The UK is scheduled to leave the EU on 29 March 2019 at 11pm GMT, which is now less than 12 weeks away.
The UK and EU have agreed a Withdrawal Agreement at government level, which would provide for a post-Brexit transition period to 31 December 2020. The intention during that period would be to continue on a ‘business as usual’ basis: free movement rights would continue, and EU law would continue to apply in and to the UK. The short-term impact of withdrawing on the agreed terms would therefore be limited, with businesses and others gaining extra time to consider and prepare for whatever new arrangement would then take effect in 2021. That might be the ‘backstop’ set out in the Withdrawal Agreement: this would see the UK remain in a modified customs union with the EU, with Northern Ireland also remaining subject to some of the EU’s single market rules, unless and until agreement could be reached on a new and ongoing UK-EU trade arrangement.
However, the Withdrawal Agreement remains subject to approval by the UK and European Parliaments. The House of Commons is set to vote on the Withdrawal Agreement in the near future, with the debate commencing today (take this link to our blog post on the ‘meaningful vote’, which was posted in December before the original vote was postponed). The consensus among political commentators still appears to be that MPs will reject the Agreement.
Considering the limited time remaining until exit day, and that there appears to be no obvious consensus in Parliament for any other option, businesses should be viewing a ‘no-deal’ Brexit as very much a live prospect. This would mean Brexit would take place on 29 March 2019, with no transition period. Even if a deal is ultimately agreed following an initial rejection, this might potentially only be confirmed very late in the process, with a no-deal Brexit remaining possible right up to that point.
The UK Government has produced dozens of ‘technical notices’ setting out what it would propose to do in various areas in the event of a no-deal Brexit, and identifying issues for businesses and others to consider. You can find discussion of a number of these notices on our Brexit Hub. The Commission has published equivalent Brexit preparedness notices on how the EU would respond to a no-deal Brexit.
The UK Government has also been publishing orders under the European Union (Withdrawal) Act 2018 (the “EUWA”), to adapt EU legislation so it works as UK law post-Brexit. If there is a transition then these orders will not be needed until 2021, if at all, but in a no-deal situation they will come into effect at the point of Brexit. The Government estimates 800 to 1,000 such orders will be needed, with some still to be published. All businesses that deal with EU legislation should understand how the rules applying to them might change in the event of a hard Brexit. Read our update for more information on these EUWA orders.
Scottish businesses should also keep in mind that various areas currently dealt with by the EU will (at least in principle) be the Scottish Parliament’s responsibility post-Brexit. As yet the Scottish Government has not published any orders adapting EU legislation in those areas, possibly because the legal dispute over its intended equivalent to the EUWA was only decided by the Supreme Court in December. It remains unclear how they will proceed, but time will be tight to get all the required orders published, approved (where necessary) and in force pre-Brexit. Negotiations are also still ongoing between the UK and devolved governments about the introduction of new UK-wide frameworks in key areas – including agriculture, fisheries and the environment – to ensure the harmonisation that currently flows from the common EU rules is not replaced by different regulatory regimes in the various UK nations, which would create new barriers to intra-UK trade. Read our update on those negotiations.
While some of the effects of a ‘hard’ Brexit might be managed through limited-scope agreements between the UK and EU, or unilateral actions from either side, the overall impact would likely be significant. Every business should therefore be taking steps to understand its exposure to the risks of a no-deal Brexit.