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What’s next for Brexit?

Latest reflections from partner, Paul Newbon:

As the media has made us all very aware, the UK had been due to leave the EU on 29 March 2019, two years after it started the exit process, by invoking Article 50 of the Lisbon Treaty. However, the withdrawal agreement brokered between the UK and the EU was rejected three times in Parliament, leading to the UK seeking an extension for leaving the EU to 31 October 2019, and to the resignation of Theresa May as Prime Minister.

The Conservative Party has recently been in the throes of selecting a new Prime Minister and, following a final ballot on 20 June, Boris Johnson MP, and Foreign Secretary, Jeremy Hunt are currently vying for the top job, a process that is likely to run well into July, after which Parliament will go into recess for the summer.  In effect this means that Brexit will be “on hold” until September, leaving only a few weeks until the new extension expires.

There is, of course, always the possibility that a new extension may be granted.  However, there are reservations within Europe about giving more time.  Some see the UK as troublesome and believe that the EU would be better off without the UK’s continued membership; others are worried about the potentially disruptive effect to EU business of a large body of Brexit Party MEPs taking up their seats in the European Parliament in July. So, it is by no means guaranteed that a new extension will be granted.

Whoever is elected, they will essentially have three options:

  1. to push the withdrawal agreement through Parliament;
  2. work for no deal (or should that be do nothing, as this is the default position); or
  3. cancel Brexit by revoking Article 50.

The current front runner and pro-Brexiteer Boris Johnson has said the UK must leave the EU by 31 October deadline, come what may, whilst Jeremy Hunt has said that he wants to negotiate a “credible” Brexit plan by securing changes to the controversial Irish backstop.  This will be no easy task.  The EU decision extending the period for the UK’s exit makes it clear that “this extension excludes any re-opening of the withdrawal agreement” (paragraph 12).  This was underscored by Michel Barnier, the EU’s chief Brexit negotiator, in an interview with the New York Review of Books, where he warned the leadership candidates that Theresa May’s withdrawal agreement was the only option for leaving the EU.

So if the next Prime Minister is unable to renegotiate the terms of the withdrawal agreement, what will happen next?  If they are unable (or unwilling) to push Mrs May’s deal through Parliament, then the default position is that the UK will leave the EU at 23:00 hours on 31 October 2019 without a deal.

In this scenario, the UK would sever all ties with the EU with immediate effect without the benefit of a transition period. The UK would then have to trade globally on World Trade Organisation (WTO) Rules. Put simply, under the WTO Rules, each state draws up a list of tariffs and quotas which they apply to other member states. Under the WTO principle of “most favoured nation”, the UK cannot simply lower tariffs for the EU (or any other country) unless it has agreed a trade deal. It has to treat every WTO member state around the world with which it does not have a trade deal in exactly the same way.

At present, the UK is part of about 40 trade agreements that the EU has with more than 70 countries, including the USA, China and most recently Canada. Once the UK leaves the EU, it will also lose the benefit of all those trade deals and will have to replicate them directly with other WTO member states, including with the EU. The UK has signed continuity deals with some countries, most notably Switzerland, but it is a long way off replacing the trade deals it enjoyed under the auspices of the EU.

In addition to the tariff barriers and all that entails, the UK would become subject to what is known as “non-tariff barriers”, which include things such as product standards, safety regulations and sanitary checks on food and animals. In the absence of an agreement between the parties the EU will be within its rights to insist that such checks take place.

There is one final option: revoke Article 50. This has not been advocated by either of the Conservative Party leadership candidates left in the race and may only become a factor if Parliament decides to opt for a second referendum on the UK’s membership of the EU. Currently it seems unlikely that Parliament will opt for a second referendum, and it is debateable whether this would be on the table even if there was a general election, but who knows.

Whatever Brexit may bring, we are here to support you through the process. Our specialist team can advise you in all aspects of international trade, corporate, commercial and employment law, and are happy to help plan for any outcome. Contact our team today by calling 01482 325242 or email enquiries@andrewjackson.co.uk

 

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