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?
Theresa May's resignation as Prime Minister and the subsequent confirmation of Boris Johnson as her successor have maintained the uncertainty surrounding the finer details of the UK's withdrawal from the EU.
The UK was due to leave the EU on 29 March 2019. On 21 March it was granted an extension to 22 May, if MPs approved the Withdrawal Agreement or 12 April if they did not. When the agreement was rejected for a third time, the UK requested a further extension, which the EU27 granted 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.
The resulting elections heralded a historic victory for Nigel Farage's newly formed Brexit party with both the Conservative and Labour parties suffering significant losses in vote share. The Liberal Democrats also enjoyed a surge in support, picking up 16 MEPs.
This heralded much speculation that the door was now open for a hard Brexiteer to become Prime Minister, after Theresa May confirmed she would step down from the role once a successor could be found.
Following a month-long plus selection process, which initially saw some 13 Conservative MPs put themselves forward for the role, a shortlist of two candidates - Boris Johnson and Jeremy Hunt - was arrived at following a series of votes by Conservative MPs. The choice between the final two candidates was put to Conservative Party members. In the final vote, Boris Johnson came out as the preferred choice, gaining 66% of the vote and was appointed Prime Minister by the Queen on 24 July.
Since arriving at Number 10, the new Prime Minister has installed a new cabinet, populated overwhelmingly by Brexiteers. He has also reaffirmed his commitment to taking the UK out of the EU by the October deadline, with or without a deal, and outlined his continued opposition to the Northern Ireland backstop.
As things stand, Theresa May's Withdrawal Agreement and accompanying Political Declaration still remain the only 'deal' on the table and could be picked up by Mr Johnson in some form, although the appetite for doing so seems questionable given it has now been rejected three times by MPs.
Given the Conservative Party's fragile majority in Parliament, many commentators have also speculated that a general election could be on the cards, even before the October deadline.
For now, all eyes will be on the new Prime Minister as he pursues the twin tracks of attempting to renegotiate the current Withdrawal Agreement while preparing for a no-deal Brexit in the event that it proves impossible to find an acceptable deal. Eyes are also on those MPs who are set against a no-deal Brexit and who are sure to try to prevent it when Parliament returns from recess on 3 September.
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 - Partner, 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
24 May 2019
Theresa May announces she will resign as the leader of the Conservative Party
7 June 2019
Theresa May resigns as leader of the Conservative Party
24 July 2019
Boris Johnson assumes the office of Prime Minister for the UK having been elected leader of the Conservative Party the previous day.
31 October 2019
Deadline for the UK to leave EU, unless extended again