Brexit negotiations are here and the timeline on executing them very much matters. The main Brexit issue with a direct business impact that has yet to be resolved is the conclusion and ratification of an orderly withdrawal agreement between the UK and the EU. That needs to be agreed upon by the end of 2018, to allow for ratification by the UK and the European Parliament before the Brexit date of March 29, 2019.
Outstanding issues include:
- a no-friction border settlement in Northern Ireland – which is politically extremely sensitive
- elements of the UK leaving the Euratom Treaty with possible consequences on the free movement of nuclear materials between the EU and the UK post-Brexit
- some VAT rules to be applied post-Brexit
- the protection of mainly food products with a geographical indication
- the registration of intellectual property rights that will move from EU agencies to future UK authorities
- ongoing judicial cooperation proceedings in criminal matters
- ongoing law enforcement cooperation proceedings, police cooperation and exchange of information
- jurisdiction, recognition and enforcement of judicial decisions
- protection of personal data
- pending judicial and administrative cases
- administrative cooperation on customs and tax
- a future dispute settlement mechanism
A first deadline to settle the legally binding withdrawal agreement, including a transition period from March 29, 2019 until December 31, 2020, during which the UK would continue to abide by EU law without taking part in the EU decision making process, was set for the European Council meeting of October 18, 2018. In addition to the withdrawal agreement, the Council was expected to issue a political declaration on the future trade relations between the EU and the UK. But that deadline seems difficult to meet. A special European Council could be convoked in November to deal just with Brexit. Another European Council of government heads is scheduled for December 14-15, 2018; that could well become the final deadline for any orderly withdrawal agreement.
Whether a conclusive Withdrawal Agreement can be reached and ratified remains utterly uncertain. Even if the UK government and the Commission negotiators were to reach a last minute deal, the hurdle of parliamentary ratification would still be difficult given the tight window. The UK government has only a thin majority with support of the Northern Irish DUP. Prime Minister May’s Conservative Party has to reckon with an important group of dissidents who would not hesitate to sink the deal. The European Parliament is more likely to support an agreement if the EU governments massively support it.
Should no agreement be reached, or should it not be ratified, then an abrupt Brexit will occur on March 30, 2019. Legal uncertainty regarding goods and services trade between the UK and the EU would result from this scenario. A degree of chaos is expected in such case, since neither customs nor other officials nor regulatory agencies on either side would be fully prepared. Logistics of UK-EU transport may well become a nightmare with potential customs controls introduced or tariffs applied. Each day risks new incidents at EU-UK borders. A few months of constant uncertainty is likely.
Financial and monetary markets may also react violently to a brusque Brexit and subsequent confusion caused by border closures or extended delays in goods delivery. The European Central Bank and the Commission are installing contingency plans, ready if market volatility becomes uncontrollable.
Both the Commission and the UK government have issued warnings to industries to prepare for such a situation. Member States and the UK government are issuing guidance on how to cope, but these messages tend to foster uncertainty as they leave questions from economic operators unanswered.
Brexit changed EU-UK relations and will definitely continue to do so, though it remains to be seen how much. These negotiations have the potential to affect worldwide decision-making for years to come as the geopolitical landscape is rewritten. Businesses and governments should be prepared for a variety of outcomes as they look ahead to the Brexit date of March 29, 2019.