Business As Usual: Attention Turns Towards UK’s Post-Brexit Trade Deals

Two weeks into the negotiations between UK Brexit Secretary David Davis and his EU counterpart Michel Barnier, scrutiny is increasingly turning to the kind of trading relationships that the UK will enjoy after Brexit, with EU countries and beyond.

Though Barnier has indicated that discussions over a future trade deal between the UK and EU will only begin when agreement on EU citizens’ rights has been reached, and the Repeal Bill has been finalised in December, the UK’s Department for International Trade (DIT) is currently in over-drive planning ahead for these talks.

Campaign group Global Justice Now has revealed that 90% of the meetings held by DIT between October 2016 and March 2017 were with businesses, and most with large businesses, in particular. During this time frame, eight meetings were secured by HSBC, seven by BP, and six by Barclays and KPMG. This is part of the DIT’s strategy to make Britain “the world’s natural business partner”, and understand the kind of post-Brexit trade deals favoured by influential players.

Theresa May, too, is now much more open to engaging with the private sector, having initially steered clear of close relationships with big business in favour of her ‘Shared Society’ vision. This narrative, championed on her appointment as Prime Minister, focused on the needs of the disadvantaged in particular, and would have been tarnished by getting into bed with the corporate world. It seems May has now realised that she was risking missing out on a key avenue of expertise and advice.

So, with greater attention on the interests of business ahead of future trade deals, what kind of agreements is the UK likely to reach with other countries? Firstly, the Government will hope to secure a free trade deal with the EU, which International Trade Secretary Liam Fox has said should be “one of the easiest in human history” to complete. According to Fox, the existing integration between UK and EU services and goods offer a very good foundation for negotiating a new deal.

However, it is not the economics but the politics of such an agreement that ministers are wary of. “The only reason we wouldn’t come to a free and open agreement is because politics gets in the way of economics,” Fox said last week. And speaking at a panel discussion two weeks ago, former Conservative MP Peter Lilley warned that the EU might prioritise being tough on the UK over reaching the most mutually beneficial trade agreement.

Even if a free trade deal with the EU doesn’t materialise, many remain confident of the UK’s economic prospects, and the potential for trade deals with influential countries around the world. Without a deal with the EU, these arrangements would operate under the World Trade Organisation’s (WTO) ‘Most Favoured Nation’ principle, which prevents discrimination between trading partners.

Though EU rules prohibit trade deals between a member state and a non-EU country, informal preliminary discussions are already underway with a number of countries. Liam Fox is spending two days in Washington this week to talk through the basic principles of future trade between the UK and US, while fellow Commonwealth countries have also been cited as attractive trading partners.

James Cleverly, the Conservative MP for Braintree who was on the International Trade Committee until May, spoke last week about the enthusiasm that Australia and New Zealand have for future cooperation, and made a firm prediction that it will be one of these two countries that the UK does a deal with first. Cleverly believes it is better to sign a less comprehensive trade deal early on, as additions and amendments can always be made further down the line.

It remains to be seen whether Cleverly’s approach is the one adopted by the Government. Many would argue that his vision of the UK as a world leader of a “liberal free trade philosophy” after Brexit is one warped by rose-tinted spectacles. The EU remains the world’s largest economy, and, with the UK’s exports to the EU having risen by over 5% during the last three months, it is undoubtedly still pivotal to our own economic standing.

No matter how the UK’s trade negotiations unfold, it is likely that business will continue to dominate the agenda.