others have highlighted recent cuts to bodies such as the Food Standards Agency and DEFRA and warned that “t o leave the EU would sever the UK from many bodies which underpin food – from scientific advisory bodies to regulators, from research programmes to subsidies to regions. What is going to replace these?” 100
92
https://www.gov.uk/government/speeches/the-unfrozen-moment-delivering-a-green-brexit https://www.publications.parliament.uk/pa/cm201617/cmselect/cmenvaud/599/599.pdf 94 http://www.telegraph.co.uk/news/2017/03/27/cut-eu-red-tape-choking-britain-brexit-set-country-freeshackles/ 93
95
https://www.fginsight.com/news/nfu-singles-out-three-eu-laws-for-urgent-reform-post-brexit-24469
96
https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/109/109.pdf https://www.ft.com/content/2f2f0f14-12ce-11e7-b0c1-37e417ee6c76 (£) 98 https://www.gov.uk/government/speeches/the-unfrozen-moment-delivering-a-green-brexit 99 http://blogs.lse.ac.uk/politicsandpolicy/uk-expertise-on-health-security-will-be-a-strong-card-in-thebrexit-negotiations-but-few-seem-to-realise/ 100 https://www.sussex.ac.uk/webteam/gateway/file.php?name=foodbrexitreportlangmillstonemarsden-july2017pdf.pdf&site=25 97
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The outgoing head of the Food Standards Agency has said that Brexit is “a really significant challenge” entailing “big issues but no extra resources, so we are shuffling our resources around to deal with this … we rely on the European Food Safety Authority [EFSA] for a lot of the science, so need to work out how we access that science base in future.” 101 The food and drink industry is reportedly concerned about the time and money it will take to set up a new domestic regulatory apparatus if the UK loses access to the EFSA.102 The Chair of the FSA has said “You can participate in EFSA and not be a member of the EU… I’m absolutely sure that we will have a continued relationship with EFSA.” 103 One right-leaning thinktank has said that after Brexit the FSA will need increased powers and resources to allow the UK to determine its own standards (including departures from EFSA precedent required by free trade deals with states outside the EU. 104
The Animal and Plant Health Agency will, according to the Institute for Government, need significantly increased funding and staffing if leaving the EU customs union means increased border checks on highly-regulated agricultural goods.105
It is expected that the UK will need to find “scores” of additional qualified veterinary professionals and support staff to undertake its own overseas animal inspections if it is no longer able to rely on European Commission resources. The Food Standards Agency has not commented on whether it will be taking on the work. 106 The British Veterinary Association has suggested that more than 90% of official veterinarians, who provide government licensed services such as disease testing in animals and ante and post mortems in abattoirs, are non-UK EU nationals.107
Fera (formerly the Food and Environment Research Agency) has hitherto played an important role in coordinating and contributing to European projects such as Food Integrity. Its owner, Capita, warned Brexit would cause delays to contract signings across its outsourcing businesses, 108 and ousted its Chief Executive after a 33% drop in pre-tax profits.109
The Government has delayed publication of its “25 Year Environment Plan” and “industry-led” “25 Year Plan for Food Farming and Fisheries” to enable it to take Brexit implications into account. 110
The Government has noted that “the UK’s agriculture, food and fisheries sectors are currently heavily influenced by EU laws, through frameworks such as the Common
101
http://www.civilserviceworld.com/articles/interview/catherine-brown-interview-food-standardsagency-chief-modern-regulation-and-horse 102 http://www.economist.com/news/britain/21711920-if-it-wants-carry-doing-business-europe-britainwill-have-keep-following-its?fsrc=rss%7Cbtn 103 http://www.foodmanufacture.co.uk/Regulation/FSA-to-continue-working-with-EFSA-after-Brexit 104 https://policyexchange.org.uk/publication/farming-tomorrow/ 105
https://www.instituteforgovernment.org.uk/sites/default/files/publications/IfG_Brexit_customs_WEB_0 .pdf 106 https://www.ft.com/content/c4999e54-3702-11e7-bce4-9023f8c0fd2e (£) 107 http://www.bbc.co.uk/news/uk-politics-40703369 108 https://www.ft.com/content/fee8cc6c-860c-11e6-a29c-6e7d9515ad15 (£) 109 https://www.ft.com/content/45b27fe2-ff22-11e6-8d8e-a5e3738f9ae4 (£) 110 https://www.theguardian.com/environment/2016/jul/19/uk-government-must-deliver-on-25-yearenvironmental-pledge; http://www.independent.co.uk/voices/25-year-plan-environment-farming-whywe-should-be-worried-a7567866.html 15
Agricultural Policy (CAP) and the Common Fisheries Policy, and through other rules meeting multiple objectives, such as high levels of environmental protection or animal welfare.” 111 The CBI has warned that the agriculture sector “is concerned about facing high tariff and non-tariff barriers to UK-EU trade”, and said that “continued access to non-graduate labour is critical”, arguing that “it would be helpful for the government to provide further assurances on the future of agricultural regulation, funding for the rural economy, and international trade”. The food and drink industry is said to be most concerned about stability and certainty around regulations currently set at EU level, arguing that “mutual recognition of regulations enables easier trade in food and drink, which can be complex.” 112
A right-leaning thinktank has argued that the UK should use the “opportunities from Brexit” to develop its position in advanced agriculture: “The UK has many strengths that it can build upon to become a world leader in AgriTech, including: significant pre-existing strengths in agricultural sciences, in facilities like the John Innes Centre or the Roslin Institute; global links through our international aid budget; and world-leading expertise in machine learning and the application of big data. Leaving the European Union will allow the UK to further liberalise the many regulations in life sciences that have held back sectors, as exemplified by the issue of GM crops”.113 The Department for International Trade has pointed to a new agritech facility in Tees Valley among major private sector investments confirmed since the referendum in June, 114 though this had been announced previously. 115
The Treasury has guaranteed to continue EU funding to “that it would have received under Pillar 1 of CAP until the end of the Multiannual Financial Framework in 2020”, as well as replace funding for agri-environment schemes (such as the Countryside Stewardship scheme administered by Natural England) signed before the 2016 Autumn Statement up till 2020; 116 and bids agreed later than this if they meet “meet UK priorities and value for money criteria”.117
The Government has suggested that the replacement of the Common Agricultural Policy, currently worth around £3bn a year to UK farmers, “offers the UK a significant opportunity to design new, better and more efficient policies for delivering sustainable and productive farming, land management and rural communities”,118 a view echoed by many from DEFRA and its agencies.119120121 There
111
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 112 http://www.cbi.org.uk/index.cfm/_api/render/file/?method=inline&fileID=304BB095-03A0-4B639877A999AF6B3F5F 113 https://policyexchange.org.uk/wp-content/uploads/2017/07/Farming_Tomorrow.pdf 114 https://www.gov.uk/government/news/dit-secures-over-16bn-of-foreign-investment 115 https://www.ft.com/content/0f276426-d67b-11e6-944b-e7eb37a6aa8e (£) 116 https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyonddate-uk-leaves-the-eu 117 http://press.conservatives.com/post/151284663940/hammond-an-economy-that-works-foreveryone 118
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 119 https://www.civilserviceworld.com/articles/news/brexit-golden-opportunity-defra-saysdepartments-former-chief 120 http://www.telegraph.co.uk/news/2017/03/27/cut-eu-red-tape-choking-britain-brexit-set-countryfree-shackles/ 16
are signs this may involve a switch from subsidising farming as such to paying for specific environmental and public goods provided, though overall levels of funding (including for agri-environment schemes) could fall. 122 Some have pointed to the experience of New Zealand, which removed agricultural support in the 1980s. 123 The new Environment Secretary has said “support can only be argued for against other competing public goods if the environmental benefits of that spending are clear”. 124 A right-leaning thinktank has argued that some resources should be diverted from direct support for farming towards “a diverse range of ecosystem services from carbon sequestration to cultural heritage” and a reversal of cuts to publicly funded agricultural R&D.125 A coalition of environmental organisations has said that replacing the CAP offers “an historic opportunity to reshape our food and farming system so that it delivers better for our health, better for the environment and tackling climate change, better for animal welfare, better for feeding people fairly and better for providing livelihoods for sustainable farming”. 126
The UK will also no longer be part of the Common Fisheries Policy, the Government stating that “we will want to ensure a sustainable and profitable seafood sector and deliver a cleaner, healthier and more productive marine environment.” 127
Some have warned that key agricultural sectors such as beef and poultry that are currently protected by high EU tariffs could suffer from any new trade deal agreed with the US, which would be likely to demand their removal. There are also concerns about the relaxation of EU-mandated hygiene and animal welfare rules that would need to be maintained to continue selling into the EU. 128
The Government is reportedly planning new legislation on agriculture and fisheries as part of the withdrawal process. 129 The agriculture bill is now expected in “late spring” 2018.130
121
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmenvaud/599/599.pdf http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7213; https://www.ft.com/content/a094c8da-2b22-11e7-bc4b-5528796fe35c (£); see also https://www.demos.co.uk/wp-content/uploads/2017/03/Demos-final-brexit-report-v2.pdf. The statutory Committee on Climate Change has said a UK framework replacing the CAP “should link farming support more closely to actions that would reduce emissions” https://www.theccc.org.uk/wpcontent/uploads/2016/10/Meeting-Carbon-Budgets-Implications-of-Brexit-for-UK-climate-policyCommittee-on-Climate-Change-October-2016.pdf. The Heritage Alliance has suggested that “there is an opportunity to look at how heritage protection could be better served by changing blanket subsidies to farmers to instead pay them for specific environmental and heritage services.” http://www.theheritagealliance.org.uk/tha-website/wp-content/uploads/2017/03/Brexit-and-HeritageBriefing-1.pdf 123 https://www.demos.co.uk/wp-content/uploads/2017/03/Demos-final-brexit-report-v2.pdf 124 https://www.gov.uk/government/speeches/the-unfrozen-moment-delivering-a-green-brexit 125 https://policyexchange.org.uk/publication/farming-tomorrow/ 126 http://eating-better.org/uploads/Documents/2017/Beyond_the_CAP_report.pdf 122
127
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 128 https://www.ft.com/content/9b2ab7ec-e3a6-11e6-8405-9e5580d6e5fb (£); https://www.theguardian.com/politics/2017/jul/25/uks-animal-welfare-standards-threatened-by-postbrexit-trade-deals?CMP=twt_gu 129 http://www.telegraph.co.uk/news/2017/03/14/seven-new-brexit-bills-must-passed-article-50triggered-leaked/ 130 https://www.pressandjournal.co.uk/fp/business/farming/1325974/gove-confirms-continuationfarm-subsidies-dodges-convergence-uplift/ 17
One academic has noted that outside the EU the UK will be excluded from the European Centre for Disease Control and will not, in theory, be privy to intelligence through the alert and communication systems (known as the EU Early Warning and Response arrangements). Broader information-sharing with regards to public health initiatives and practices will be affected, with aspects of these having population health dimensions. 131
Heritage
A high proportion of people employed in the museum and gallery sector are EU nationals – generally below minimum earnings thresholds mooted for future work visas.
