Brexit and businesses – Keep calm and carry on!
Brexit; no longer a question of ‘if’ but are we any clearer on the question of ‘when and how’
Are you a business-big or small? Do you employ EU nationals? Are you an EU national working or operating in the UK or a UK citizen employed abroad in the EU? The decision to leave will no doubt have cast you into the pool of uncertainty and concern. But rest assured, we at JFH Law are ready to assist and guide you through these unchartered waters.
Brexit: the divorce
On the 23rd June 2016, the country hit the poll booths and voted to end its 43 year-long relationship with the European Union. Whether the ‘divorce’ is messy or amicable, one thing is for sure; there is a degree of uncertainty in the air at present regardless of which way people voted. With the position of Prime Minister also now up for grabs, there will inevitably be a delay in finding out what the exact implications for leaving are, and how, if indeed it happens, the exit will be managed.
Under Article 50 of the Treaty on European Union, the UK would have to give two years’ notice of its intention to leave the EU. During this time the terms of the exit would need to be negotiated and deals would need to be struck. At the end of that period, unless an extension of time is granted, the UK would cease to be part of the EU. Whilst some EU leaders have called for the UK to invoke Article 50 as soon as possible, the Prime Minister, David Cameron, has said that this is something for his successor to do. The Conservative leadership contest is now scheduled for the 2nd September 2016.
So where does this leave you?
The UK is still a part of the EU until the two years expires from the date of Article 50 being triggered. In that respect you can continue with business and trade as you always have. The laws and regulations that have been in place continue to remain so.
The key thing right now is to keep calm and carry on. The Governor of the Bank of England Mark Carney’s speech following the result aimed to have a calming effect on the economy ensuring stability. This approach needs to be adopted by us all. Businesses need to focus on keeping their operations going and progressing. The attention needs to remain on delivering quality goods and services. Change is coming, but until it actually does, you need to concentrate on working hard and stay focused. A similar approach should be taken with investment portfolios. On the 28th June the Chief Executive of Aberdeen Investment Trust, Martin Gilbert, on Radio 4’s Today program, has encouraged investors to do nothing in the short term, assuring listeners that the markets will rally.
Whilst the position remains unchanged in the short run, most businesses, big or small, and individuals, be they EU citizens living in the UK or UK citizens living abroad, are likely to be concerned at what the future holds and exactly how their businesses or themselves will be affected. Unfortunately, the short answer is that we do not know for sure.
However, the government has gone to great lengths in the days following the result to reassure us that the exit plan will be careful and considered. The UK is a world leader in many industries and this is something that will be at the forefront that the UK will want to protect and maintain.
Ultimately, the legal and business landscape will depend considerably on the model the UK decides to adopt post exit. This will determine the extent and nature of the UK’s relationship with the EU and the changes made to our laws.
The UK may choose to adopt a model similar to Norway and be a member of the European Economic Area with access to the single market. Under this model, the UK would lose its ability to have a say on the law making process. However, we would still be bound by an array of EU laws, including employment and competition, but would be exempt from areas such as foreign and justice policies. Under this model, the UK would not be able to restrict EU immigration because free movement rules would remain in place. This appears to be the model currently advocated by Conservative leader hopeful, Boris Johnson who wrote in The Telegraph on the 27th June of ‘forging a new and better relationship with the EU – based on free trade and partnership’ and stated that ‘there will continue to be free trade, and access to the single market.’
Another approach could be the Swiss model. Here, the UK would need to join the European Free Trade Association enabling bilateral trade agreements with the EU and some access to the single market. Switzerland has a set up where it has many bilateral agreements with the EU through which it has some access to the single market. This means it can trade freely with the EU without being automatically exposed to EU legislation. This results in some limitations on the movements of European workers.
A third option would be for the UK to go it alone leaving the EU as well as the EU single market. In doing so, the UK could trade relying on the World Trade Organisation rules or negotiate its own trade agreements. This would result in no freedom of movement for EU nationals and is the least likely model to be adopted.
Impact assessment of areas of law
The decision to leave will affect a wide spectrum of laws, to varying degrees depending on the exit model chosen. A few of these areas are discussed below:
A lot of the UK employment law comes from EU legislations and are now rooted in good business practice; both employers and employees have become accustomed to them. It is unlikely that the there will be a complete overhaul of this, although this cannot be ruled out. Areas such as discrimination rights are likely to be safe, whereas the measures for areas such as Working Time Regulations and agency worker regulations could be repealed.
The UK is highly regarded where international dispute resolution is concerned. It is likely that this will remain the same. What is unclear is the position of contracts which are based on EU legislation which may or may not remain in place depending on the exit model selected. This could lead to a period of uncertainty which may in turn lead to disputes.
Financial Services Regulation
The UK is the EU’s largest financial hub with lots of international banks and financial institutes using London as a base to trade with the rest of Europe. A lot of the legislation on financial institutes comes from EU law. The question now is whether this will be kept or whether this will be replaced. Leaving the EU could restrict EU market access for the UK, although with this being a key UK sector, the government will no doubt try to prevent this happening.
Whilst the extent of the impact on different areas of law is unclear for now, the effects of Brexit have already started to be felt elsewhere. The pound has taken a nose dive so foreign goods and services are now more expensive. British holiday makers will find their beers cost a lot more along the sunny beachside bars of popular destinations this summer. With the pound falling and wholesale fuel prices quoted in dollars, petrol prices are expected to increase. The Petrol Retailers Association and the AA motoring organisation has warned that by the end of the week there could be of a 2p to 3p increase. Today Richard Branson speaking about Virgin told ITV’s breakfast show Good Morning Britain “we were about to do a very big deal and we cancelled that deal that would have involved 3,000 jobs and that’s happening all over the country.” Large organisations including a number of US investment banks have also indicated moving UK jobs elsewhere to other European cities. Whether this transpires and to what extent, only time will tell.
It is difficult to predict what post-Brexit Britain will look like and what the precise ramifications of leaving will be at this stage. It is however clear that Brexit will continue to dominate the headlines these coming months, in some form or another. For us at JFH Law it is business as usual and we suspect and hope that many organisations will be taking this approach.
The impact of Brexit is likely to be far reaching and you will no doubt want to plan ahead to safeguard your interests and that of your business assessing the risks and opportunities available to you. You may wish to future-proof contracts or consider the impact on your current or future task force. We recommend that you contact us so that we can evaluate your circumstances and offer tailored advice and guidance based on your needs and goals.
If you would like advice or assistance, please contact us on 0207 388 1658 or by email firstname.lastname@example.org.
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Jigna Vekaria, Solicitor