BREXIT: What's going to change?
Dorit McCann, partner in the corporate team at Carson McDowell LLP, explores the impact of the UK’s exit from the EU.
23 August 2016
It is clear by now that the next few years will bring a degree of uncertainty for businesses in Northern Ireland, and indeed the rest of the UK, while the terms of the UK exit from the EU are being negotiated. However, it is important to bear in mind that the UK remains a full member of the EU and that EU laws will continue to apply in the UK during the negotiations.
Moreover, many EU laws are implemented into UK law and will therefore continue to apply after the UK exits the EU. The UK Parliament will have to decide which of these laws it would like to repeal, which it would like to retain and which it would like to amend. This process will take many years.
At this stage nobody knows what the UK’s future relationship with the EU will look like. This means that it is too early to say what the long term implications for businesses will be. This will become clearer as the negotiations with the UK and the EU take shape and details of the new trading relationship emerge. For example, if the UK remains a member of the European Economic Area (EEA), the majority of EU laws would continue to apply to the UK, including the free movement rules, competition and procurement laws.
The effects of Brexit will be more significant if the UK chooses a trading relationship with the EU outside the EEA. A free trade agreement similar to the ‘Canadian’ model would give the UK the freedom to regulate much of UK life without reference to EU laws but would be subject to any free trade agreement’s provisions regarding goods and services - UK goods imported to the EU, for example, would have to comply with relevant EU standards.
A customs union along the lines of the relationship the EU has with Turkey would provide a common external tariff for all industrial goods but would not address agriculture, services or public procurement. If no other trade model has been negotiated with the EU in the two years provided for by the EU Treaty, in the absence of an extension of that period which would require the unanimous consent of all EU Member States, the UK’s trade will be governed by the rules of the World Trade Organisation (WTO). This would mean that UK exports of products to the EU would be subject to the EU common external tariff and that the UK would have to comply with EU product standards for exports to the EU.
Regardless of the future trading relationship between the EU and the UK, it is important to bear in mind that many pieces of EU legislation are firmly embedded in UK law and are therefore unlikely to change substantially in the short to medium term. Examples are employment, data protection, competition, public procurement, environmental and planning laws.
Of course these potential legal developments have to be viewed in light of the impact of the Brexit vote on broader markets. The initial impact on market sentiment in terms of mergers and acquisitions and investment activity has been a negative one according to economists. As greater clarity begins to emerge, businesses will look to see where opportunities may lie and one assumes that the UK government’s focus will be on seeking to restore business confidence.
As Northern Ireland is the only UK region to share a land border with another EU Member State, the future relationship with the Republic of Ireland and the post-Brexit treatment of the border between the UK and Ireland is a critical issue for businesses in Northern Ireland that currently operate on a cross border basis.