How and when the UK will leave the European Union (EU), as well as if it will at all, continue to be topics of debate. While the route that the UK will take is still unknown, it is clear that change is coming for companies and there is an essential need for them to understand how Brexit will affect business.
Our data suggests that many businesses have not begun seriously planning for Brexit because they do not know which scenario to plan for. While the future is still unclear, businesses should take the initiative to prepare as best they can for both risks and opportunities.
What is the current status of Brexit?
With uncertainty over the future of Prime Minister Theresa May's Brexit deal and a variable extension to Article 50 agreed, speculation is heightened on what will happen next. One thing is clear - the immediate timeline has shifted.
The UK was due to leave the EU on 29 March this year, but as Parliament was unable to ratify the proposed withdrawal agreement in good time, the EU has since agreed to extend the deadline until 31 October 2019.
Upon granting this extension, the European Council confirmed that there would be no reopening of the withdrawal agreement negotiations and stipulated that the UK must take part in elections to the European Parliament on 23 May or leave on 1 June without a deal.
Initially, Theresa May stated that the UK would not have to take part in the elections if MPs agreed to a Brexit plan first. However on 7 May, David Lidington, the Prime Minister's de-facto deputy, announced it would not be possible to conclude the process before the date and the UK legally has to take part. In another twist, there is a possibility that the government will bring forward the legislation which would give domestic effect to the withdrawal agreement, on the basis that a positive vote on second reading could be read as ascent to the deal itself and might serve as a way to avoid the EU elections. The support of MPs for that legislation remains unlikely, and another failure will increase calls for the Prime Minister to give a clear (and more imminent) timetable for her departure.
Meanwhile, talks between the government and the Labour Party to try and formulate an agreed position on Brexit have now been brought to an end having failed to achieve any consensus. There will now be talks to organise a series of indicative votes in Parliament as a means to try and break the current political deadlock.
Separately, Theresa May has announced she will put her withdrawal agreement bill to the House of Commons during the week commencing 3 June. The Bill is intended to give domestic effect to certain elements of the withdrawal agreement, even though the latter has now been rejected three times by MPs. The Prime Minister is seeking a "stable majority" for the passing of the Bill, although there is already much speculation around the likelihood of this occurring.
As has been the case throughout this process, there is still much to unfold and our Brexit experts continue to follow the debate closely to help businesses adapt their plans. At this time, it is more important than ever to stay agile and for companies to prepare as best as possible for the risk and opportunities of different scenarios.
What industries will be affected by Brexit?
Every industry will be affected by Brexit due to the potential economic impacts (reduced investment and recession) and manpower issues (migrated workforces and skilled worker shortages). Some industries will be affected more than others such as financial services but it is the businesses that trade internationally that stand to be most affected by Brexit, regardless of the sector that they operate in. Businesses with continental European suppliers or customers will be impacted, while trade with non-EU countries will be affected by losing access to the EU's current free trade arrangements and any customs blockages.
What key issues does Brexit cause for businesses?
How Brexit will affect business will be different across the board. Every organisation will face different challenges when it comes to the UK leaving the EU, but there are some key challenges that we all need to be aware of and prepare for which are set out below.
- Supply chain - There is a likelihood of experiencing increased costs and administrative complexity. Determining which party bears these costs and how delivery lead times will need to be adjusted will be essential considerations.
- Customs/border tariffs - Brexit will completely change this process for UK businesses. Heavily dependent on any deal that is agreed with the EU, at a minimum there will be costs where tariffs apply that will need to be allocated.
- Workforce - Some industries are dependent on either transient migrant workforces (e.g. fruit pickers) or skilled workers (e.g. the NHS). While some businesses are considering relocating functions overseas, businesses need to ensure that key workers do not leave and/or they can recruit an adequate workforce.
- Regulation - While regulation is often dependent on the industry involved, Brexit will have a major impact across the board. In many areas we largely work to European-wide standards. It is likely we will continue to harmonise (with no ability to shape policy) yet there will be transitional adjustment issues and divergences over time that are likely to create barriers and delays to market entry. For example, businesses need to consider the data protection implications of a no deal Brexit.
- Economic issues - The uncertainty surrounding Brexit has already affected investment in the UK. Many economists are predicting recession and currency volatility and some businesses may find themselves struggling and/or failing. There may be an increase in dispute and the need for risk management skills.
As the UK's journey to leave the EU unfolds, it is easy to get caught up in the jargon and lose understanding of the events taking place. If you are a business leader involved in planning, it is essential that you take the time to understand what the key terminology means and how Brexit could affect your business.
What is a withdrawal agreement?
The Brexit withdrawal agreement sets out how the UK will leave the EU. As well as proposing how Brexit will be implemented, the agreement outlines what the future relationship between the UK and the EU will look like.
What does no deal mean?
A no deal Brexit would result in the UK leaving with no withdrawal agreement in place regarding its relationship with the EU in the future. If a no deal Brexit occurs it could result in outcomes such as trade being severely affected and border checks being re-introduced.
What is a transition period?
The transition period will form part of the withdrawal agreement if the UK leaves the EU with a deal in place. It refers to a specified period time after the UK's withdrawal before the permanent arrangements for the relations between the UK and the EU are implemented. If there is a transition period it should allow time for businesses to prepare for new regulations.
