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#TradeTuesday: "The long goodbye” - progress review on the UK’s regulatory divergence from the EU

14 March 2023

By Hugh Matthews

The Retained EU (European Union) Law Bill (REUL Bill) was the flagship piece of legislation during Boris Johnson’s tenure as Prime Minister. It aimed to revoke EU law in UK, establish a clear difference between EU and UK law, and deliver the Brexit promise that laws would be set in the UK rather than in the EU.  

The REUL Bill survived under Truss and is now making its way through the Houses of Parliament. Most recently it passed Committee Stage in the House of Lords on Thursday 9 March. For Trade Tuesday Hugh Matthews examined the Bill and what difference it will make to the legal framework of the UK, and the political success this government seeks to have as we move into pre-election warm up phase. 

What is the government trying to achieve with the Bill?  

A Brexit dividend is politically important, as critics are eager to blame last year’s further 7% drop in UK trade with the EU on the current government. While not a Bill founded under his leadership, Rishi Sunak is looking to show which benefits of Brexit can be unlocked to spur trade and support growth if divergence is enabled and remaining EU legislation binned. This is crucial as Sunak aims to prove to voters in both the red wall and conservative heartlands that his government can deliver on its Brexit commitments, staving off threat from the Reform Party. 

Practically, as demonstrated in the January ‘Benefits of Brexit Report’, the UK Government is aiming to create a political and legal divergence between UK and EU law, to give UK businesses a competitive advantage. By aiming to abolish the general principles of EU law in the UK by the end of 2023, the UK Government are aiming to no longer align with the EU on regulatory decisions in multiple sectors. This can be exemplified by the UK's decision to remove the bankers' bonuses cap to improve growth as part of the Edinburgh Reforms. Another example of divergence is the introduction of the Financial Services and Markets Bill (FSMB) which aims to create a separate domestic regulatory framework for UK businesses.   

To ensure the divergence of UK and EU law, a sunset clause has been created on remaining EU legislation. Any further EU regulation and law in the UK statute book will cease to exist by the end of this year. However, this clause does not apply to EU law which is part of domestic primary legislation, and any law which is maintained will be renamed and processed into UK law.  

Critics from the Labour Party and the Liberal Democrats are staunch in their opposition to this policy as they fear that this an undemocratic move to roll back on policies relating to employment rights, environmental protection, and civil liberties.  

​The opposition to the government's policy covers a selection of policy areas, including anxieties about the future of workers' rights, regression in environment standards and how this bill will affect future legislators' ability to scrutinise the executive. Labour Peer Baroness Chapman of Darlington criticised the lack of governmental accountability, stating: “Ministers are going to get too much power to do things without accountability, like the discussions we have had before”.  Further, the Environment lobbyist group Client Earth argued this would give the UK Government the opportunity to ditch any climate changes initiatives that it dislikes.  

This fear has stemmed from the speed with which the bill has passed through the Commons. Commentators have questioned the government's ability to fully replace EU-derived laws by the end of this year.  

The forthcoming Report Stage in the Lords and subsequent Commons stages are unlikely to come before Easter, and the news agenda – and general Brexit fatigue – has meant this Bill has had less attention than it may have done in previous years. But Rishi Sunak is aiming to demonstrate impact for the electorate and soon, and he is rebuilding alliances with the EU and member states (such as the recent Summit in France). Hence the stakes are high as to how the government will be judged on this final piece of the Brexit puzzle.