LONDON — Britain faces an economic “cliff-edge” in 2021 unless the government can extend the “ridiculously short” Brexit transition window, according to a senior former UK diplomat.
Lord Hannay — a cross-bench peer and former UK ambassador to Europe and the UN — told Business Insider that the transition window, scheduled to finish in January 2021, would need to be lengthened to avoid a disastrous “no-deal” scenario.
“The transition window is ridiculously short, as everyone has now understood,” he said.
‘”I think it’s very likely that we will not be in the fully functioning new partnership [with the EU] by January 2021. I don’t find anyone whose work I’ve read or I’ve talked to who seriously thinks the contrary.”
Hannay, who was Britain’s permanent representative in Brussels when the UK helped draft the legislation which created the European Single Market, warned that failure to extend the transition window would likely mean that Britain faced a second cliff-edge in January 2021 rather than in March next year.
“If the government don’t, when it’s needed, extend that period — and all the signs at the moment are that it will need to be extended — then we go over another cliff-edge. Not the March 2019 cliff-edge but the January 2021 cliff-edge.
“If we go over that before we can negotiate a really satisfactory EU trade deal, then business will be confronted with two wrenching shifts: One where they go over the cliff-edge and one where they scramble back up again.”
Hannay said that Brexiteers who would be content for Britain to crash out of the EU without a deal in 2021 risked drowning out the arguments of business groups who fear that such an outcome would have a devastating impact on business.
“The difference is between those who — with a certain fecklessness — think that’s what’s going to happen but couldn’t care a damn, perhaps because they want to go over a cliff-edge — and those, mainly who are in business, who are genuinely deeply concerned about it, but can’t seem to get their view across to the government in a very effective way because the government is so busy arguing amongst itself,” he said.
Hannay’s warning comes as even some senior Brexiteers urge the prime minister to extend the transition period amid fears that their plans for new customs arrangements would take years to implement.
The EU is likely to be receptive to calls for an extended transition. Business Insider reported last week that the EU is “deeply concerned” about the UK’s lack of preparation in its plans to roll over non-EU free trade deals ahead of Brexit. One senior source in the European Parliament told BI that the European Commission has privately said it would be prepared to include an extended transition period in the final draft of the withdrawal agreement if Britain requested it.
The UK secured a conditional 21-month transition deal with EU negotiators in March, which delayed the prospect of a cliff-edge scenario for business when Britain leaves the EU in March next year.
But UK negotiators did not seek an option to extend the transition window beyond January 2021, and there are growing concerns that both sides will not have agreed upon the terms of a new trading relationship by then.
However, that would likely incur the wrath of many Brexiteers who argue that the arrangement represents an attempt to delay or block Brexit.