What opportunities could leaving the EU offer to UK businesses?
Brexit is frequently seen as only a risk or negative event yet there will be new opportunities for those that wish to capitalise on them. The volatility of currency will favour some businesses and new trading relationships will be explored. Depending on the UK's relationship with the EU, our domestic laws in various sectors may change in either form or substance, enabling businesses to have the opportunity to influence government in shaping future regulation.
What are the legal implications of Brexit?
As the UK breaks away from the EU, there will be the challenge of untangling its regulatory framework for government and parliament. Brexit will affect businesses immediately by changing how the law is approached. The process will include transforming applicable EU law into UK law and courts will need to consider whether they use decisions previously made in the European Court of Justice as points of reference.
The changes to the UK's legal framework will causes headaches for organisations as they attempt to navigate how the changes will affect their operations including their contracts and employees. It is vital that decision makers have access to expertise in the applicable areas to ensure that they are managing risks appropriately and are aware of any potential opportunities.
How can Gowling WLG help?
Our experts play a regular part in the conversation surrounding Brexit. Despite the number of potential scenarios that could play out when the UK leaves the EU, businesses need to move past the uncertainty and move forward with investment decisions, planning supply chains, managing workforces and meeting bank and customer expectations.
Gowling WLG's Brexit Unit are helping clients navigate this period of flux and plan for the future with expertise across a range of issues and services designed to support those operating cross-border. From advice on strategic planning, contingency risk management and managing transactions, to building new structures and relationships in a post-Brexit future, the team is equipped to handle a full range of matters.
We have experience across a broad range of sectors including financial services, the public sector, real estate and tech. From advising government organisations on the mechanics of Brexit and the impact on international trade to asset managers and the passporting regime, Gowling WLG is highly active in this new and challenging arena.
To help explore what Brexit means for you and your business please contact one of our lead experts or another member of our Brexit Unit.
David Lowe - Partner, Head of International Commerce
David's knowledge of international trade and the supply of goods and services is second to none. He regularly advises on the important next steps GCs should take in light of the Brexit vote.
Bernardine Adkins - Partner, Head of EU, Trade and Competition
Partner Bernardine Adkins is head of the firm's EU, Trade & Competition team. With a wealth of over 25 years' experience in providing key strategic advice to clients, Bernardine is perfectly placed to advise on all aspects of EU, trade and competition law in light of the Brexit vote.
Kieran Laird - Director, Head of Constitutional Affairs
Kieran Laird is a key member of our public sector team who has been researching, analysing and commenting on the various developments in the Brexit debate since autumn 2015. He is available to offer advice on the changes of the UK legal framework as Britain's departure from Europe unfolds.
Contact our Brexit Unit
Brexit Legal Services
- Antitrust issues (including State Aid related issues)
- Brexit & environmental law
- Brexit implications for intellectual property
- Business relocations
- Business solvency & risk
- Consumer issues
- Contract analysis/review & continuity
- Corporate consolidation (including restructuring/reorganisation/transactions)
- Cross-border advice
- Customs duties & tariffs
- Data protection & privacy
- Dispute resolution & Brexit
- Financial services - regulatory aspects of Brexit
- Lobbying around Brexit
- Real estate readiness
- Regulatory compliance
- Supply chain management
- Trading impacts (including impact on trade agreements and WTO)
- Workforce readiness
Key Brexit dates
Please note that some of these timings are indicative only.
15 January 2019
MPs vote by a majority of 230 to reject the Withdrawal Agreement and future framework laid before Parliament on 25 November 2018.
16 January 2019
Government defeats a motion of no confidence tabled by the Labour Party.
21 January 2019
Prime Minister makes a statement in Parliament outlining the Government's next steps following the defeat of the current deal.
29 January 2019
MPs vote to amend the motion taking note of the Prime Minister's proposed next steps stating that they are not in favour of a no-deal Brexit and instructing the Government to replace the 'backstop' in the current deal with alternative arrangements to avoid a hard border in Northern Ireland.
4 February 2019
First meeting of the Alternative Arrangements Working Group, a group of MPs tasked with developing proposals for negotiation to replace the backstop.
13 February 2019
If no deal has been approved by the House of Commons, the Government tables a motion to be debated on 14 February. MPs are able to amend that motion to provide views on what should happen next.
14 February 2019
MPs debate the motion laid the previous day.
15 February - 21 February 2019
House of Commons recess cancelled to allow Brexit work to continue.
24-25 February 2019
EU leaders in Sharm el Sheikh, Egypt, for summit meeting with the League of Arab States. Could be used as an opportunity to sign off any amendments to the current deal.
27 February 2019
Another amendable motion laid by the Government to be debated if no deal has been approved
February - March 2019
A second vote on the Brexit deal takes place and is voted down by a majority of 149.
An extension to Article 50 is agreed to delay Brexit (It was due to happen on 29 March)
21-22 March 2019
European Council meeting.
March - April 2019
Theresa May has Brexit deal rejected three times by Parliament
23-26 May 2019
European Parliament elections
31 October 2019
Deadline for the UK to leave EU, unless extended again