The referendum on the United Kingdom’s continued membership of the European Union will take place on 23 June 2016. The question on the ballot paper will be: “Should the United Kingdom remain a member of the European Union or leave the European Union?”. The responses will be “remain a member of the European Union” or “leave the European Union”. The outcome of the referendum will have a major impact on domestic politics throughout the UK and will influence profoundly the UK’s relationship with Europe and rest of the world. From a business perspective, the consequences could be significant.
It is not possible to predict the outcome of the referendum. No alternative legal or political treaties and/or arrangements will be put to the voting public in the referendum itself nor will any such alternative be known at the time of the referendum. There is a real concern that a vote to leave would lead immediately to political, economic, legal and regulatory uncertainty.
This Legal Perspective briefing examines the implications of a Brexit for Irish companies and businesses which could arise from a changed relationship between Ireland and the UK. We consider the possible changes to the legal and regulatory environment in different sectors and work areas.
We also make suggestions regarding the preparations that might be made both prior to the holding of the referendum and, if a vote to leave is the result of the referendum, after 23 June 2016 and before an actual Brexit.
In the Long Term
Impact on some sectors could be marked, affecting investment and trading in significant ways.
In its latest Quarterly Bulletin published on 1 April 2016, the Central Bank of Ireland commented that the ‘Brexit referendum creates uncertainty and is a downside risk factor’ for the Irish economy. This statement, of course, plays down the nature and extent of the risk. In fact, because of our very close trade and economic links with the UK, the Irish economy and Irish business could be affected in very significant ways by a Brexit.
As AIB Treasury Economic Research Unit noted recently, “the UK is a very important market for Irish indigenous exporting firms. Those trading with the UK, at a minimum, would face increased administrative and regulatory costs following a Brexit”. And, of course, political and social implications could also arise.
The long term implications of a Brexit for the UK and the continuing member states of the EU (including Ireland) legally, economically and politically cannot be predicted. However, some commentators predict very adverse consequences: “If it goes wrong, the British economy could be in trouble for the next 10 years” – Willem Butler, Citicorp. Economically adverse consequences would, inevitably, have legal and political implications.
In March 2016 – underlining comments made earlier by its Governor, Mark Carney, in October 2015 – the Bank of England noted that, for the majority of the period since the UK joined the EU, the greater openness and deeper integration afforded by EU membership had very likely increased the UK’s dynamism - i.e. the ability of the UK economy to grow and progress. Mr Carney has also previously stated that “in some respects, the UK is the leading beneficiary of the famous four freedoms in the Treaty of Rome”. In fact, many in the UK do not realise just how much they rely directly and indirectly on those four freedoms. For UK business, the loss of rights and benefits under various existing EU trade agreements and future perspective agreements such as TTIP and Canada could be very significant.
If the UK votes to leave the EU, the long term implications for Ireland, the other remaining EU member states and the UK cannot be known at this time. However, it can be said that it is very likely that legal and regulatory divergence in many trade and business sectors would increase over time and the impact on some sectors could be marked affecting investment and trading in significant ways.