UK: Will a two or three year transition period be long enough? - ING

A big fear of Brexit-supporting ministers is that the transition period could lead to an indefinite period where the UK is neither in nor out of the EU, according to analysts at ING.

Key Quotes

“This is partly because the next election is scheduled for 2022, and an extended transition could leave the government vulnerable to suggestions it hasn’t brought the UK entirely out of the EU.”

“But does this give firms enough time to adjust? The complexity of modern supply chains means many goods often travel multiple times between the UK and EU before being sold in the single market. The BMW Mini and pints of Guinness are good examples. These processes will take time (and money) to re-orchestrate.”

“Logistics are also a big consideration. At Dover, less than 1% of lorries arriving and departing require checks. Given the sheer number of lorries that pass through, maintaining a frictionless border will be key. The British Freight Transport Association has said that adding even two minutes to the process could generate queues of up to 17-mile queues on the M20 motorway. Part of creating a fluid customs process will require new staff, but this too takes time. For instance, it takes three years to train a new customs official in Germany, and two years in France.”

“Of course, there is the potential for the transition period to be extended. If negotiations take longer than expected, it is unlikely that the UK government would walk away and trigger "cliff edge" Brexit having worked so hard to avoid it this time around.” 

“While this may upset the most hardline of Brexiteers, the government compromises made so far suggest they are increasingly acknowledging the need to minimise the threats to the economy and jobs.”