In the Limelight: Brexit

May 11, 2018

Alison Cowie reflects on Brexit now we’ve passed one-year-to-go until the UK will officially leave the European Union

March 29, 2018, marked a year to go until the UK officially exits the European Union. But there were no street parties or mass celebrations among the triumphant Brexiteers.

This might have been because the new transition period could delay any real change until the end of 2020 – and it seems a bit early to get bunting out. It might be that the ongoing debate of whether the UK will actually leave the EU won’t abate, despite the clear message from the Prime Minister that ‘Brexit means Brexit’.

More likely, though, is simply that any jollification was muted because details of the deal and its impact remain unclear. Leavers – or indeed Remainers – have little idea if they should be celebrating or commiserating at this point.

Speeches from Theresa May, Boris Johnson and David Davis in recent months have attempted to provide some detail as to what the UK without the EU will look like but it still seems that it’s one step forward and two steps back.

The most recent (at the time I write this) upsets have come from the House of Lords, which has inflicted three humiliating defeats as Theresa May’s attempts to pass the EU withdrawal bill.

For businesses in the North East – the only net exporting region in the UK – the ongoing uncertainty and mixed messages coming from governing powers have been frustrating. However, of those business owners who have broached the subject with me over the last 18 months (surprisingly few), most remain positive and resolute to ‘get on with it’ – whatever ‘it’ will be.

Indeed, North East England Chamber of Commerce’s Quarterly Economic Survey, released last month, showed that North East export businesses have grown their export sales at the fastest rate in more than 11 years.

The Chamber continues on its quest to provide support to its local membership base with what information is available and on the year-to-go anniversary, it held a joint Brexit Summit with commercial Law Firm Square One Law, attended by more than 150 local business leaders.

Speakers included Neil Warwick, head of EU and competition law at Square One Law, which has partnered with the Chamber to offer ongoing practical help to businesses and supply chains in navigating Brexit through its Brexit Ready Supply Chain campaign.

On reflection, Neil believes negotiations are developing better than he anticipated but adds “this does come with a caveat; both sides are really just negotiating the heads of terms. The best position we’ll get to by September this year will be an outline of what they want the deal to be, but without any real detail in it.”

Neil has therefore been working on some of the possible scenarios and the implications for North East businesses.

He explains: “If you look at the worst-case scenario – the so-called ‘hard Brexit’ and we crash out and get World Trade Organisation (WTO) terms, everything that is imported or exported from the UK to the EU will have to be reclassified and the tariff determined.

“This will have huge implications for manufacturers – a sector the North East is heavily reliant on – and their supply chains.”

Neil highlights the prediction from Ralph Saelzer, managing director at Sunderland-based Liebherr, who also spoke at the summit, that this could mean an additional 1000 tariff administration entries for just one of their products.

Neil continues, “once you have a final product, you will then have to assess how much of it was made in the UK to determine whether it is UK-made, or a hybrid product – as this will determine the tariff charged”.

Neil has also looked at the other end of the spectrum, where import and export regulation and tariffs remain similar to the current terms. The so-called ‘soft Brexit’ option.

“From the outset, I believe a frictionless transition and a frictionless border system are going to be best for our clients, our manufacturers and members of the Chamber,” he says.

“The simplest and probably the most pragmatic option is to remain in the Customs Union, which is what the House of Lords proposed in their amendments last month. Technically, if we leave the EU but remain in the Customs Union, we will have still ‘Brexited’ – but this is unlikely to appeal to the hardliners who voted to leave.

“We may end up with something that neither Leavers or Remainers wanted.”

Regardless of the outcome, Square One Law and the Chamber agree that businesses should be preparing for Brexit now and have collaborated on what practical steps business can be taken.

These include ‘registering as an authorised economic operator, assessing your trading terms, reviewing your supply chain and travel requirements to and from the EU’.

“A lot of businesses have this attitude that they can put things off until after the transition period but if you identify the areas in your business that could be affected and put contingency plans in place, it will be far more effective,” Neil adds.

So, as the pages of the calendar are stripped away and the clock continues to tick down, we all wait to see what developments occur over the next 12 months – and whether the result is a hard or soft Brexit.

Regardless, the divisive debates on Brexit – whether in Government chambers, company boardrooms, family living rooms or in public houses the length and breadth of the county – are sure to rumble on for the foreseeable future, if not beyond.