Many museums and galleries have benefited directly or indirectly from EU funding streams. Since 2014 the Creative Europe programme has delivered £40m to UK museums – including the National Galleries of Scotland and the Museum of Archaeology and Anthropology in Cambridge – with more due over the next four years. Regional Development Funds (sometimes through Local Enterprise Partnerships) and Horizon 2020 (especially the Cultural Co-operation strand) have also been important. The Museums Association welcomed the Treasury’s guarantees to maintain funding levels to 2020 but warned that “many museums are already losing out on funding due to the uncertainty and antipathy caused by the Referendum vote amongst project partners in other EU countries”. 132
It has been calculated that at least £450m of EU funding has been invested in England’s historic environment between 2007 and 2016, including £289m from the European Agricultural Fund for Rural Development enabling land managers to preserve scheduled monuments; £89m from successive EU Framework Programmes (FP) invested in historic environment research undertaken by English research institutions; and £56m from the European Regional Development Fund for regeneration schemes that have a heritage component. 133 The Heritage Alliance has suggested that “there is an opportunity to look at how heritage protection could be better served by changing blanket subsidies to farmers to instead pay them for specific environmental and heritage services”,134 a suggestion also floated by the right-leaning thinktank Policy Exchange. 135
Some parts of the heritage sector could benefit from increases in tourism following from the fall in sterling, though museums reportedly saw a drop in attendance last summer, and some such as the Natural History Museum are said to be facing a fall in sterling income as a result of changing exchange rates.136 In the medium term
131
http://blogs.lse.ac.uk/politicsandpolicy/uk-expertise-on-health-security-will-be-a-strong-card-in-thebrexit-negotiations-but-few-seem-to-realise/ 132 http://www.museumsassociation.org/download?id=1174544; http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culture-mediaand-sport-committee/impact-of-brexit/written/42356.pdf 133 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/42242.pdf 134 http://www.theheritagealliance.org.uk/tha-website/wp-content/uploads/2017/03/Brexit-andHeritage-Briefing-1.pdf 135 https://policyexchange.org.uk/publication/farming-tomorrow/ 136 http://advisor.museumsandheritage.com/features/triggering-article-50-brexit-challengesopportunities-museums/ 18
however there are concerns that Brexit could have a negative impact on tourism to the UK. Historic England has raised a “risk that international tourists may perceive barriers being erected that at very least are a disincentive for travel to the UK. Collaborative, pro-active steps are needed to mitigate this risk.”137
EU directives have been important to the regulation of the movement and trade of cultural objects, artists’ licensing rights, and other activities important to the sector.
Museums have highlighted the importance of retaining access to the Europ ean Orphan Works Database, which may entail a cost. 138
Museums have also highlighted the value of keeping up with the development of EU copyright law, including provisions in the latest proposals for the Digital Single Market that could enable greater public access to UK museum collections particularly for disabled users - and providing important exceptions to enable museums to conserve objects in their collections without having to first clear copyright.139
Archaeology is seen as particularly vulnerable to cuts after Brexit because 38% of its research funding comes from the EU. 140 In addition, many archaeology units are heavily reliant on EU nationals. 141
IT & Telecoms
A key issue for IT sectors is whether UK operators can continue to participate in the Digital Single Market (as Norway does). The cross-party Exiting the EU Committee has said that “the digital industry … relies on the stability of data flows across UK and EU borders. The Government must seek to maintain uninterrupted UK-EU data flows by securing a data adequacy agreement with the EU before the end of the Article 50 negotiations”.142
The exclusion of the UK from EU-wide rules on data protection could raise issues for data sharing and interoperability. The government has said that the UK will go ahead with implementation of the European General Data Protection Regulation (GDPR) in 2018 and “then look later at how best we might be able to help British business with data protection while maintaining high levels of protection for members of the public”.143 The Broadband Stakeholder Group has said “Government should seek to secure “adequacy” of the UK data protection regime (that is, sufficient similarity to the European regime to allow free exchange of data) during Brexit
137
http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/42242.pdf 138 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/42356.pdf 139 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/42356.pdf 140 https://www.ft.com/content/c9755056-3fab-11e7-82b6-896b95f30f58 (£);http://www.raeng.org.uk/news/news-releases/2017/may/new-report-uk-universities-and-eufunding 141 https://www.theguardian.com/science/2017/jun/20/trouble-brewing-british-archaeology 142 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmexeu/1125/1125.pdf 143 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/responsibilities-of-the-secretary-of-state-for-culture-media-andsport/oral/42119.html 19
negotiations, as failure to do so may lead to the “localisation” of data flows on EU citizens outside the UK”. 144
The UK may need to conclude Mutual Recognition Agreements with the EU to facilitate the accreditation process of electronic products and remove obstacles for market entry of telecoms equipment. The WTO Information Technology Agreement provides for zero-tariffs on many IT goods. Whilst the EU is a signatory to the Agreement, the UK would need become part of it following the process of exiting the EU. Given the importance of technical standards to the UK companies competing in the European and global markets, it has been suggested that Government’s involvement within standardisation bodies (e.g. ETSI, ENISA and CEN/CENELEC) should be increased to minimise the risk of EU standards being used as non-tariff barriers to UK companies. 145
The Government has highlighted communications as one of three “UK-wide network industries and associated services which interact extensively with the EU”, noting that “telecoms operators are regulated in the UK by the EU’s ‘Electronic Communications Framework’, which promotes competition and choice” and that “as we exit the EU, we will want to ensure that UK telecoms companies can continue to trade as freely and competitively as possible with the EU and let European companies do the same in the UK”. 146 The head of Ofcom has noted that “BT provides services to every EU country, and is 12-per-cent owned by Deutsche Telekom. O2 is owned by Spain’s Telefónica. Vodafone Group is headquartered here, but generates half of its revenues – some £20bn – from the EU. “147
According to a leaked government document from early 2017, the telecoms sector is classed as a “low priority” industry in Brexit negotiations. An industry figure was quoted as commenting: “we as an industry were not invited in by government to discuss Brexit challenges until the end of January… Yet there are huge challenges surrounding data flows, regulatory regimes and collaborative technology thrown up by Brexit.”148
Telecoms in Britain are regulated by Ofcom in line with the EU telecoms framework, seen as a cornerstone of the “Digital Single Market” and creating the possibility for UK-based companies to access incumbent operators’ networks in other EU Member States. It is currently under review, which has created some uncertainty over whether revisions will be transposed into UK law under the EU Withdrawal Bill. The Government has committed to taking part in and influencing the ongoing negotiations. In the short and medium term, the expectation is that the UK telecoms regulations will remain aligned with overall EU regulatory framework to provide legal and commercial certainty during the transition period, but that Government may see benefits in diverging from the EU on aspects of the framework in the longer term, in
144
http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 145 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 146 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/responsibilities-of-the-secretary-of-state-for-culture-media-andsport/oral/42119.html 147 https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2016/making-brexit-work-for-ukconsumers-of-communications 148 http://www.thetimes.co.uk/edition/news/leak-reveals-low-priority-industries-for-brexit-talksq020z5clb (£) 20
areas such as “frequency of market review, avoiding regulatory asymmetry across converged services and bundles, deregulating where possible, tailoring access remedies”.149
It is possible that regulation of the telecoms sector will move in a more interventionist direction if Britain departs from the European Telecoms Framework. One commentator has argued that “Brexit will give the UK Government and OFCOM greater leeway to take action to resolve problems relating to the operation of competition in retail telecoms markets in the public interest, in a way that might otherwise have been constrained by membership of the EU” – suggesting in particular that retail price regulation could come onto the agenda, as has happened with the proposals for price caps in consumer energy.
