Brexit Explained: What's So Tricky About Transition?

  • Conservatives, Labour, EU lean toward an interim deal
  • EU doesn’t want transition to be an excuse for never leaving

Gros Says Silent Majority Asserting Itself on Brexit

As Brexit talks resume on Monday, the U.K.’s opposition Labour Party has stolen the limelight with a proposal for Britain to remain in Europe’s single market for as long as four years in a so-called transitional deal aimed at smoothing the exit.

While Labour’s plan goes further than the government’s recently forged consensus that an extended interim deal is needed, it reflects the same desire to avoid the cliff-edge Brexit that business dreads.

But what exactly is a transitional arrangement and how is it defined on each side of the negotiating table?

Who wants what?

The U.K. cabinet has fallen into line behind Chancellor of the Exchequer Philip Hammond to call for a time-limited interim period. The U.K. would not remain a member of the customs union but will seek to closely replicate it for the transition. Foreign Secretary Boris Johnson has said it could last up to three years, and Brexit Secretary David Davis said it would be “as close as we can to the current arrangements,” while still allowing the U.K. to strike trade deals with other countries -- something that’s prohibited for members of the customs union.

Labour’s proposal goes further, arguing that the U.K. should remain in the EU’s single market and the customs union for up to four years after it leaves the bloc in March 2019. That would mean the U.K. would maintain practically the same terms of membership -- including having to pay for membership and obey EU court rulings -- but without being able to vote on changes in EU law.

Labour’s off-the-shelf proposal would be more straightforward to implement than the bespoke deal sought by the U.K. government.




So Brexit wouldn’t mean Brexit?

Labour’s idea would look a lot like existing EU membership. The Conservative government’s proposal would be a half-way house. The benefit of both is that it would give ministers several more years to sort out the messy business of extricating the U.K. from all its current arrangements with the EU -- in areas from aviation and data protection to financial services and pharmaceutical standards -- while giving companies and bankers more time to adapt.

What does the EU say?

The EU is worried that a transition period could be a way for the U.K. to leave the EU without ever really saying goodbye.

The bloc’s chief negotiator, Michel Barnier, hasn’t ruled out what he’s called “periods of phasing out and of phasing in,” but he said any such arrangement should be strictly time-limited, and with agreement in advance on what kind of final relationship they are transitioning to.

In April, German lawmakers voted for a resolution signed by the leaders of the three main parliamentary groups in the governing coalition, saying any transitional arrangement should only be used as a last resort, and for a limited, defined period of time.

Barnier has also made clear that during any transition, the U.K. would still be subject to the oversight of the European Court of Justice -- controversial for Britain’s most enthusiastic Brexit-backers.

Can they just agree to this now?

No. There will be no transition period unless the EU allows it. And they’re not even going to discuss it until the 27 leaders agree there’s been “sufficient progress” on the three thorny issues of the U.K.’s withdrawal: the status of expatriates, the border between Northern Ireland and the Republic of Ireland, and the U.K.’s financial obligations to the bloc.

Still, if the U.K. committed itself to a transitional arrangement of several years during which it would pay into the EU budget, it could help ease the EU’s immediate financial demands.

So what’s the obstacle?

While the EU might be open to an arrangement that keeps the U.K in the customs union and single market and maintains the U.K.’s budget payments, the U.K. government says it wants to quit both arrangements when it leaves the bloc. Prime Minister Theresa May would struggle to persuade pro-Brexit lawmakers that anything resembling EU membership after March 2019’s exit is acceptable, in particular if it comes with financial contributions and European judges. Fighting the next election while still in a transitional deal, as Labour proposes, could be a red line.

The EU won’t let the U.K. “cherry-pick.” Anything that includes the benefits of membership without the obligations, even during an interim period, would probably get short shrift.

What’s more, many EU officials say there is simply not time to design the bespoke transitional arrangement that the U.K. government wants.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE