Written Statement: EU Transition Period Extension

The fourth round of the negotiations between the UK Government and the EU on our future partnership concluded last week and it is clear that fundamental differences remain largely as a consequence of the UK Government moving away from the commitments made in the Political Declaration agreed between both parties in October.  Given how little progress has been made, it is increasingly difficult to see how a Comprehensive Free Trade Agreement can be in place by the end of 2020, when the transition period comes to an end.

The Withdrawal Agreement requires that an extension to the transition period must be agreed by the Joint Committee before the end of June. With less than three weeks to go until then, it now seems impossible that the UK Government will be able to give us a credible assurance by then that a deal is within reach.

That is why the First Minister has today written jointly with the First Minister of Scotland calling on the Prime Minister to ask for an extension to the transition period in order to provide a breathing space necessary to complete the negotiations. This echoes the call made by the First Minister at the start of this crisis, over 11 weeks ago for the Prime Minister to seek an extension in order to allow all governments to focus their full attention on fighting the pandemic - a request which was ignored.

The prospect of completing these complex negotiations within the transition period was always going to be a challenge, but the wholly unforeseeable and tragic Covid crisis has only compounded the difficulties of the negotiations. As a Government we know it has been impossible to devote the resources we would have wished to European Transition at this time, and it is clear that is also true of the UK Government and indeed the EU.

The risk of the UK leaving the transition period without a deal on our future relationship with the EU is very real.  All credible evidence suggests there will be significant adverse economic consequences of such an abrupt and drastic change to our trading relationship with the EU. This is why the OECD’s Economic Outlook for June includes a very strong recommendation for an extension stating that “The United  Kingdom  should  make  a temporary arrangement to stay in the EU Single Market beyond 31 December 2020 given the pressures firms already face from COVID-19.” The Welsh Government has previously summarised the evidence of leaving the EU under a range of future relationship scenarios. This evidence is clear the further the UK moves away from the current level of economic integration the greater the economic damage. This analysis is available at: https://gov.wales/the-future-uk-eu-relationship.

At a time when business reserves have been exhausted and the economy is looking for certainty and growth, the UK Government’s approach to our future relationship with our largest export markets risks adding additional costs, new barriers to trade and confusion. The UK Government’s approach further increases the risk of business closures, putting more jobs at risk and adding further strain on our communities.  Public money available to support business and communities through the changes will also have been severely depleted by efforts to respond to the current crisis.

Voluntarily putting our country through this at a time when we should be focusing on how we recover from the enormous economic shock caused by the Covid crisis is reckless and unnecessary.  We will therefore be continuing to make the case to the UK Government at every opportunity in the coming weeks for them to request for an extension in order to allow time for the negotiations to conclude with an outcome in the best interests of all our nations.  This will give our fragile economy the chance to restart, and our businesses the breathing space to recover from the shocks of the last few months and to prepare for our future relationship with the EU.