Some have suggested that Ofcom’s independence from EU regulatory frameworks will increase the likelihood of BT being forced to sell its Openreach broadband division. The head of Ofcom has said the UK should keep the best European rules but use the opportunity to toughen powers against “oligopolies”. 150 The Chief Executive has said that “when the UK leaves the EU, we want our powers to reform BT confirmed in UK domestic law so we can ensure a more independent Openreach that will deliver for all of its customers.” 151
The EU is currently considering extending the scope of the 2002 Universal Service Directive to include a right to access a broadband connection, guaranteed through public funding. The Government is proceeding with its own broadband Universal Services Obligation which may differ from the eventual EU Directive, particularly on funding which the Government wishes to come from industry. It is not clear if the Government will align its approach with the EU position when this is finalised. 152
There is a possibility that the sector may lose access to funding schemes supporting the development of emerging technologies (e.g. 5G, IoT) and the deployment of broadband networks. 153 One industry forum has said “retaining a seamless level of research and funding cooperation with the EU in the ICT sector is essential. Government also needs to consider whether it will continue to support programmes which have benefited from EU funding.” 154
There have been some suggestions that leaving the jurisdiction of EU rules on state aid could give the UK Government more latitude to support investment in ultra-fast broadband, 155 rural broadband delivery, 156 or telecoms research. 157 The current National Broadband Scheme had to be submitted for state aid approval which it
149
http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 150 https://www.ft.com/content/1f1716ea-b7a6-11e6-961e-a1acd97f622d (£) 151 https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2016/brexit 152 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 153 http://www.grantthornton.co.uk/insights/three-areas-where-brexit-will-hit-the-telecoms-sector/ 154 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 155 http://www.eurocomms.com/features/opinion/11732-opinion-post-brexit-considerations-for-thetelecommunications-sector 156 https://www.carnegieuktrust.org.uk/carnegieuktrust/wpcontent/uploads/sites/64/2017/09/Final_Brexit_Report.pdf 157 http://www.eiu.com/public/topical_report.aspx?campaignid=Brexit 21
received in 2016. 158 BT’s chair has said Brexit gives “some flexibility on industrial policy, on industrial strategy, the state aid rules won’t apply to the same extent”. 159 The Broadband Stakeholder Group has said that there may be opportunities to “ tailor the regime to the specificities and needs of the UK market”, particularly by speeding up decision-making processes, but stresses the importance of independently assessed rules “to protect competition and private investment”. 160
Restrictions on free movement are likely to impact the sector, with one industry forum highlighting the role of “researchers and innovators from across the EU in specific sectors such as cyber security”, as well as “low-skilled workers who have been particularly relied upon for the deployment of fibre broadband networks”. 161 In the words of one analysis, “a major concern for digital industries in the UK is the proportion of their skilled labour supply currently met from the EU, in contrast with an historic digital skills gap in the UK”.162
Ofcom has suggested that a potential benefit of Brexit to the industry could be an end to the EU requirement for frequent automatic reviews of the regulatory framework, which it suggests has created unhelpful levels of uncertainty. 163
BT provides services to every EU country, employs 13,000 people on the continent, owns physical networks in several states, including a major hub in Hungary. It could be vulnerable to cross-border tariffs than the largest European firms Deutsche Telecom, France Telecom, Telecom Italia and Telefonica which are less reliant on UK markets.164 It has emphasised the value of stability and the maintenance of regulatory alignment “where possible”, at the same times as arguing the UK should “take advantage of Brexit, both to evolve regulatory approaches where appropriate to ensure that the UK remains the most digitally advanced economy of the major nations in Europe” as part of an “optimal industrial strategy for the future” that maximises “the promotion of investment, innovation and competition.” It has also stressed that “it is now even more important that the current standard of appeals (where Ofcom’s decisions can be challenged on the merits) is retained.” 165
Deutsche Telekom has blamed a write-down of its 12% stake in BT on Brexit among other factors. 166
Vodafone Group generates half of its revenues from the EU. In the immediate aftermath of the referendum Vodafone said it might move its headquarters to the
158
http://uk.reuters.com/article/uk-eu-uk-broadband-idUKKCN0YH0X7 http://www.cnbc.com/2017/01/17/interview-with-sir-mike-rake-chairman-of-bt-from-the-worldeconomic-forum-2017.html 160 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 161 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 162 https://www.carnegieuktrust.org.uk/carnegieuktrust/wpcontent/uploads/sites/64/2017/09/Final_Brexit_Report.pdf 163 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/46321.pdf 164 https://www.prospect.org.uk/be-involved/brexit/brexit-and-telecoms 165 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/42300.pdf 166 https://www.ft.com/content/601dc6a0-ff1a-11e6-96f8-3700c5664d30 (£) 159
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continent, though it later drew back from this stance, 167 and has since announced the creation of 2,100 new customer service jobs in the UK. 168
Telefonica said it was abandoning attempts to sell or float O2 until market conditions settled. (Its previous plan to merge O2 with Three was blocked by EU competition authorities, a decision supported by Ofcom).
It has been argued that there will be a need to create or identify “a third party body, potentially the Competition Market Authority, to play a backstop role in maintaining Ofcom’s independence from Government while ensuring its decisions are properly scrutinised”. It has also been recommended that the Government should seek to retain an active role for Ofcom within the Body of European Regulators in Elect ronic Communications (BEREC). 169
There have been reports that British tourists and businesses travellers face higher roaming charges for using their phones in the EU after 2019, 170 but the Chief Executive of Vodaphone has said he did not expect such an outcome. 171 The Government has said it will maintain the ban on consumer roaming charges; retaining the caps on wholesale charges would require a reciprocal agreement with the EU.172 For UK consumers to continue to benefit from ‘roam like at home’ in the EU and EEA after Brexit, UK operators must continue to have access to wholesale roaming rates at or below the EU regulated caps. Without access to these wholesale rates, domestic mobile operators will face significantly higher costs, which will lead to higher roaming charges for UK consumers. “Should the UK not secure access for UK operators to wholesale roaming rates at or below the regulated caps, domestic mobile operators are likely to have no choice but to increase retail roaming charges in order to fund roaming services.”173
Prospect has highlighted the implications of Brexit for regulation, union consultation rights, roaming charges, and tariffs that could be faced by firms such as BT that exports to and invests and employs in other EU member states. 174
Justice
The head of Europol has said collaboration on forensic science “will not be the same” after Brexit but that he hopes Britain will be able to continue its leading role. 175
167
http://www.computerweekly.com/news/450402924/Vodafone-softens-Brexit-stance http://www.independent.co.uk/news/business/news/vodafone-vote-of-confidence-post-brexitbritain-2100-uk-customer-service-jobs-northern-powerhouse-a7626426.html 169 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 170 https://www.theguardian.com/politics/2017/feb/06/uk-tourists-face-mobile-phone-roamingcharges-post-brexit-paper-says 171 http://www.telegraph.co.uk/business/2017/02/28/vodafone-boss-says-brexit-will-not-lead-hikemobile-phone-roaming/ 172 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8034%23fullreport 173 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 174 https://www.prospect.org.uk/be-involved/brexit/brexit-and-telecoms 175 https://www.policeoracle.com/news/police_it_and_technology/2017/May/04/Europol-Forensicscience-collaboration-cannot-be-the-same-post-Brexit_94731.html 168
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Media and Entertainment
The Government has noted that “the UK is currently the EU’s biggest broadcasting hub, hosting a large number of international broadcasting companies.” 176 More than 650 different TV channels use the UK to broadcast to countries across the EU, more than double the number based in France, the second largest hub. 177
The European Audio Visual Media Services Directive enshrines a “Country of Origin” principle allowing broadcasters licensed in one Member State (in the UK by Ofcom) to broadcast to any other. Broadcasters, backed by Ofcom, have highlighted the importance of a reciprocal agreement with EU member states to maintain the principle – with some fears of firms being forced to relocate if this is not secured. 178 The cross-party Exiting the European Union Committee has said this should be “a priority”, warning that falling back on the Council of Europe’s Convention on Transfrontier Television would be an “inadequate replacement” as it does not cover on-demand broadcasting, excludes six member stages, and is not effectively enforced.179 An industry forum has said the principle “has been crucial for content and audio-visual businesses” and that failing to “conclude an agreement with the EU to retain the status quo” would be “highly disruptive for UK licensed broadcasters”. 180
The UK’s strength in audio-visual production and broadcasting could be a key stake in the negotiation of any future free trade deal with the EU. One industry forum has stressed that “it will be important to avoid disrupting the UK’s world-beating mixed broadcasting ecology through demands from partners, such as removing targeted regulation which sustains a thriving production sector and internationally -envied public service broadcasting”, important sectors for “attracting foreign direct investment, as exports and contributors to UK ‘soft power’.” 181
The Commission has proposed a new regulation to ensure cross-border portability of online content services. The UK would need to reach a reciprocal agreement for UK consumers to continue to be able to access subscription digital content services while temporarily travelling in the EU.
