The United Kingdom and European Union have finally agreed on a Brexit deal — but the drama isn't over yet. The UK parliament still needs to give its approval and at the moment, that isn't looking likely.
The European Union leaders last weekend approved the UK’s Brexit deal at a summit in Brussels.
The deal nominally brought to an end months of negotiations and will not only help frame the divorce but also the future relations between the two entities.
For those who haven’t been paying close attention, that would seem to be that, but in reality we face a few more weeks— and potentially a much longer period — of uncertainty.
Where are we now?
The withdrawal document includes details such as the financial settlement or divorce bill (there’s no exact figure given but it is likely to be around $50 billion or £39 billion) and perhaps most contentiously what will happen with the border between the Republic of Ireland and Northern Ireland.
What happens next?
Anyone thinking that it is all over would be wrong. The UK parliament still has to agree the deal. Ordinarily this wouldn’t be a problem but in this case Prime Minister Theresa May has a couple of big problems.
She called a risky election in 2017, which actually reduced the Conservative Party’s majority. She was then forced to agree to an alliance with a small party in Northern Ireland to keep power.
The other big issue is that for a variety of reasons, many of her Conservative colleagues hate the deal agreed to with the EU.
Parliament will likely vote on whether to approve the deal in the next few weeks. In the meantime May is busy trying to sell the deal to the country – in reality her political future depends on getting it through.
The European Parliament — the third of the EU’s political bodies alongside the Commission and the Council — also still needs to vote on the deal.
What happens if UK parliament votes it down?
Chaos, probably. The problem for May is that those in favor of leaving the EU (Brexiteers) and those who want the UK to stay in it (Remainers) both hate the compromise deal.
At the moment it looks like May doesn’t have the votes. If parliament votes it down then we’re in unknown territory. There’s a belief that the market reaction to a “no” vote would be so bad that a second vote might squeak through.
The other options are extending the Article 50 process — the two year window given to countries wishing to leave the EU —or holding a second referendum something that would be difficult given the time constraints.
Some Conservative MPs want the prime minister to go back to Brussels and renegotiate a deal but the EU has shown little interest in doing so.
The default position for leaving the EU is crashing out with no deal. This would likely be catastrophic given the UK has been a member of the EU for 45 years and its laws and its economies are tightly entwined with the other 27 member states.
What happens to travel and tourism if it all goes through?
If — and it’s a big if at the moment — Prime Minister May somehow gets the deal signed off in parliament, come 11 p.m. on March 29, nothing will really change for a period of 21 months or so.
EU law would continue to apply as it does now, although the UK will no longer have a say on the EU’s representative bodies.
This means that freedom of movement between the UK and the other member states would continue and the aviation industry will remain unchanged.
Once the transition period has come to an end, things will change and both sides hint at the future in a slim document released at the same time as the withdrawal bill catchily entitled: “Outline of the political declaration setting out the framework for the future relationship between the European Union and the United Kingdom.”
The thing to keep in mind is that this is a statement of intent rather than anything legally binding. The detailed negotiations will happen after the UK leaves next March.
There are a few key sections for the travel and tourism industry.
While free movement of people between the EU and UK will come to an end, they both envisage implementing “visa-free travel for short-term visits” as well as specifically mentioning “temporary entry and stay of natural persons for business purposes”. The new relationship shouldn’t affect holidays and corporate travel but at some point in the future UK travelers will likely have to $8 (€7) when the EU brings in its European Travel Information and Authorisation System. There will also probably be tougher border controls.
The changes, however, do create a big headache for industries that rely on immigrant workers such as the hospitality industry.
Kate Nicholls, the CEO of lobbying group, UKHospitality, called the withdrawal agreement a “positive step forward.”
“Hospitality operators need to know they will have the reassurances provided by a deal. It cannot be stressed enough that a no deal Brexit would present the sector with severe problems and would have a serious impact on confidence,” she said.
But UKHospitality is worried about the UK ending the free movement of people, which has become the central plank of May’s Brexit plan.
“Hospitality businesses are putting considerable effort into providing opportunities for UK workers. Three-quarters of our workforce is home-grown and we invest significant amounts into apprenticeship schemes to build the workforce of the future from right here in the UK,” Nicholls said.
“The reality is, though, that hospitality businesses do need to supplement their workforces with non-UK workers, particularly given the record employment rate and if they want to keep pace with projected growth. If, following the UK’s withdrawal from the EU, there is not a system in place to ensure employers can access labour then businesses will struggle, and consumers will suffer through higher prices and falling service levels.”
The two sides also want provisions to “facilitate electronic commerce and cross-border data flows, [and] address unjustified barriers to trade by electronic means.” Good news for companies selling between the UK and the rest of the EU.
Aviation and other transport
Airlines, including, most vocally, Ryanair, have been calling for clarity for the aviation sector since the vote in June 2016. Many have also said Brexit has weakened demand.
The UK’s rulebook is tied in with the EU’s and governs things such as safety and flying rights both within the Europe and crucially with a number of other countries, including the United States.
Fortunately, both sides want a “comprehensive air transport agreement,” which would cover “market access and investment, aviation safety and security, air traffic management and provisions to ensure open and fair competition.”
On the surface this sounds great. But remember this is a negotiation and the different sides will have different agendas. Last year Ryanair CEO Michael O’Leary alleged that carriers like Air France-KLM and Lufthansa were pushing for the EU to take a tough stance on UK carriers.
UK-based EasyJet has set up an Austrian subsidiary to cope with any potential Brexit fallout.
“Cross-border rail services” and “connectivity in the maritime transport sector” also get a mention.
But What if the UK Crashes out With No Deal?
This is the real doomsday scenario for the UK and, let’s remember it is the default conclusion of the Article 50 process. MPs from different parties have rushed to criticize May’s deal, making it plausible.
But crucially, the European Commission, the EU’s executive arm, recently outlined a series of measures it would put in place in the event of the two sides not reaching a deal – and it’s broadly good news for the travel and tourism industry.
The Commission it would allow visa-free travel to the EU for UK nationals in a no deal scenario. The UK has said it would do the same.
The same is broadly true for airlines with the commission saying it would allow flights from the UK to fly over, make technical stops as well as land and fly back to the UK.
The one area where the Commission is standing firm is on ownership, saying that airlines wanting recognition as EU air carriers need to be “majority-owned and controlled by EU legal or natural persons,” something that some companies are yet to achieve.
“We support progress towards the withdrawal agreement and transition period. Our focus is on ensuring that flights continue whatever the Brexit outcome – and we welcome the positive statements from both the UK and the EU on this intent,” said a spokesperson for Airlines UK, the trade body for UK-registered airlines.
“Whilst we don’t support a no-deal Brexit, we welcome that both the UK and the EU have proposed in this event a minimum agreement that would cover flight and safety requirements for the benefit of both passenger and cargo services, which provides further reassurance to passengers and businesses that flights will continue whatever happens over the coming weeks.”
We originally wrote the financial settlement between the UK and EU would be around $50 million or £39 million. Of course that should have read $50 billion or £39 billion. We have updated the story.
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Photo credit: UK Prime Minister Theresa May and European Commission President Jean-Claude Juncker. The EU and the UK have reached an agreement on Brexit, now it is up to parliament. Bloomberg