Brexit After Oct 31st: What It Means For International Business
Even though the October 31st deadline has come and gone, along with Prime Minister Boris Johnson’s vow to get it done “do or die,” no one understands the impact Brexit will eventually have on their business. It’s still in limbo.
Three years of frustrating negotiation and political pandering over Brexit has only led to more uncertainty. Unsurprisingly, many companies remain fearful of what the future holds for their international business. The U.K.’s proposed withdrawal from the European Union could significantly impact their foreign company if they operate within the country or trade with the nations within it.
As a result, it’s important to understand where things stand at the moment and the potential risks. Here’s what your company can do to lessen the impact, no matter how Brexit eventually pans out.
E.U. Endorses Proposal
Despite significant skepticism, Prime Minister Boris Johnson managed to get his proposed Brexit deal unanimously endorsed by the E.U. just two weeks before the October 31st deadline.
However, the proposal only covered the terms for withdrawal, the Irish land border and the rights of British and E.U. citizens living in each other’s territories. It did not cover all the details of trade and other important issues.
That comes later.
U.K. Members of Parliament Advance Bill
The first step in the U.K. involved a vote on the proposed agreement by the Members of Parliament. They passed the main principles in a second reading by a 329 to 299 vote.
However, this is just one stage in the legislative process. MPs responded that no one could quickly decipher a document of this importance and scope within the short timeline proposed by Johnson.
Lawmakers had just over 24 hours to digest the one hundred and fifteen pages of legal text and over three hundred pages of explanatory notes and memorandums in the Withdrawal Agreement Bill (WAB) before they were asked to vote.
Understandably, the MPs chose a deal postponement. They wanted to give lawmakers the time they needed to digest the contents.
E.U. Agrees to Extension
Even though John repeatedly stated he would not request a Brexit extension from the European Union again, he was forced to do so when Parliament refused to vote on the deal.
Johnson sent a letter to the E.U. and they agreed to an extension, for the third time. The new deadline is January 31, 2020. However, the E.U. also stated the U.K. could leave beforehand if a proposal was ratified by Parliament.
What’s Different in this Proposal?
Parliament rejected Theresa May’s proposal three times. The principle issue was how to handle the Irish border.
Northern Ireland’s Democratic Unionist Party, crucial allies to the British Parliament, denounced the agreement from the get-go. Also, the Republic of Ireland is a European Union member and they did not want a hard, physical border between it and the United Kingdom’s Northern Ireland. This “backstop” was the major reason Theresa May’s proposal met with disdain each time it went to a vote.
The revised plan creates a customs and regulatory “Irish sea border” between Northern Ireland and Great Britain. This means some goods entering Northern Ireland from Great Britain would be subject to tariffs. However, goods that remain in Northern Ireland would qualify for tariff refunds.
Northern Ireland will still follow EU food and manufacturing rules, but the rest of the U.K. will not. They will also follow E.U. customs rules, but will still be part of the U.K. territory. No checks will occur between goods traveling to and from Northern Ireland and Great Britain either.
The remainder of the proposal remains basically unchanged from May’s original plan. However, the new Irish border proposal already adds a layer of complexity. This is all before other Brexit trade, compliance and legality issues are hammered out.
Johnson Calls Election
Johnson called for a general election on 12 December. It’s the third U.K. election in four years, and it’s likely meant to break the Brexit deadlock. However, there’s no guaranteed outcome.
At this point, one can only speculate the final outcome of Brexit, never mind its implications. The following are potential outcomes mentioned by The Institute for Government, a United Kingdom independent think tank, and the BBC.
If Johnson can secure a majority Conservative government, passage of the proposed Brexit legislation is likely. The Conservatives would want to complete the bill by January 31, 2020.
New Deal & Referendum
The E.U. might be forced to renegotiate if the Labour Party wins the election. The new Withdrawal Agreement Bill would have to go through the entire parliamentary process from the beginning.
Then the Labour party would put the “remain” or “leave” question to a public vote through one of several referendum options. After tallying the results, they would decide how to proceed.
If Parliament does not pass a deal, the U.K. will leave the E.U. without an agreement on January 31, 2020. The U.K. will immediately exit the E.U. single market and customs union and lose any trade benefits it once enjoyed.
The Institute for Government suggests the chances of no-deal are slight, but not zero. Even after a general election, no-deal Brexit is still a possibility.
Clearly, this isn’t an option for the Conservatives. However, if the Liberal Democrats win a majority in the House of Commons they’ve stated they would revoke Article 50, the separation process started by Theresa May after the 2016 referendum.
All the U.K. needs to do to stop the process is to write a letter to the European Council. The U.K. would retain its membership and current terms with the E.U., but they can’t use Article 50 as a stall tactic so they can withdraw later and negotiate for a better deal. It’s a one shot deal.
Impact on International Business
The results of the upcoming election and its business implications are filled with variables and uncertainty. Consequently, current information and expert advice is more important than ever for international business.
Certainly, many experts were shocked by the results of the 2016 referendum and businesses scrambled to understand the implications. Now, Brexit uncertainty is greater than ever. Without due diligence and expert guidance it could be difficult for international business to successfully overcome its challenges.
The experts at Blueback Global closely monitor Brexit and understand the implications on international business. We can steer you through Brexit, help you mitigate risk and find ways for your business to adapt and remain competitive. We’re well-positioned and highly-experienced. Contact us for a free consultation and get the targeted advice you need in uncertain times.
Contact Blueback Global Today!