Bertelsmann, whose UK subsidiaries include Fremantle Media and BMG, is reported to be reviewing relocation options in anticipation of a possible exclusion of the UK from the coverage of the EU directive on withholding tax, which currently exempts royalty payments on music rights licensed in the UK. Tax experts have however played down the concern. 182
176
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 177 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmexeu/1125/1125.pdf 178 https://www.ft.com/content/f0f2770a-ad1e-11e6-9cb3-bb8207902122 (£); https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2016/brexit; http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culture-mediaand-sport-committee/impact-of-brexit/written/46321.pdf 179 https://publications.parliament.uk/pa/cm201617/cmselect/cmexeu/1125/1125.pdf 180 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 181 http://www.broadbanduk.org/wp-content/uploads/2017/04/Implications-of-Brexit-on-the-digitalcommunications-sector-FINAL.pdf 182 https://www.ft.com/content/840838c6-139b-11e7-b0c1-37e417ee6c76 (£) 24
Vivendi is reportedly pushing ahead with plans to build a new London headquarters near Kings Cross for its UK-based companies, which include See Tickets (and until recently UGC cinemas). 183
According to Ofcom, some estimates suggest up to 40% of people working in the creative industries may be EU nationals born outside the UK. 184
BECTU has contributed to a Federation of Entertainment Unions intervention highlighting the importance of free movement and rights for migrant workers; free movement for goods such as equipment, props, and scenery; the need to replace EU funding streams and retain membership of Creative Europe and Eurimages as a non EU state, and ensuring that “country of origin” issues do not affect current activities, use of tax breaks and potentially state aid to support the sector, and retention of EU copyright laws.185
Nuclear
The Government has taken the view that invoking Article 50 will mean leaving Euratom agreement for regulating nuclear trade and activity, which while a separate legal entity is governed by EU institutions, and provides the legal framework for civil nuclear power generation and radioactive waste management. 186 This was confirmed in its “Article 50” letter which gave formal notice of its withdrawal from Euratom. 187
The cross-party Business, Energy and Industrial Strategy Committee, among others188, has said that exiting Euratom “seems to be an unfortunate, and perhaps unforeseen, consequence of the Prime Minister’s decision to leave the jurisdiction of the European Court of Justice”.189
There is widespread concern about the potential for disruption to the nuclear sector if Euratom arrangements and agreements are not replicated by March 2019. The cross-party committee on business, energy, innovation and skills has said “we share the concern of the nuclear industry that new arrangements for regulating nuclear trade and activity will take longer than two years to set up. We therefore recommend that the Government seeks to delay exit from Euratom, if necessary, to be certain that new arrangements can be in place on our departure from the EU”. 190
183
https://www.ft.com/content/840838c6-139b-11e7-b0c1-37e417ee6c76 (£) http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/46321.pdf 185 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/impact-of-brexit/written/44808.pdf 186 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/culturemedia-and-sport-committee/responsibilities-of-the-secretary-of-state-for-culture-media-andsport/oral/42119.html 184
187
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604079/Prime_Ministe rs_letter_to_European_Council_President_Donald_Tusk.pdf 188 See also comments of James Chapman, former aide to the Secretary of State for Exiting the European Union - https://www.ft.com/content/e1dc9558-5db2-11e7-b553-e2df1b0c3220 (£) 189 https://publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf 190 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/909/909.pdf 25
It has suggested that the Government could seek to agree some kind of “associate membership” of Euratom, though whether this is a real possibility is not confirmed. 191
Leaving Euratom will require the Office for Nuclear Regulation to establish new arrangements for safeguards inspections, which are mostly (and increasingly) conducted by Euratom officials. The Government has now confirmed that Britain is currently planning to set up its own regime on nuclear safeguards with the view to securing bilateral treaties to maintain international co-operation and no regulatory hiatus at Brexit.192 One official working on the new plan said: “It’s a massive waste of human brain power, it’s utterly tedious and it creates uncertainty for about 300 nuclear researchers. But it’s ultimately possible to solve the problem.” 193 The Nuclear Industry Association has said that outside the EU the Office for Nuclear Regulation “will require more staff to undertake the safeguarding work”. 194
Prior to the referendum the CEO of the Atomic Energy Authority expressed concern about the risk to EU funding of such an eventuality, including the impact on jobs at the Culham Science Centre where work on fusion has been based. 195 More recently the Nuclear Industry Association has highlighted the fact that “the research funding for fusion research comes through EURATOM, and the work that happens at Culham on JET. That is important industrially, not just in relation to JET but also to ITER in France. A number of UK nuclear industry companies have got significant work from that and are involved in that; around €500 million equivalent has been lent to either British companies or British companies in joint ventures with others on that”.196
Concerns have been raised in Ireland about the maintenance of safety standards at Sellafield following the UK’s exit from Euratom. 197
The UK Atomic Energy Authority has said that “uncertainty surrounding freedom of movement following UK’s exit from Europe”, alongside “challenges in competing with market pay rates due to government pay constraints”, is “impacting UKAEA’s ability to attract and retain key specialist skills”. 198
EDF Energy, NuGeneration and Horizon Nuclear Power all stressed their commitment to the UK's nuclear new build program in the wake of the referendum result.199 EDF has however warned of power outages and delays to the Hinkley Point C project if the Euratom issue is not resolved. 200
Prospect is working with members and employers in other affected groups to highlight the importance of the provisions of the Euratom Treaty to the nuclear
191
http://www.bbc.co.uk/news/uk-politics-40593588 https://www.gov.uk/government/speeches/written-ministerial-statement-on-energy-policy 193 https://www.ft.com/content/e1dc9558-5db2-11e7-b553-e2df1b0c3220 (£) 194 https://www.niauk.org/media-centre/blog/eur-outem/ 195 http://www.bbc.co.uk/news/uk-england-oxfordshire-36288657 196 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/oral/48479.pdf 197 http://www.thejournal.ie/sellafield-brexit-3359089-Apr2017/ 198 https://www.gov.uk/government/publications/ukaea-annual-report-accounts-201617-hc-295 199 http://www.world-nuclear-news.org/NP-The-Brexit-effect-on-UK-nuclear-24061601.html 200 http://utilityweek.co.uk/news/edf-fires-warning-over-post-brexit-nuclearoutages/1312032#.WcJ9xtJSyUk 192
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industry, and the need for effective transitional arrangements if Britain leaves. 201 The Government has said that it “fully recognises the importance of international collaboration in nuclear research and development and we will ensure this continues by seeking alternative arrangements.” 202
Public Services
Preparations for Brexit negotiations are already raising demands on civil service staff, skills and resources. Attention has focused on the UK’s lack of experienced trade negotiators,203 but the whole system is feeling the pressure of a process with potential to become “a bureaucratic vortex, sapping energy and resources”. 204 In the Autumn Statement the Chancellor committed up to £412m additional funding to support departments directly involved in the Brexit process 205 – it is not clear whether these resources will be adequate. 206 One independent report warned that “there will be tensions if there is any further bifurcation of salaries in Whitehall - for example, providing newly recruited trade negotiators (whose loyalty might be limited by the terms of their contract) with high rewards, leaving other Whitehall civil servants further behind after a near-decade of salary stagnation.” 207 The NAO reported in 2017 that “The decision to leave the European Union (EU) in the referendum of 23 June 2016 has put further immediate pressure on the capability of the civil service”. It noted that while two thirds of “over a thousand” new roles created to prepare for the process have been filled “mostly by transferring staff from elsewhere in gove rnment”, there has been no “commensurate increase in the overall size of the civil service”. 208
Beyond the negotiations themselves, many departments and agencies may see their roles change significantly when delivery of EU policies ceases, but may need to be replaced. A paper by Brexit-supporting economists has argued that Whitehall will need to be “scaled up” as well as restructured “to reflect the return of competencies from Brussels”.209 A “leaked” Deloitte memo claims that 10,000 to 30,000 civil servants will be required to shoulder the additional workload. 210 This may change some departments’ staffing and skill requirements, 211 and raise further doubts over
201
https://www.prospect.org.uk/news/id/2017/January/30/Write-your-MP-about-exiting-Euratomtoday 202
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 203 http://www.civilserviceworld.com/articles/news/brexit-will-stymie-whitehall-decade-warns-formerblair-aide; https://www.theguardian.com/commentisfree/2017/aug/04/britain-leave-single-markettrade-deal 204 https://www.ft.com/content/f1435a8e-372b-11e7-bce4-9023f8c0fd2e (£) 205 https://www.gov.uk/government/publications/autumn-statement-2016-documents 206 http://www.instituteforgovernment.org.uk/blog/cost-brexit-what-we-learned-autumn-statement; https://www.civilserviceworld.com/articles/news/extra-brexit-cash-not-enough-foreign-office-mpswarn 207 http://ukandeu.ac.uk/wp-content/uploads/2016/11/Brexit-and-Beyond-how-the-UK-might-leavethe-EU.pdf 208 https://www.nao.org.uk/report/capability-in-the-civil-service/ 209 https://policyexchange.org.uk/wp-content/uploads/2017/01/Policy-Exchange-Clean-Brexit-16thJanuary-2017.pdf 210 http://www.thetimes.co.uk/edition/news/cabinet-split-threatens-to-derail-may-s-brexit-talkshxfwmv2td; https://www.ft.com/content/616468d6-ab03-11e6-9cb3-bb8207902122 (£) 211 “Beyond the much hailed recruitment drive of highly-rewarded trade negotiators, the disengagement from EU regimes will place pressure on existing systems - a ‘reformed’ immigration 27
