Brexit, as the proposal for the United Kingdom to exit from the European Union is known, is causing many companies to rethink their European strategies. Learn more about Brexit and its impact in this question-and-answer with the trade office that represents Wisconsin in the UK market.
Q: What is the current status of Brexit?
A: Brexit consultations, vigorous debate and continued uncertainty prevail within the UK and throughout Europe. Various alternatives to Brexit are being heatedly discussed, including cancellation, an extension beyond the end of March, and another referendum. Without an extension, the UK will formally leave the European Union on March 29 at 11 p.m. UK time (midnight in Brussels). Currently, all sides remain focused on the end-of-March date, which is cited in British law. Party politics are also at play. Some have suggested that Labour, the UK's main opposition party, wants to force a general election and, after winning it, go back to Brussels to negotiate its own version of Brexit, which would also require Brexit being pushed back from March 29.
Q: What is the transition period?
A: If the UK and the EU agree on a Brexit deal, there will be a period of time from March 29, 2019, to Dec. 31, 2020 (or possibly later) to get everything in place and allow businesses and others to prepare for the new post-Brexit rules governing relations between the UK and the EU. During the transition, Britain would remain inside the single market and be bound by its rules. Freedom of movement would also continue during the transition. The UK would be able to agree to trade deals on its own, separately from the EU—but any such deals wouldn’t be able to take effect until Jan. 1, 2021.
Q: What is meant by a ‘no deal’ exit?
A: Central to the debate is the ‘no deal’ exit, which would mean the UK would sever all ties with the EU effective immediately, with no transition period. The government fears this would cause significant disruption to businesses, with lengthy lines of trucks at the channel ports as drivers face new checks on their cargos. Food retailers have warned of shortages of fresh produce, and the National Health Service is stockpiling medicines in case supplies from EU countries are interrupted. Government ministers and multinational companies with factories in the UK have also warned about the long-term impact on the British economy, with some firms looking to move critical operations out of the UK. The UK would revert to World Trade Organization rules on trade and face the EU’s external tariffs. The price of goods for UK customers would rise. Some British-made products might be rejected for sale in the EU market, as new authorizations and certifications would be required. Border delays and customs checks would become lengthy. Flights to the EU could be grounded until safety confirmations covering both ends of the journey are in place. Finally, there are 12,000 EU laws that apply in Britain that will need to be incorporated into domestic law, involving 600 statutory instruments, or secondary legislation.
Q: What still needs to be done?
A: Several proposals from Prime Minister Theresa May on how to deal with Brexit have failed in Parliament votes. A major obstacle continues to be the Northern Ireland backstop, or how to handle the border between the Republic of Ireland (which will stay in the EU) and Northern Ireland (which would leave the EU). There are also roughly 100 international treaties with other countries that the British Parliament must ratify to keep them in force once the UK leaves the EU. In addition, the government needs to get six other essential primary legislation bills through before March 29, covering trade, immigration, financial services, agriculture, fisheries and international health care arrangements. Several scenarios are still possible. The UK could leave without a transition deal. The March 29 divorce date could be pushed back. The prime minister could call a snap election or try one more time to get her deal passed. Some have suggested that Britain could hold another Brexit referendum. Pundits are saying a ‘no deal’ Brexit is now more likely.
Q: How will Brexit impact the General Data Protection Regulation?
A: A ‘no-deal’ Brexit would change how UK organizations manage data with their EU partners and counterparts. The UK Data Protection Act of 2018 will be in place, but by leaving the EU, the UK will not have an arrangement for data sharing with the EU, because it will no longer be part of the territorial scope to which the General Data Protection Regulation (GDPR) applies. Instead, the UK would become a so-called ‘third country’ and would need to implement data safeguard mechanisms as required by GDPR or go through a robust process to prove UK data protection measures are adequate. While the UK waits for adequacy status, it will be more difficult for businesses to share data between EU and European Economic Area member states and the UK. This is likely to affect most UK businesses, because over 75 percent of international data sharing from the UK goes to the EU. The UK government has also published its no-deal Brexit advice on privacy and data protection, which encourages companies to rely on established safeguarding mechanisms, such as Convention 108+.
Q: How is Brexit impacting the British economy?
A: The UK economy has grown at an average annual rate of about 1.5 percent since the referendum. February 2019 analysis indicates that the UK suffered a sharp slowdown in the last quarter of 2018, only expanding by 0.2 percent—the weakest growth since 2012. The three main drivers of UK growth—construction, services and production—all shrank during December. The cost of Brexit to the British economy is estimated at £40 billion a year, and a damaging no-deal scenario could force an emergency cut in interest rates, according to a Bank of England rate-setter.