Post-Brexit trade deal means ‘inevitable’ business costs, says EU

EU and UK businesses will face ‘inevitable’ extra costs while the post-Brexit trade deal remains in place, European Commission Vice-President Maroš Šefčovič warned on Monday (12 June), playing down the prospect of a major overhaul of the agreement. 

“Trade can no longer be as frictionless and dynamic as it was before. This inevitably means additional costs for businesses on both sides,” said Šefčovič at the EU-UK forum, an annual virtual conference focused on the 2021 EU-UK Trade and Cooperation Agreement and the Windsor Framework. 

“Over time, increased divergence may bring even more costs, and it will further deepen the barriers to trade between [the] EU and the UK,” he told the EU-UK forum annual conference.  

The Trade and Cooperation Agreement, which came into force when the UK exited the EU’s single market in December 2020, provides for cross-Channel tariff and quota-free trade.

The UK government of Prime Minister Rishi Sunak appears to have moved away from diverging from EU standards across a swathe of economic sectors and has dramatically scaled down its plans to repeal EU laws on the UK statute book this year.

Speaking at the same event, UK Foreign Secretary James Cleverly pointed to migration, security, energy and climate change as policy areas where the EU and UK could work closer together. 

However, while the UK has participated in EU military support programmes to support Ukraine since Russia’s invasion, such cooperation is only on a case-by-case basis. 

On energy policy, meanwhile, Sunak’s government launched its own consultation on plans to create a domestic equivalent of the EU’s Carbon Border Adjustment Mechanism in March but faced the prospects of high costs for businesses unless it makes an identical regime to the EU. 

Even then, the London School of Economics has warned that the levy could cost UK firms €1 billion per year, with exporters of steel hit particularly hard. 

Officials from Brussels and London are also still deadlocked in talks to finally grant UK associate status with the EU’s €95.5 billion Horizon Europe research programme because of continued disagreement over the UK’s contribution to the scheme, which started in 2021. 

On Monday, David Lammy, foreign affairs spokesperson for the opposition Labour party, said that a review of the Trade and Cooperation Agreement would give a potential Labour government an opportunity to go “sector by sector” to establish where the UK can better work with the EU. 

“We need structured dialogue,” he said. 

In April’s report, UK lawmakers urged EU and UK officials to gradually rebuild relations following a period of “tension and mistrust”, putting visa access for musicians and speedy UK access to the Horizon Europe research programme.  

However, the prospect of the review being the start of a significant overhaul of the EU-UK relationship was played down by Šefčovič, who said that the TCA had only been in place for two years and “hasn’t been used for its true potential.” 

EU officials added that a review would not begin until 2026.  

“It’s a review, not a revision, not a renewal or even amendment of any sort,” said Stefan Fuehring, head of the Commission’s unit on the TCA. 

[Edited by Alice Taylor]

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