the wisdom of recent exits and redundancies. There are already reports that the drafting of the “Great Repeal Bill”, aimed at transposing existing EU legislation into UK law, is testing the government’s in-house legal capabilities. 212 Reports from the National Audit Office and Institute for Government have reinforced concerns about skills gaps and the risks of overload.213
The Institute for Government has highlighted the fact that much relevant expertise “no longer lies in core Whitehall departments, but in arm’s length bodies, such as the Environment Agency, that have been implementing and enforcing EU regulations. So Whitehall will need to be ready and have the mechanisms in place for engaging these bodies, which have differing degrees of independence from departments, have their own governance arrangements and have seen their policy input role scaled back in recent years.”214
DEFRA has hitherto been primarily concerned with implementing EU Directives, rather than generating legislation of its own. 215 The NAO has said that “departments, such as the Department for Environment, Food & Rural Affairs, which have had large amounts of EU-derived funding and legislation need legal, economic and sector experts to deal with the implications of Brexit. They will have to do this while using their remaining staff to achieve pre-existing priorities”. 216 A recent FOI request to DEFRA has found that “at least 298 or 17% of DEFRA’s core staff body left through redundancy or voluntary exit schemes after the EU referendum was announced. The losses included senior staff with a significant amount of environmental experience and knowledge.”217 The cross-party Environmental Audit Committee has expressed “scepticism over the capacity of Defra to meet the additional pressures that exiting the EU creates for meeting the Government’s manifesto commitment [to “be the first generation to leave the environment in a better state than it found it”] in a costeffective manner alongside its non-environmental priorities.” Areas of work unrelated to flood prevention and mitigation, which has become a political priority, are thought to be particularly vulnerable.218
regime seeking to keep tabs on all non-UK citizens being the primary example. Other examples might include food inspections in third countries, new - or expanded - national regulatory bodies, a possible need for customs inspectors, and a strengthened competition policy if the UK were no longer bound by EU competition law. Such new regimes are likely to require further resources…” http://ukandeu.ac.uk/wp-content/uploads/2016/11/Brexit-and-Beyond-how-the-UK-might-leave-theEU.pdf 212 http://www.thetimes.co.uk/edition/news/whitehall-cant-cope-with-legal-nightmare-of-brexit-sayexperts-rw27w7fhq 213 https://www.nao.org.uk/report/capability-in-the-civil-service/; https://www.instituteforgovernment.org.uk/publications/civil-service-after-article-50 214
https://www.instituteforgovernment.org.uk/sites/default/files/publications/IFGJ5327_Report_Brexit_Ci vil_Service_080317_WEB.pdf 215 http://www.politico.eu/article/brexit-in-the-hands-of-the-unbelievers-eu-referendum-civil-servantsremain/; https://www.ft.com/content/08fc5978-8589-11e6-a29c-6e7d9515ad15; https://quarterly.blog.gov.uk/2016/11/01/how-defra-is-adapting-to-the-challenge-of-brexit/ 216 https://www.nao.org.uk/report/capability-in-the-civil-service/ 217 http://www.endsreport.com/article/54789/defra-unprepared-for-brexit-after-slashing-staff-inreferendum-run-up 218 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmenvaud/599/599.pdf 28
Doubts have been expressed by independent observers over whether the additional resources so far allocated to the Foreign and Commonwealth Office are adequate to enable it to fulfil its role in the Brexit process. 219
The Met Office warned prior to the referendum that its ability to carry out cutting edge climate research could be impacted by loss of access to EU research funding. 220 More recently it has emphasised that its “long term science programme” that “helps maintain the UK’s position at the centre of the scientific underpinning of international climate negotiations” is “independent of the UK’s membership of the European Union”.221
The DVSA has noted that EU legislation set to be converted into UK law under the Great Repeal Bill currently “governs functions managed by DVSA”, and that it is “likely to have an important role in helping implement new systems and processes that will need to be in place. DVSA will therefore work closely with partners in Whitehall to ensure that the functions and processes for driver testing, enforcement and market access operate efficiently after we leave the EU. This may involve additional requirements during the year and DVSA will ensure that the necessary policy and delivery resources are devoted to any new systems and legislation.”222
The Animal and Plant Health Agency will, according to the Institute for Government, need significantly increased funding and staffing if leaving the EU customs union means increased border checks on highly-regulated agricultural goods.223
It is expected that the UK will need to find “scores” of additional qualified veterinary professionals and support staff to undertake its own overseas animal inspections if it is no longer able to rely on European Commission resources. The Food Standards Agency has not commented on whether it will be taking on the work. 224
The Government has said it will continue to implement a single European patent system, with a branch of the new Unified Patent Court planned for London in premises leased by the Intellectual Property Office. It is unclear whether the Government has the intention or option of remaining part of the system once the UK has left the EU.225
The government has begun the process of scaling back the UK civil service presence in Brussels by announcing that it will be up to individual departments to fund seconded staff, and decide if there is a business case for them to remain
219
http://www.instituteforgovernment.org.uk/blog/cost-brexit-what-we-learned-autumn-statement; https://www.civilserviceworld.com/articles/news/extra-brexit-cash-not-enough-foreign-office-mpswarn 220 http://www.climatechangenews.com/2016/02/11/met-office-fears-brexit-would-hit-world-bestclimate-models/ 221 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/businessenergy-and-industrial-strategy-committee/leaving-the-eu-energy-and-climate-negotiationpriorities/written/44834.pdf 222 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/603383/dvsabusiness-plan-2017-to-2018.pdf 223
https://www.instituteforgovernment.org.uk/sites/default/files/publications/IfG_Brexit_customs_WEB_0 .pdf 224 https://www.ft.com/content/c4999e54-3702-11e7-bce4-9023f8c0fd2e 225 https://www.ft.com/content/6a07fdba-b56f-11e6-ba85-95d1533d9a62 (£) 29
working in Europe. As many as fifty staff have been told they will no longer be funded centrally by the Foreign Office-funded EU staffing unit.226
No reallocation of resources previously earmarked for EU budget contributions have been announced. The Office for Budget Responsibility’s expenditure forecasts published alongside the November 2016 Autumn Statement assumed that “Expenditure transfers to EU institutions” continue to 2018-19 and transposes these sums to “assumed domestic spending in lieu of EU transfers” from 2019-20 onwards.227
In response to the economic slowdown and uncertainty resulting from the referendum result the Treasury has left Spending Review plans for departmental spending largely unchanged, but indicated that tight constraints on spending, and net reductions in total public sector employment, were now likely to continue beyond 2020. 228
Prospect has warned that the UK will enter negotiations with “one hand tied behind its back” unless it addresses concerns over civil service capacity and workloads. 229
Science
The EU has historically contributed billions of pounds of funding to UK science (according to one estimate, around £1bn a year or a quarter of all public funding for UK science230) has come from the EU through programmes such as Horizon 2020, as well as enabling international collaboration through free movement and shared regulatory frameworks. In the wake of the referendum result there were numerous reports of projects and appointments being suspended or cancelled due to uncertainty over future funding and migration rules.
The Treasury has said it will “underpin” funding bids that are successful prior to the UK’s exit. Scientific bodies are said to be still worried about the gap of almost two years between Brexit in 2019 and the start of Framework Nine in 2021.231 The crossparty Committee on Exiting the European Union has said “The Government needs to make an explicit commitment that it wishes to continue joint research with the EU27 on the basis of the Horizon 2020 framework, and its successor.” 232
The Prime Minister has said the Government will “welcome agreement to continue to collaborate with our European partners on major science, research, and technology initiatives” 233 and said that there “may be specific European programmes in which we might want to participate”. The Campaign for Science and Engineering
226
https://www.theguardian.com/politics/2016/nov/21/government-begins-scaling-back-uk-civilservice-in-eu 227 http://budgetresponsibility.org.uk/efo/economic-and-fiscal-outlook-november-2016/ 228 https://www.gov.uk/government/publications/autumn-statement-2016-documents 229 http://civilserviceworld.com/articles/opinion/garry-graham-running-down-civil-service-no-way-runbrexit; see also https://www.prospect.org.uk/news/id/2017/March/24/UK-will-lose-out-Brexitnegotiations-without-specialist-skills 230 https://www.digital-science.com/resources/digital-research-reports/digital-research-reportexamining-implications-of-brexit-for-the-uk-research-base/ 231 https://www.ft.com/content/88af3f8c-9172-11e7-a9e6-11d2f0ebb7f0 232 https://www.publications.parliament.uk/pa/cm201617/cmselect/cmexeu/1125/1125.pdf 233 https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-theeu-pm-speech 30
has said this might offer “a glimmer of an indication that the UK may bid to continue to participate in the EU science programmes that have supported the UK so extensively to date … But the EU position is that participation requires free movement – which is not on the table.” 234 The Government has reiterated its ambition in a “partnership paper”, 235 alongside which it was reported to be ready to contribute around £1 billion a year to secure “associate membership” of Horizon 2020. 236
There have been calls from the scientific community for early clarity on the right of EU researchers working in the UK to remain indefinitely, and continued support for free movement of scientists without costly and time-consuming visa processes. The House of Commons cross-party Science and Technology Committee called in November for “an immediate commitment to exempt EU researchers already working here from any wider potential immigration controls.” 237
A related concern is ensuring recognition in the EU of UK professional qualifications, hitherto guaranteed by the EU Professional Qualifications Directive. 238
The sector may also be hit by additional costs of imported equipment and materials, and subscriptions to international bodies such as Cern, following the fall in sterling.
