Uncertainty Abounds – How Customs Issues Are Now Dominating Brexit

There has been much spoken and written about Brexit since our last whitepaper, yet very little has progressed.  The issue dogging the talks, that of the Irish border, has caused negotiations to move much like a tortoise when the pace of a hare is needed now as the UK nears the end of its membership of the European Union and enters into a transitional period.  Uncertainty abounds.  However, again, it looks as if the United Kingdom’s negotiators had only recently decided on the shape and style of the future arrangement that they would like to have with the European Union before jettisoning it following pressure from Brexiteers within the Conservative Party. How will this impact on the customs union?  Will the UK seek to integrate with European institutions, much to the chagrin of hard line Brexiteers?

With less than a year until the transitional period begins companies need to continue planning for a worst case scenario where the UK could crash out of the Union without any deal.  The possibility of a stalemate or a complete breakdown of talks in acrimonious circumstances remains a possibility as hardliners on both sides of the negotiating table seek the best arrangement for their constituencies.

While the UK will leave the European Union on March 30th 2019 it will remain a member of the Customs Union until the end of the proposed transition period of December 31st 2020 (subject to the UK adhering to EU law). The mooted transition period of 21 months is subject to final agreement by EU Heads of State at the June 2018 EU summit and, as with everything Brexit related; nothing is agreed until it is agreed.

Membership of the Customs Union would go some of the way to alleviate supply chain issues for companies for a further 21 months.  The deferral of the UK’s departure from the Customs Union would provide additional time for both sets of negotiators to agree a deal on the future customs arrangements for both parties.

There is, at this time of writing, speculation that the issue of the Customs Union might cast a larger pall over negotiations.  Speculation that the UK is considering seeking to remain in the Customs Union (despite it being considered to be a ‘red line’ issue not so long ago) has been floated by a number of credible sources as a means of the UK avoiding the creation of a hard border between the Republic of Ireland and Northern Ireland.  However, such an agreement would definitely split the UK’s already fragile government and might even lead to another general election.

While uncertainty over the Brexit issue dogs the supply chain sector there has been a more categorical statement of what the future holds in relation to the UK’s future relationship with the European Medicines Agency.

In the summer of 2017, while the UK Parliament was in recess, the idea that the UK might continue to be a member of the European Medicines Agency was suggested in a joint letter to the Financial Times by the Business Secretary Greg Hands and the Health Secretary Jeremy Hunt.  The proposal was, at the time, drowned out by Brexiteers who were perceived as being eager for the United Kingdom to lower its regulations in an effort to attract new trade deals.  However, as reality dawned on many, the concept of ongoing membership of the European Medicines Agency gained some traction to such an extent that the UK’s Prime Minister Theresa May suggested on March 2nd 2018 that the UK would like to be an associate member of the EMA while remaining outside the EU.  The suggestion was swiftly rebuffed by the European Council:

“the Union will preserve its autonomy as regards its decision making, which excludes participation of United Kingdom as a third country to EU institutions, agencies or bodies”.

The UK’s MHRA has stated that they will not deviate from the current UK regulatory framework in the short term.  The UK agency has agreed to adopt a ‘pragmatic approach’ to regulation for the foreseeable future.  The UK will, despite the transitional agreement, become a third country on March 30th 2018 and companies must begin preparing for that.

There is still much to decide and to put in place in an ever diminishing time frame.  To repeat the words used in an earlier paragraph: uncertainty abounds.

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