Thursday

19th Oct 2017

Column / Brexit Briefing

Taking control of the red-tape revolution

  • “Very little will change”, insists one senior French diplomat, who adds that the main sticking point will be whether the European Central Bank accepts that systemic banks based in the UK will no longer be regulated by them. (Photo: Dave Collier)

The publication on Tuesday (8 August) of a draft bill to transfer the EU’s Data Protection Regulation - which establishes tighter controls on the processing of personal data, and gives individuals greater rights to access it - into law, well before the UK leaves the EU in 2019, was not a surprise.

Nonetheless, it will go some way towards calming the nerves of an increasingly nervous tech community, which has been looking at Dublin, Berlin as alternative homes.

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It is still a significant move. The data protection bill is one of the first major pieces of EU legislation to start the journey into UK law since the June referendum last year.

While some in the Brexiteer camp argued during the referendum campaign that leaving the EU would mean a bonfire of troublesome regulation, ministers have quickly realised that red-tape is impossible to eradicate. The only question is whether it emanates from Brussels or Whitehall.

The imminent loss of the European Banking Authority (EBA) and European Medicines Agency (EMA) - the two EU agencies currently based in the UK - is a source of some chagrin for ministers who had hoped to keep them.

The bidding war of 27 bids between 21 countries for the first pieces of ‘Brexit booty’ has focused the minds of ministers and officials about how best to manage the post-Brexit regulatory burden, and who will do it.

Bureaucratic empires

Post-2019, the UK faces a choice: keep putting single market rules into national law and use the inaccurately described ‘Repeal Bill’ to keep virtually all existing measures on the statute book; or replicate all the regulatory functions at national level and secure bilateral recognition from its new trading partners.

Choosing the latter would create a vast and expensive bureaucratic empire - Labour MEP Richard Corbett has worked out that Brexit will mean the UK leaving more than 40 other agencies.

The first option, meanwhile, would avoid the need for recruiting thousands of new civil servants to duplicate the work of the EU agencies, but is hardly ‘taking back control’.

The, admittedly, very early signs are that prime minister Theresa May’s ministers see no short-term alternative to the cheaper option. May has indicated that the UK will opt into the new Europol rules and remain party to the EU's Unified Patent Court Agreement.

After reluctantly accepting that the EMA would leave their Canary Wharf headquarters in London’s financial district, health minister Jeremy Hunt and his business counterpart, Greg Clark, now want to strike a ‘deep and special relationship’ with the EMA.

The EMA currently licenses a quarter of all global pharmaceutical sales, and the prospect of it leaving is a source of anxiety for the UK’s National Health Service (NHS) and pharmaceutical firms.

The UK's Medicines & Healthcare Products Regulatory Agency is already the most important national authority in the EMA’s work - responsible for assessing around 20 percent of the drugs evaluated by EMA each year - but it would have to launch a huge recruitment drive if it became solely responsible for approving all UK-developed drugs for the European market.

Unfortunately, it is not as easy as merely adopting EU rules. In the case of data protection, outside the EU, the UK will be classified as a ‘third country’, and will need an ‘adequacy decision’ from the European Commission for data transfer to and from EU countries to continue.

Industry group TechUK is nervous enough to have put together an advisory panel on Brexit, including former civil service head Gus O’Donnell (who has criticised the government’s lack of preparedness for the Brexit process) and Tory MEP (and Brexit supporter) Syed Kamall. They are lobbying the government to guarantee data passporting rights.

Cautious optimism

Despite fears that London’s dominant status in the European banking sector would come under threat from Frankfurt and Paris - both of whom have bid to host the European Banking Authority (EBA) - the message from several EU officials is that a deal will be struck.

“Very little will change”, insists one senior French diplomat, who adds that the main sticking point will be whether the European Central Bank (ECB) accepts that systemic banks based in the UK will no longer be regulated by them.

The prospect of a ‘cliff-edge’ effect - with the UK falling out of the EU in 2019 without any agreement on future trading arrangements - is very slim, he adds.

Even so, any cautious optimism among civil servants about the fate of the City is tempered by the grim realisation of the scale of the regulatory challenge facing it.

Benjamin Fox, a former reporter for EUobserver, is a freelance writer.

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