The UK life sciences industry is said to be most concerned about low tariff and non-tariff barriers, stable regulation, and “openness to people and international collaboration,239 and has stressed the importance of the UK MHRA maintaining harmonised regulation of drugs and medical equipment with the rest of Europe. 240 It has been reported that some ministers favour the development of a distinct UK regulatory regime that combined safety and cost control under the auspices of an expanded NICE, but pharmaceutical companies have argued this will mean the UK loses out to larger European and Asian markets. 241 One former MHRA head has argued that leaving the EMA creates opportunities to modernise regulation through the creation of a single agency to both regulate and assess medicines, medical devices and veterinary medical products. 242 A recently published industrial strategy for the life sciences sector, commissioned by the Government, said it was necessary to increase R&D expenditure more than twice as fast as the current Government target implies, and implied that the costs might outweigh the theoretical benefits of departing from EU regulatory frameworks. 243
234
http://www.sciencecampaign.org.uk/news-media/press-releases/case-responds-to-theresa-mayspeech-on-brexit.html 235 https://www.gov.uk/government/publications/collaboration-on-science-and-innovation-a-futurepartnership-paper 236 https://www.ft.com/content/88af3f8c-9172-11e7-a9e6-11d2f0ebb7f0 (£); https://www.thetimes.co.uk/article/britain-offers-1bn-a-year-to-stay-in-the-eus-science-clubphnhrbvmq (£) 237 http://www.publications.parliament.uk/pa/cm201617/cmselect/cmsctech/502/50202.htm 238 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/science-andtechnology-committee/leaving-the-eu-implications-and-opportunities-for-science-andresearch/written/36038.pdf 239 http://www.cbi.org.uk/index.cfm/_api/render/file/?method=inline&fileID=304BB095-03A0-4B639877A999AF6B3F5F 240 https://www.ft.com/content/2ca416ba-c8f8-11e6-8f29-9445cac8966f 241 https://www.ft.com/content/713b61be-b6f8-11e6-ba85-95d1533d9a62v (£) 242 https://www.ft.com/content/4560f016-3a2b-11e7-ac89-b01cc67cfeec 243 https://www.gov.uk/government/publications/life-sciences-industrial-strategy 31
There are concerns that the Medicines and Healthcare Regulation Agency could have its income impacted by the relocation of the European Medicine’s Age ncy from London.244
AstraZeneca has said the lack of clarity over regulation after the UK is due to leave the EU in March 2019 meant the pharmaceutical company would take a “wait to see” approach to some key investment decisions in Britain.245
There are concerns that the UK space industry could be disadvantaged following Brexit, given the close links between the EU and the European Space Agency. UKspace has raised the risk of exclusion from the European Galileo satellite navigation system, which some say could jeopardise billions of pounds of business opportunities. Some capabilities, currently reserved for EU member states, are thought to offer potential in areas like road tolling. 246 The Government has published a paper emphasising its desire to remain part of EU space programmes. 247
A number of commentators have raised concerns about the failure of the Department for Exiting the European Union to appoint a Chief Scientific Advisor. 248
Some have argued that UK science can thrive outside the EU if the Government ensures sufficient funding and makes effective use of the opportunity to reform regulations where beneficial (for example, in genetics and stem cells) and use targeted state aid to support the industry. 249
In a survey of Prospect members in STEM sectors, 39 per cent said that their jobs had become less secure; half said that the Brexit decision had impacted negatively on their organisation’s work; and 67 per cent were dissatisfied with government preparations for life outside the EU. 250
Prospect has played a key role in highlighting the potential risks to pan-European funding and collaboration from Brexit 251 and is campaigning for:
guaranteed rights for EU nationals already working in the UK to remain here
continued international mobility for scientists and engineers, including for UK citizens to work in other EU countries
assurances that the UK will not exit Euratom, at least until equivalent provisions have been put in place
assurances about funding after 2020 – although the Chancellor announced in 2016 welcome additional funding for research and development as part of the
244
https://www.theguardian.com/politics/2017/aug/08/top-uk-research-agencies-will-lose-out-inbrexit-relocation-of-eu-medicines-regulator 245 https://www.ft.com/content/0aee8528-736b-11e7-aca6-c6bd07df1a3c (£) 246 https://www.ft.com/content/48e12b28-5e2d-11e6-bb77-a121aa8abd95 (£) 247 https://www.gov.uk/government/publications/collaboration-on-science-and-innovation-a-futurepartnership-paper 248 https://www.civilserviceworld.com/articles/news/brexit-department-told-hire-chief-scientistwithout-delay; https://www.timeshighereducation.com/news/brexit-department-lacks-scientificadviser-as-talks-get-under-way 249 https://www.ft.com/content/5db36726-5740-11e6-9f70-badea1b336d4 (£) 250 https://inews.co.uk/uncategorized/science-danger-line-brexit/ 251 https://www.prospect.org.uk/be-involved/brexit/brexit-stem/; https://www.theguardian.com/politics/2017/mar/07/brexit-putting-british-scientists-at-risk-ofbecoming-bit-part-players-warns-report-prospect 32
Productivity Investment Fund, it is not yet clear where this will be allocated or if it will replace key EU funding streams when the EU’s own legal commitments to honour these payments ends
early clarity about the UK’s relationship with the EU (and other countries) to provide assurances to international professional networks and mitigate against the UK being frozen out of collaborative proposals
strong repudiation of incidences of racism and xenophobia wherever and whenever they occur
engagement with stakeholders in developing a long-term strategy for UK STEM.252
Transport
The Government has highlighted transport as one of three “UK-wide network industries and associated services which interact extensively with the EU”, noting that “there is a substantial body of EU law covering four transport modes (aviation, roads, rail and maritime), which governs our current relationship with the EU, and which will need to be taken into consideration as we negotiate our future relationship.” 253
The House of Commons Library has noted that “the UK has been a leading advocate for the development of the single market in transport across all modes. To which end the UK has usually found itself aligned with the European Commission in promoting liberal market-based aviation and maritime sectors.” 254
The Secretary of State for Transport has said that “when it comes to aviation … the objective is business as usual. That is what is in everyone’ s interests”. 255
According to a leaked government document, aviation is classed as a “high priority” industry in Brexit negotiations. 256 The Government has pledged to consult closely with the aviation sector on options for withdrawing from the EU. 257 The CBI has said that “leaving the EU must not disrupt the UK’s access to the Single Market for Aviation or international aviation markets” and warned that “the UK’s world-leading status in this sector is enhanced by high-skilled immigration and collaboration over international rules”.258
The EU single aviation market, which extends to some states outside the EU through the European Common Aviation Area, allows any carrier licensed, owned and headquartered in the area to operate any service in the area. UK membership of the Common Aviation Area, or a close operating agreement such as that used by
252 253
https://www.prospect.org.uk/be-involved/brexit/brexit-stem/
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 254 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7633#fullreport 255 https://hansard.parliament.uk/commons/2016-11-23/debates/DD7548E4-34A9-438A-9C26957501A41C03/ExitingTheEUAndTransport 256 http://www.thetimes.co.uk/edition/news/leak-reveals-low-priority-industries-for-brexit-talksq020z5clb 257 https://www.gov.uk/government/news/david-davis-visits-london-city-airport-to-discuss-brexit-withindustry-leaders 258 http://www.cbi.org.uk/index.cfm/_api/render/file/?method=inline&fileID=304BB095-03A0-4B639877A999AF6B3F5F 33
Switzerland, may be ruled out by the Government’s commitment to end any jurisdiction of the European courts. EU officials are reportedly unsympathetic to airlines’ desire for a special sectional deal. 259 A further obstacle may be Spanish refusal to agree to any deal that treats Gibraltar airport as British. 260 UK carriers’ ability to operate in many countries outside Europe also depends on being covered by EU deals (such as the EU-US Open Skies Agreement, for example) or UK treaties (as with South Korea) that include EU clauses. The Chief Executive of Ryanair has predicted that “the British will fall off a cliff in two years’ time”, 261 with the airline warning of “deep cuts to our flights both to, from and within the UK from March 2019 onwards” if the issue is not resolved within 12 months. 262
