The divergence devil lies in the detail

November 1 2023, by Joël Reland

The era of ‘big divergence’ is over. Only a couple of years ago, Boris Johnson was promising to smash down EU regulations and create bespoke UK regimes for everything from procurement to medical devices to data protection.

For Johnson, divergence was central to his aim of remaking Britain after Brexit. Yet, today, ‘Brexit opportunities’ are at the margins of the government’s agenda. UK in a Changing Europe (UKiCE) regular divergence trackers have recorded a marked decrease in the number of cases of ‘active’ divergence – where the UK seeks to remake its rules outside the EU. And where it does occur, it tends to be narrow and limited in scope.

The simple reason for this shift is a change in political priorities. The Government’s primary ambitions are now controlling inflation and boosting growth. Regulatory divergence – which invariably creates more administration for businesses operating between the UK and EU – is a barrier to both.

The ultimate symbol of the government’s pivot is the removal of the ‘sunset clause’ from the Retained EU Law (REUL) Act – which would have seen thousands of pieces of EU-derived legislation expire by default at the end of this year. “We are not arsonists,” was Business Secretary Kemi Badenoch’s frank explanation for the decision.

Three reasons why divergence still matters

For those who feared the disruption of ‘big divergence’, these changes are likely to be welcome. Yet, our latest tracker shows that, while divergence is now much more limited in scale, it still has the potential to be highly disruptive for three key reasons.

First, the REUL Act has not been scrapped entirely, and its other effects could still be significant – in particular its switching off of the supremacy of EU law.

To illustrate: the right to equal pay is enshrined in both UK and retained EU law. At present, the supremacy of retained EU law means its case law defines how the law is applied. This includes a 2021 ECJ ruling that workers with the same employer are entitled to the same pay, even if they work in different establishments. In effect, a female shop worker at Tesco must be paid on the same basis as a male worker at the distribution centre – because Tesco is the employer of both.

Once the REUL Act takes effect, that case law will lose its effect, removing an important provision in upholding the right to equal pay. The UK government has now committed to replicating that ‘single source’ provision in UK law, but only after the Labour Party said it would do so.

This implies government was caught unaware and raises a critical question as to how many other important pieces of case law are going to be effectively switched off by the REUL Act. Even if civil servants are working diligently to identify as many as possible, it seems very likely that some will slip through the net and not come to light until somebody feels the effect of their absence.

A second reason divergence continues to matter is the impact on Northern Ireland. Although we are now identifying fewer cases of divergence, a significant chunk create divergence between GB and NI because of the Protocol on Ireland/Northern Ireland.

For example, a Health and Safety Executive opinion that certain forms of lithium should not be classified as toxic diverges from the view of the European Chemicals Agency (which also applies in Northern Ireland). Lithium is used in a range of goods including electric car batteries, and the divergence could mean British manufacturers have to meet additional EU safety requirements to export their goods to the EU. But there is a risk that ‘made for UK’ products do not meet the EU requirements and therefore are not exportable to Northern Ireland.

A third factor is ‘passive divergence’ – where the EU changes its rules and the UK does not follow, creating new barriers to trade. For instance, the EU imposed restrictions on 31 pesticide ingredients and 8 hazardous chemicals which remain permitted in GB, meaning goods treated with those substances will not be permitted for export to the EU.

British businesses will likely adapt their processes to meet the new EU rules, to ensure exports continue. But the challenge is that the EU is an active regulator and thus the scale of passive divergence will only grow with time, meaning more and more issues which businesses have to monitor and adapt to. Moreover, in some cases, like the introduction of the EU Carbon Border Adjustment Mechanism, new barriers to trade are unavoidable unless the UK actively aligns with the EU (in this case its emissions trading scheme).

Monitoring EU policy changes is a job for life

What this all boils down to is that, though UK officials may no longer be tasked with identifying and implementing many big ‘Brexit opportunities’, divergence will still permeate much of their work. The REUL Act needs to be closely watched for unintended effects as it comes into force, while monitoring EU policy changes and assessing their impact is a job for life. There is also an ongoing task in assessing the divergence effects, including upon the UK internal market, of any Westminster reforms.

In isolation it may be tempting for officials to see individual bits of disruption as surmountable, but over time the slow drip of divergence is likely to create an ever-thicker regulatory barrier across the Channel and in the Irish Sea.

Though the era of big, headline-grabbing divergence may be over, there is still plenty of devil to be found in the finer detail.

Further reading: Non-divergence is the new consensus in British politics: UKiCE.