The Brexit Clock is Ticking – Brexit Alert No. 2: “Time to Debunk Misconceptions”

on Aug 24, 2018 in News

In the Brexit Alert of 10 August our Brexit Team has taken the position that a Hard Brexit is more likely than not.

Some additional information in this regard:

  • The August Paper of the UK Institute for Government, “Autumn surprises: possible scenarios for the next phase of Brexit ” (IfG August Paper) concludes :

“The unsatisfactory conclusion is that it is extremely hard to predict how the period between October 2018 and March 2019 will play out. The interaction of continuing negotiations with the EU27, the remaining real difficulties over the Irish backstop, the lack of progress on the future framework, the internal divisions in the Conservative Party, the Prime Minister’s fragile position and the number of parliamentary hurdles any agreement has to pass to take effect, mean that charting a clear path through to an orderly Brexit with a transition period is hard.”

  • The IfG August Paper also looks at five scenarios for the next phase of Brexit, leading to one Orderly Brexit and four No Deals, taking into account the realities of the UK legislative process.
  • Please note that the IfG August Paper does not consider the EU approval process, which needs to be added to the list of uncertain events:
    • Approval of the European Parliament, following recommendation of the Constitutional Affairs Committee
    • Vote of the Council – 72% of the members, representing 65% of the EU population
  • Brexit negotiators, Michel Barnier and Dominic Raab, indicated on Tuesday that the timeline has moved to November :

Both men agreed that, while there has been progress in drafting possible cooperation between the EU and Britain on security and defence after Brexit, the Irish border and trade ties were still the key sticking points.

  • European Parliament members have indicated that the Withdrawal Agreement, once this were to be agreed on at the Negotiators’ level, must be received timely.
  • Advisories claiming that the recent warnings on contingency planning at governmental level are “simple negotiating techniques” and that there should be no concern as it would be “easy” to reach an agreement by “March 2019”, show a lack of understanding of the legal requirements and processes.

The Withdrawal Agreement need not define the details” — “It lays out high level principles, reducing risks of a No-Deal by the end of the transition period, prospectively December 2020.”

  • This is not the case: The Withdrawal Agreement requires agreements on each legal, textual provision, which includes an agreement on Northern Ireland (Protocol).  At present, there is a no accepted solution for Northern Ireland & the parties have not been able to agree since December 2017.
  • Brexit occurs on 29 March 2019 (UK) / 30 March 2019 (EU). Transition is not agreed at present because as long as there is no agreement on all provisions of the Withdrawal Agreement, there is no transition.  The provisions on transition are part of the Withdrawal Agreement itself.
  • There is confusion on the need to have a Withdrawal Agreement and the need to have an agreement on the Framework of a Future Relationship, which is a separate issue under article 50.  How detailed or how high-level the “framework for the UK’s future relationship with the EU” under article 50 must be, is unclear.  It is clear that the UK Parliament will only approve the Withdrawal Agreement together with the Framework for the Future Relationship (UK Act, European Union Withdrawal Act 2018, article 13, Parliamentary approval of the outcome of negotiations with the EU).
  • Under the assumption of the best-case scenario, namely that everything goes smoothly at the level of the UK and the EU approval, the agreement on Withdrawal must be reached at the latest by November not to endanger above-mentioned approvals.

What can and should a business do today?

  • Contingency planning
    • Mapping your potentially affected supply chain
    • Reviewing your contracts
    • Checking your IP, your GDPR plan to be “Brexit proof”
    •  …
  •  New investments in the UK must take into account the Brexit impact  

Dates to watch out for:

  • 19 – 20 September (EU informal Salzburg meeting)
  • 30 September – 3 October (annual conference of the UK Conservative Party)
  • 13 – 14 December (last scheduled EU Summit)

Is your company already preparing?

Please complete our Brexit survey on the Brexit preparedness on business (https://pwcbe.smarpshare.com/app.microblog/#/5b6305b7f06a6d00010018a1)

Additional information:

Institute for Government – “Autumn surprises: possible scenarios for the next phase of Brexit”: https://www.instituteforgovernment.org.uk/sites/default/files/publications/brexit-scenarios-final_0.pdf

Reuters – “EU expects delay in Brexit deal beyond October target”: https://www.reuters.com/article/uk-britain-eu-meeting/eu-expects-delay-in-brexit-deal-beyond-october-target-idUSKCN1L61TD

UK Legislation – European Union (Withdrawal) Act 2018: http://www.legislation.gov.uk/ukpga/2018/16/contents/enacted

UK Government – “Guidance on how to prepare for Brexit if there’s no deal”: https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal

 

A joint PwC and PwC Legal initiative,

on behalf of the Brexit team,

Ine Lejeune – Brexit Lead Belgium