Airlines such as easyJet and Ryanair, reportedly seen as vulnerable by rivals such as Lufthansa and Air France, are executing or considering relocations, restructuring and applications for new operator licenses to ensure they can maintain operations after April 2019.263 Although EasyJet has said its restructuring will not affect UK jobs, it is thought that such moves could carry “significant economic consequences” for the UK as a whole as well as airlines’ UK employees and suppliers and fee income for the UK Civil Aviation Authority, and may mean that “daily flight schedules that now start and end in Britain with business friendly departure times may become less likely”. 264 Airport operators have stressed the need for rapid resolution of these issues to provide the certainty needed for investment and route-planning. 265 The Secretary of State for Transport said in July that it will be “some time yet before we can deliver that certainty”.266
A related issue is the UK’s membership of European Aviation Safety Agency, “which sets rules for certification of everything from aircraft and their components to flight training schools”, and for which the Civil Aviation Authority effectively acts as a local office.267 It has been claimed that the UK and France provide ⅔ of all the rule making input on European Safety Regulation and together we undertake close to 90% of EASA’s outsourced activities. 268
259
https://www.theguardian.com/business/2017/mar/09/brexit-airlines-worst-fear-preoccupationlegal-framework; https://www.ft.com/content/d39943fa-130d-11e7-b0c1-37e417ee6c76 260 https://www.ft.com/content/a62b292a-ef99-11e6-930f-061b01e23655 (£) 261 http://uk.reuters.com/article/uk-britain-eu-ryanair-idUKKBN1581C4; see also http://www.travelweekly.co.uk/articles/63113/aviation-should-prepare-for-hard-brexit-says-monarchboss 262 https://www.ft.com/content/9ad3bdc5-81a3-333b-b4ee-ce6009115998 (£);http://www.telegraph.co.uk/news/2017/07/11/ryanair-chief-michael-oleary-discuss-brexit-effectaviation/ 263 http://www.bbc.co.uk/news/business-40604375 264 https://www.theguardian.com/politics/2017/mar/22/uk-based-airlines-told-to-move-to-europeafter-brexit-or-lose-major-routes; http://news.sky.com/story/low-cost-airline-easyjet-close-to-landingpost-brexit-eu-base-10814831; https://www.ft.com/content/57c0c01c-ef9c-11e6-930f-061b01e23655; https://www.theguardian.com/business/2017/mar/09/brexit-airlines-worst-fear-preoccupation-legalframework; http://www.telegraph.co.uk/business/2017/03/22/will-brexit-mean-uk-airline-industry/; https://www.theguardian.com/business/2017/jul/14/easyjet-austria-eu-flights-brexit 265 https://www.aci-europe.org/component/downloads/downloads/4919.html; http://www.travelweekly.co.uk/articles/275306/fears-aviation-is-being-left-in-the-dark-in-brexit-talks 266 https://www.gov.uk/government/speeches/secretary-of-state-for-transport-addresses-the-aviationclub-lunch 267 https://www.ft.com/content/2f2f0f14-12ce-11e7-b0c1-37e417ee6c76 (£) 268
https://www.caa.co.uk/uploadedFiles/CAA/Content/News/Speeches_files/GADspeech_AndrewHaines_ 011216.pdf 34
The ADS and Rolls Royce have called for the UK to remain a member. Regulatory divergence could create barriers to trade and damaging uncertainty for the civil aerospace industry. 269
In late 2016 the Chief Executive of the CAA said he had “yet to meet anyone of substance” that supports withdrawing “altogether” from EASA, saying it would “would mean a major increase in UK regulatory regime, potentially represent a major barrier to track increased costs and yet we would also risk becoming a backwater in terms of wider impact.”270
There are also issues of domestic regulatory capacity: ADS has estimated that replicating the EASA would cost around £400m over a decade, and require an extra 300 staff. According to the Royal Aeronautical Society “the Civil Aviation Authority has been run down considerably because many of the staff have gone to work at EASA… That’s where competence has been transferred.” 271 The FAA has said that “if the UK does not maintain an associated or working arrangement with EASA upon exit from the EU, the UK will need to quickly re-establish competencies in specific areas, especially around the certification of new aviation products.” 272 The ability of CAAi, the CAA’s consultancy arm, to bid on future EASA contracts will be subject to the outcome of the wider negotiations between the British Government and the EU. 273
EASA’s founding directive states that it shall be “open to the participation of European third countries which are Contracting Parties to the Chicago Convention and which have entered into agreements with the European Community whereby they have adopted and are applying Community law in the field covered by this Regulation and its implementing rules”. This would entail contribution to the agency’s budget and, on the face of it, acceptance of CJEU jurisdiction. 274
The economic regulation of UK airports and air traffic services is currently conducted by CAA in line with the performance management regime associated with the European Commission’s Single European Sky plan to improve efficiency across European airspace.
It is possible that the UK may wish to revise rules on passenger rights and compensation, which have hitherto been largely determined by EU legislation, and which some in the industry regard as overly generous towards passengers, and punitive towards travel operators. 275
269
https://www.adsgroup.org.uk/blog/no-deal-mean-trade/; https://www.adsgroup.org.uk/blog/continuity-is-key-for-post-brexit-aviation-safety-regulations/; https://www.thetimes.co.uk/article/planemakers-face-brexit-on-a-wing-and-a-prayer-bkcmjgzb8; http://www.theneweuropean.co.uk/top-stories/britain-s-aerospace-sector-fears-crash-landing-15094526; https://www.thetimes.co.uk/article/rolls-royce-calls-for-britain-to-stay-in-euratom-and-euaviation-agency-w7qnmnnxn 270
https://www.caa.co.uk/uploadedFiles/CAA/Content/News/Speeches_files/GADspeech_AndrewHaines_ 011216.pdf 271 https://www.ft.com/content/7dc9a004-c6c4-11e6-8f29-9445cac8966f (£);http://www.bbc.co.uk/news/business-40743826 272 https://www.ainonline.com/aviation-news/business-aviation/2017-06-20/faa-uk-talks-post-brexitaviation-repercussions 273 http://www.caainternational.com/eu-referendum 274 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7957%23fullreport 275 275
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There may also be appetite for changing rules for allocating new airport slots, which under the EU regime require 50 per cent to be allocated to new competitors. The Chief Executive of the CAA has suggested that “if the UK were able to establish a UK based slot regime that would permit auctioning of new slots by either the airp ort operator or the Government, this could offer new solutions to the challenge of financing new airport development”, and “could even boost regional connectivity too – with the potential for slots to be bought by regions and safeguarded for regional services” .276
The UK will have the option of applying a more liberal regime of regulation in “general aviation”, including drones. 277
Prospect has been engaging with the Department of Transport on implications for aviation. An initial view from members in air traffic control services is that
the UK government must ensure it achieves the best deal so that the industry can continue to thrive in future
a “Swiss-style” integration where the UK government negotiates aspect of the relationship that suit the market conditions best may be the best model to achieve this
the UK should take the opportunity to exit the Single European Skies Performance Scheme and Functional Airspace Block project, concentrating on individual partnerships in lieu of this
the UK should negotiate a new relationship with the Single European Skies project
the UK should remain a member of the European Aviation Safety Agency, the Single European Sky ATM Research Project (SESAR) and Network Manager 278
The Government has highlighted the fact that for Road Haulage, “it is the EU’s regulatory framework that guarantees rights for HGV operators to carry goods to, from, through and within other EU countries.” 279 The Secretary of State has implied that the Government may wish to expand the share of UK-based hauliers in traffic between the UK and the continent above the current 15%. 280 The CBI has noted that “EU regulations in the transport, logistics and distribution sector covers a huge variety of issues, including the condition of vehicles, additional ‘blind spot’ rear view mirrors, warehousing and the training, health and safety of drivers”, and said that “the UK based sector would like to see some EU rules dropped but the regulations governing logistics operations are widely accepted by the industry.” 281 One prominent Leave
276
https://www.caa.co.uk/uploadedFiles/CAA/Content/News/Speeches_files/GADspeech_AndrewHaines_ 011216.pdf 277 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7633#fullreport 278 https://www.prospect.org.uk/be-involved/brexit/brexit-and-aviation 279
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 280 https://hansard.parliament.uk/commons/2016-11-23/debates/DD7548E4-34A9-438A-9C26957501A41C03/ExitingTheEUAndTransport 281 http://www.cbi.org.uk/making-a-success-of-brexit/Transport_distribution_and_lo.html 36
campaigner has cited regulations limiting truck drivers’ overtime as an example how Brexit could reduce costs to business. 282
UK legislation on driver licensing and testing currently derives from EU law. Harmonisation of categories and standards is widely seen as beneficial but there may be pressure for change in some areas such as the Certificate of Professional Competence for HGV and bus drivers which has been criticised by some in the industry.
