Business Group Blog

Breaking Down Brexit

Brexit, the United Kingdom’s impending withdrawal from the European Union, is top of mind for Global Business Group on Health members. Our team recently conducted an interview with representatives from the British embassy to learn more about the situation and potential implications and associated outcomes.

As widely reported, the current situation is extremely fluid since the resounding defeat of the deal, secured by British Prime Minister Teresa May following a year and a half of negotiations with the EU. To understand the significance of Parliament rejecting the deal, and the magnitude of what may lie ahead as a result, let’s have a quick recap of what the deal outlined. 

Parliament needed to vote on two documents, as the first step required for ratification.

  1. The withdrawal agreement, included provisions to:  a) end free movement across borders, b) address trade, c) leave the EU common agriculture and fisheries and d) increased standards to protect jobs. The withdrawal agreement also contained a 20-month transition period which provided protections to both UK citizens in the EU and EU citizens in the UK for a period of time following Brexit. If passed, the withdrawal agreement would become law. 
  2. The political declaration, took positions on the future relationship between the UK and the EU.  This document if passed, would not become law but would become the framework to negotiate future policies through 2020. Since then:

In the wake of Parliament’s rejection of the deal, discussions continued in attempts to navigate the situation and avoid a “no deal Brexit,” whereby the UK would exit the EU with no agreement in place. On January 29, following further debate within Parliament, May announced that she had Parliament’s support to go back to the EU to obtain changes to the withdrawal agreement concerning the controversial backstop related to the Irish border by replacing it with “alternative arrangements.” While the UK Parliament may now be in agreement internally with what they want to see in a revised withdrawal agreement, the EU is not. The UK announcement was met with an immediate response from the European Union (EU) ruling it out saying in a statement that the current agreement remains the “best and only way.” With the French President Macron declaring it is “not re-negotiable.” An official from the European Parliament also stated that there is “no majority to reopen or dilute the deal.”

So what could happen next? Here is a break-down of the potential scenarios.

May will return to Brussels with intent to negotiate with EU, mostly a change in to the backstop, and if successful the next step is a second vote in Parliament.

A complete renegotiation would take some time and would more than likely require an extension of Article 50 to delay Brexit. Any extension would need to be agreed by unanimity. The process would require a request by the UK and agreed by EU member states. It is anticipated that any such extension would only be granted for a short period of time with specific intent.

The rules for referendums are set out in a law called the Political Parties, Elections and Referendums Act 2000.2

In order to get a political mandate, May could ask MPs for an early election.

The Labour party could go forward with another motion of no confidence at any time and if successful, trigger an appointment of a new PM. However, no matter who would come to power the same range of Brexit options would apply.

A no-deal Brexit is not ideal, and in many minds the last resort, but if an agreement cannot be made the UK would leave the EU on 29 March 2019 with no withdrawal agreement in place. This would mean there would be no transition period.

As Brexit looms closer and uncertainty continues, concerns are understandably increasing. Member companies with operations and employees in the UK will be paying close attention to how events unfold in the coming weeks as it will have implications for their workforce.

 

No-deal

A no-deal Brexit would mean the UK would leave the EU as scheduled on 29 March 2019, with no agreement at all in place.

The UK would follow World Trade Organization (WTO) rules in trade with the EU and other countries.

Transition period

If a deal is agreed and accepted, this period would last 21 months from Brexit day, on 29 March 2019, to 31 December 2020. It could be extended by up to two years.

Article 50

Part of an EU treaty that sets out how member countries can leave, with a two-year timetable for leaving.

Backstop

Currently, goods and services are traded between Ireland and Northern Ireland with few restrictions as the UK and Ireland are currently part of the EU single market and customs union - so products do not need to be inspected for customs and standards. After Brexit, Ireland and Northern Ireland could be in different customs and regulatory regimes, which could mean products being checked at the border. To adhere to the Good Friday agreement and avoid a return of a hard border, the concept of the backstop was put in the withdrawal agreement.

Under the backstop, in the absence of another solution, Northern Ireland, would effectively remain within the EU customs union.  However, the UK wants to leave the customs union and the single market as part of Brexit. 

Withdrawal agreement

Agreement outlining the terms of the UK exit from the EU. Negotiated with the EU by PM Theresa May on behalf of the UK. It includes the amount of money the UK must pay to the EU as a settlement, details of the transition period, citizens' rights, and covers the controversial "backstop".

Divorce Bill

The money the UK has agreed to pay to the EU under Theresa May's deal.

The bill is widely expected to be about £39bn and will be paid over multiple years, with about half of it during the transition

Global Public Policy Watch

The GBGH team will stay on top of this issue and continue to update content based on the situation. Learn about more about global public policy affairs through GBGH’s recent deliverables:

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