This is a shorter version of the regular 'Boardroom Brexit' email we produce to keep our clients informed of the latest Brexit developments. If you are a client and would like to receive these updates, please email [email protected].
There has been a lot going on in recent months; the UK general election, the start of formal Brexit negotiations, and the unofficial launch of Britain's independent trade policy at the World Trade Organisation in Geneva.
With so much activity it's often hard for businesses to cut through to the real issues. DLA Piper's Boardroom Brexit is a key client briefing which breaks down recent developments into what businesses need to know, and recommended actions that senior management teams can take now to prepare their business to make the most of Brexit. Here we offer an overview of our recent briefing.
What type of Brexit?
Hard or soft Brexit to one side, the three most significant impacts on business are:
- The UK Government wants to leave the Single Market. This means no free movement of goods, services, people and money between the UK and EU, which comes with membership, but access to it as a third (non-EU) country. Businesses should be asking themselves how much of their profitability depends on using these four freedoms.
- The EU considers that the Single Market is indivisible, so being out of it means being out of every sector of cooperation within it. In other words, no side deals on the automotive sector, aviation, financial services etc.
- The UK Government wants to leave the Customs Union, which means it can have separate trade deals with non-EU countries but will face customs procedures and tariffs on exports to the EU, and will apply the same to imports from the EU. The UK may also lose the benefit of preferential trade terms with the 45 or so countries the EU has a free trade agreement with. Businesses should assess the impact of these changes on their bottom lines
The Labour Party is yet to make clear its position on the Single Market and Customs Union.
Transitional arrangements - What you need to know
In the past week, news bulletins and newspaper editorials have been full of talk about "transitional arrangements". But what are they and how might they affect you?
In a nutshell, transition would be a time-limited implementation period post Brexit day itself where some EU rules would continue to apply to the UK in order to avoid a "cliff edge", preserving access to labour and the economic stability and certainty that the economy requires. This would also give further time to hammer out a long-term trade deal between the UK and EU.
Transition could be achieved by rolling over the rules of the UK's membership of the EU, or it could be the temporary use of an off-the-shelf model: membership of the European Economic Area would mean access to the Single Market and continuing free movement of workers, but also require payments to the EU's budget; while membership of the European Free Trade Association would mean more limited access to the EU market for some but not all sectors, coupled with reduced requirements to apply EU laws.
There is now political momentum within the UK to secure some form of transitional arrangements, but a number of senior politicians are arguing strongly that transition must have ended before the next general election scheduled for early Summer 2022. Regardless of speculation about this timeline, the current political and media focus opens up a clear opportunity for businesses to put forward their priorities and make the commercial arguments for a transition framework that facilitates investment and economic activity.
What action you can take now
Uncertainty and unpredictability in national and international politics should not be a reason for delaying taking action. As things stand, the deadline for the UK's departure has been set for less than two years' time, and the type of Brexit to expect is becoming clear.
Companies should be looking to:
- Understand the details of Brexit and forecast its likely impacts on their business and bottom line. This will require relying on more than press reports.
- Take steps to prepare for the impact of the UK's withdrawal. For example, how much of your business relies on EU law and what is the fall-back position if there is no deal?
- Act now to put in place contingency plans which can be activated as and when required. Remember to calculate lead-in time when considering contingency plans.
- Influence the outcome through an effective policy advocacy strategy, ensuring that your commercial priorities are understood by the UK and EU negotiators and are delivered in the final agreement. This is the most effective way of securing a good result from Brexit.
If you would like to discuss how DLA Piper can help you to take any of the steps listed above, please contact Paul Hardy, our dedicated Brexit Director in the UK, and Jeroen Jansen, who leads our EU Government Affairs practice in Brussels. The key to navigating Brexit successfully is informed analysis, accurate forecasting and practical contingency planning. DLA Piper has the combination of political, policy and legal expertise, as well as global coverage, to provide this level of Brexit advice.