Common vehicle standards are operated across the EU under the Whole Vehicle Type Approval system, for which the Vehicle Certification Agency is the recognised approval authority for the UK. Prior to the referendum the AA and RAC said that the EU Type Approval framework delivered “‘economies of scale, increased competition between manufacturers and has reduced the general price differential between Member States” evidenced in “falling purchase prices in real terms”. 283 Although manufacturers wishing to supply EU markets can seek approval from approval authorities in any member stage, according to the Society of Motor Manufacturers and Traders, “The vast majority of manufacturers in the UK use the VCA to obtain their European type approvals and have a long, established working relationship with the VCA which help produce efficiencies in the approval process”. 284
A key concern for motor manufacturers is that VCA approvals remain valid for EU markets. Failing to secure this would add significant costs to manufacturers and impact on location decisions – “as automotive investment decisions, particularly those related to R&D, include an analysis of the location of available testing facilities and approval authorities, the UK's attractiveness as a location for inward automotive investment will be negatively impacted should the VCA not be able to issue or extend European approvals following the UK's withdrawal from the EU”. 285 There is also concern that any regulatory divergence does not result in models being withheld from UK markets.286 According to one report the industry is hoping that “Brexit negotiations will include a formal agreement covering common standards and a mutual recognition of conformity assessment.” 287
Already, according to the SMMT, “Uncertainty around the VCA’s status means many manufacturers are now seeking approvals in other Member States to mitigate the risk that VCA European approvals will be deemed invalid in the future”. 288 This may affect the VCA’s fee income, which accounts for around 75% of its costs, though this does not seem to be reflected in its forecast income for 2017-18.289
282 283
https://www.ft.com/content/d42e186c-bc6a-11e6-8b45-b8b81dd5d080 (£)
http://webarchive.nationalarchives.gov.uk/20160220034303/https:/www.gov.uk/government/uploads/ system/uploads/attachment_data/file/278966/boc-transport.pdf 284 https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Brexit-issue-paper-TYPEAPPROVAL.pdf 285 https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Brexit-issue-paper-TYPEAPPROVAL.pdf 286 http://www.autoexpress.co.uk/car-news/100288/bad-brexit-deal-could-see-cars-pulled-from-ukshowrooms 287 https://alliedfleet.co.uk/brexit-nightmare-for-automotive-sector/ 288 https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Brexit-issue-paper-TYPEAPPROVAL.pdf 289 http://www.dft.gov.uk/vca/additional/files/general-information/vca-annualreport/VCA%20Business%20Plan%20-%202017%20-%202018.pdf 37
The November 2016 Autumn Statement announced additional funding, rising to £1bn a year, to transport, including to support upgrades on local and strategic roads and future transport technologies such as ultra-low emission vehicles and connected and autonomous vehicles.
Growth in travel to and from the UK is expected to be slower following the referendum result, with one estimate suggesting that the aviation industry will be 3 to 5 per cent smaller in 2020 than it would have been. 290 The Office for Budget Responsibility now expects lower growth in air passenger numbers over the next five years than it did last March. 291
Employment rights Once Brexit is completed, Parliament would be free to remove or revise much employment legislation hitherto determined by EU Directives. There has been speculation that at some stage the Government might be inclined to make partial changes to Agency Worker Regulations and the Working Time Directive (both of which were resisted by the UK government at the time of their introduction), as well as the cap on discrimination payments or collective redundancy consultations. 292 The Working Time Directive has been targeted in a high profile campaign to use Brexit as an opportunity to reduce labour market regulation.293 The Prime Minister has promised that “existing workers' legal rights will continue to be guaranteed in law - and they will be guaranteed as long as I am Prime Minister”. 294 The Brexit white paper states that “As we convert the body of EU law into our domestic legislation, we will ensure the continued protection of workers’ rights” and states that “this Government has committed not only to safeguard the rights of workers set out in European legislation, but to enhance them”. 295 Even if European employment protections are retained through the Great Repeal Bill, key issues will be whether British courts interpret them more minimally than European case law has hitherto established, 296 and whether “Henry 8 clauses” will leave them exposed to amendment or repeal by subsequent Governments without recourse to Parliament. 297 290
https://www.iata.org/whatwedo/Documents/economics/impact_of_brexit.pdf https://library.prospect.org.uk/id/2017/March/8/Spring-Budget-2017-initial-briefing 292 http://www.cipd.co.uk/community/blogs/b/policy_at_work/archive/2016/06/28/what-will-brexitmean-for-uk-employment-law; http://www.clydeco.com/blog/brexit/article/brexit-some-thoughts-onemployment-law-implications; https://www.demos.co.uk/wp-content/uploads/2017/03/Demos-finalbrexit-report-v2.pdf 293 http://www.telegraph.co.uk/news/2017/03/27/cut-eu-red-tape-choking-britain-brexit-set-countryfree-shackles/ 294 http://press.conservatives.com/post/151239411635/prime-minister-britain-after-brexit-a-vision-of Some remain sceptical of such assurances: https://www.theguardian.com/law/2016/nov/07/doubtscast-on-theresa-mays-pledge-to-protect-workers-rights-post-brexit 291
295
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 296 The Government has said that the Great Repeal Bill “will provide that any question as to the meaning of EU-derived law will be determined in the UK courts by reference to the CJEU’s case law as it exists on the day we leave the EU” but its “intention is not to fossilise the past decisions of the CJEU forever”, so is proposing that “ historic CJEU case law be given the same binding, or precedent, status in our courts as decisions of our own Supreme Court”, meaning it can be departed from by the 38
The TUC has called for a commitment not to fall behind the EU on improvements to employment rights to be included in any future trade deal between the UK and EU. 298 The EU’s chief negotiator has implied this should be looked at as part of the future relationship so that the UK cannot undercut the EU through competitive deregulation. 299 The Prime Minister has said negotiations must “prioritise how we manage the evolution of our regulatory frameworks to maintain a fair and open trading environment”. 300 A private members’ bill to ensure that the government keeps its promise to protect workers’ rights post-Brexit was talked out by Conservative MPs on 13 January. 301
Issues for devolved nations and Crown Dependencies In many areas where the devolved legislatures and administrations currently have some competence, such as agriculture, environment and some transport issues, most rules are set through common EU legal and regulatory frameworks. The Government has stated that when some of these powers are repatriated to the UK, it will look to pass some of them on to devolved legislatures and administrations.302 The Scottish Government has set out three priorities: 303
influencing the overall UK position so that the UK remains in the European Single Market, through the European Economic Area (EEA) Agreement and also in the EU Customs Union
exploring differentiated options for how Scotland could remain a member of the European Single Market and retain aspects of EU membership, even if the rest of the UK leaves
safeguarding and significantly expanding the powers of the Scottish Parliament
The Prime Minister has rejected a call from the Scottish First Minister for an independence referendum by Spring 2019, which the Scottish government argues is justified by the significant material change that Brexit entails. As in the rest of the UK, Prospect’s Scotland team has been working hard to ensure that members’ concerns about leaving the European Union are raised at the highest level possible.304
Supreme Court “when it appears right to do so.” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604516/Great_repeal _bill_white_paper_accessible.pdf 297 https://www.demos.co.uk/wp-content/uploads/2017/03/Demos-final-brexit-report-v2.pdf 298 https://www.tuc.org.uk/international-issues/europe/eu-referendum/workplace-issues/welcomewords-workers%E2%80%99-rights-must-be 299 http://europa.eu/rapid/press-release_SPEECH-17-723_en.htm 300
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604079/Prime_Ministe rs_letter_to_European_Council_President_Donald_Tusk.pdf 301 https://www.prospect.org.uk/be-involved/brexit/index/2017/January/24/Lost-bill-sets-out-Goldstandard-workers-rights 302
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_K ingdoms_exit_from_and_partnership_with_the_EU_Web.pdf 303 http://www.gov.scot/Resource/0051/00512073.pdf 39
The Welsh Government has set out views on: 305
the importance of continued participation in the Single Market
a balanced approach to immigration linking migration to jobs and good, properly enforced employment practices
on finance and investment, Wales should not lose funding as a result of the UK leaving the EU
a fundamentally different constitutional relationship between the devolved governments and the UK Government
maintaining social and environmental protections
proper consideration of transitional arrangements
It has been estimated that Wales receives around £250m annually in EU funding for agriculture and rural development, and about £250m a year for regional development, and is currently benefiting from around £500m of EIB investments. 306 The Crown Dependencies – Jersey, Guernsey, and the Isle of Man – are not part of the UK for the purposes of EU law, but do have differing special statuses under the EU treaties, and are part of the EU customs union. The Government has established regular meetings with Chief Ministers and pledged “to involve them fully in our work, respect their interests and engage with them as we enter negotiations”. 307
What Prospect is doing Prospect is proud to represent more than 141,000 professionals across more than 300 employers during one of the most divisive and challenging periods in UK politics. Our union is politically independent but we are concerned that the UK’s decision to leave the European Union will have significant and challenging implications for UK workers. During it all, we are committed to protecting individual rights at work and to providing a coherent and influential voice on the future of members' industries and sectors. So far we have lobbied ministers, raised issues with the Trades Union Congress and met many branches to discuss the issues affecting their area. This is only the beginning. We look forward to sharing our work with members through various blogs, news and recruitment resources. 308 If you would like to get involved in Prospect's work on Brexit or share your story with us, contact
[email protected] or
[email protected] 304
https://www.prospect.org.uk/be-involved/brexit/index/2016/December/16/Mitigating-impactBrexit-on-workers-Scotland 305 https://beta.gov.wales/sites/default/files/201701/30683%20Securing%20Wales%C2%B9%20Future_ENGLISH_WEB.pdf 306 http://www.walespublicservices2025.org.uk/files/2016/05/Brexit-WPS-2025-Final.pdf 307 https://www.gov.uk/government/publications/the-united-kingdoms-exit-from-and-new-partnershipwith-the-european-union-white-paper/the-united-kingdoms-exit-from-and-new-partnership-with-theeuropean-union--2 308 https://www.prospect.org.uk/be-involved/brexit/ 40
Appendix: revisions to official economic forecasts since the referendum
Economic growth
Business investment
41
Public borrowing
Average earnings
More detail and background at https://library.prospect.org.uk/id/2017/March/8/Spring-Budget-2017-initial-briefing
42
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