After a frustrating 12 months for businesses, where the government has repeatedly sent out mixed signals on what ‘Brexit Means Brexit’ actually means, on the first day of the Brexit negotiations we finally found out!

Hard Brexit

On Sunday we were told that the government is still pursuing a hard Brexit, and the UK will leave the customs union and the single market.[1]

“We’re leaving the EU, and because we’re leaving the EU we will be leaving the single market and, by the way, we’ll be leaving the customs union.”

To avoid the cliff-edge, industry must now hope for an interim agreement or that an FTA can be agreed by the time the UK leaves.

… but the effects of a hard Brexit are unwanted.

Recognising that leaving the single market and customs union would be “a very, very bad outcome for Britain” Hammond said that the ultimate goal is to have an agreement that enables “British goods to flow freely backwards and forwards across the border with the European Union.”

The UK will move:

“seamlessly from the customs union that we’re in at the moment, to a new arrangement in the future that will continue to allow British goods to flow, not just without tariffs … [but] without delays in bureaucracy.”

This means that leaving the single market and customs union will be “via a slope not a cliff-edge,” presumably with the FTA being the counterbalancing ‘upward’ slope to compensate for leaving.

Therefore to continue with the benefits of a single market and customs union – a soft Brexit, in other words!

The ‘Row of the Summer’ Lasts Until Lunchtime

David Davis had promised to turn the issue of parallel negotiating (negotiating the ‘divorce’ agreement and the free trade agreement) into the “row of the summer” – the UK wanted to run both together, but the EU did not.

They will be held sequentially, as the EU had demanded, and instead of the issue being a row amongst equal parties, the EU said that,

“The UK has asked to leave the EU, not the other way around, so we each have to assume the consequences of our decisions and the consequences are substantial.”

In the current heat wave, it looks like it will be a very long hot uncomfortable summer for the UK government where the parties’ negotiating power will become clearer over time.

[1] http://www.telegraph.co.uk/business/2017/06/18/chancellor-confirms-uk-will-leave-eu-customs-union-single-market/