NO DEFINITIVE AGREEMENT

Until we have a definitive agreement and all the rules are known, the true outcomes of Brexit are still hanging in the balance. There are companies, in many cases backed by EU financial grants and incentives, that are technically/administratively relocating their corporate headquarters outside of the UK; however, this is not necessarily resulting in the huge volume of staff leaving the UK that was anticipated immediately following the Brexit vote. Yet, companies are sending some key staff overseas.

The effects are already being realized on housing prices and the availability of schooling in some locations (especially in Amsterdam and in Frankfurt). Initially, it was reported there may be 100,000 jobs lost just in financial and professional services sectors in London’s financial district. Estimates now suggest a significantly lower figure; however, it is worth noting that as no one knows where things are likely to end, this number could increase.

As the UK Prime Minister, Theresa May, continues to pursue negotiations with her fellow European leaders, the message she carries with her is that she must produce substantial changes to the withdrawal agreement in order for the deal to pass the House of Commons; however, it seems unlikely the leaders of the EU will budge to the extent required to be able to satisfy UK Parliament. Having already postponed the ‘Meaningful Vote,’ which was due within Parliament on December 11, May could delay things further based on a ruling by the European Court of Justice saying Britain has the authority to stop the clock on the withdrawal process unilaterally and cancel the March 29 withdrawal date. But, to push back the withdrawal date “would mean going back on the vote of the referendum and remaining in the EU,” according to May.

WITHDRAWAL AGREEMENT

If Parliament votes down May’s withdrawal deal, the full ramifications of what then follows are cloudy to say the least. What is clear, however, is that all parties involved are determined to avoid a ‘no deal’ scenario.

Having won a vote of confidence from within her own Conservative Party on December 12, May seems determined to carry on in her post to “see Brexit through” and is continuing to negotiate with her EU counterparts over the controversial Irish backstop. The main concern surrounding the Irish backstop arrangement is that, unless a clear trade policy is negotiated with the EU during the transition period, the UK will remain tied to the European single market and customs union. The reason this is a particular hotbed is that Brexit negotiations have already been ongoing for nearly two years without the EU making any concessions regarding the UK’s ability to trade independently from the EU and, therefore, the feeling that a deal can be successfully negotiated during the transition period after the Withdrawal Agreement is ratified by Parliament simply lacks the confidence of most people. The Irish backstop is merely seen as kicking the can of trade negotiations down the road somewhat.

Following the most recent political summit in Brussels, powers at the EU have indicated that help will be available to support Theresa May’s proposed Brexit deal, but in what form this help will come is not clear. Furthermore, the EU has indicated that their offer of help will not be made clear until January 2019.

At this juncture, May seems equally determined to avoid a second public referendum suggesting that this in itself would be a betrayal of democracy – in effect, ignoring the will of the people from the first vote. However, the option of a second referendum is gaining increasing support and is seen by many as the only way to resolve the matter given the inability of parliament to come to a consensus.

Should the vote by UK Parliament on the Withdrawal Agreement fail when it is rescheduled in January 2019, the clearest indication is that the UK Labour party will try to force a General Election in the UK.

CURRENT WITHDRAWAL AGREEMENT ACCEPTED

Neither those against Britain leaving the EU nor the pro-Brexit voters are completely satisfied with the current withdrawal agreement.

Transition
The transition period begins on March 29, 2019 and lasts until December 31, 2020. During the transition period, the UK will need to abide by all EU rules, but would no longer have any say in the deliberations there.

Money
The draft agreement outlines the financial settlement the UK will need to pay to the EU to settle all of its obligations. It is expected to be at least £39bn and will be paid over a number of years. Part of that money is the financial contribution the UK has to make during the transition period. This year the UK’s contribution to the EU budget is forecast to be a net £10.8bn.

Citizens’ Rights
UK citizens in the EU, and EU citizens in the UK, will retain their residency and social security rights after Brexit. Citizens who take up residency in another EU country during the transition period (including the UK) will be allowed to stay in that country after the transition. Anyone that stays in the same EU country for five years will be allowed to apply for permanent residence.

Northern Ireland/Trade Deal
If no long-term trade deal has been agreed by the end of 2020 that avoids a hard border between Northern Ireland and the Republic of Ireland, then a backstop consisting of “a single customs territory” between the EU and the UK will be triggered. The single customs territory is basically another name for a temporary customs union and, if it were needed, it would ensure that completely frictionless trade could continue across the Irish border. It would also prevent the UK from implementing any trade deals with other countries around the world that involve removing tariffs on goods. As long as the backstop is in operation, the UK will be subject to “level playing field conditions” to ensure it cannot gain a competitive advantage while remaining in the same customs territory. The UK cannot leave the backstop independently as it would have to be decided together with the EU.

HARD BREXIT

The Bank of England has warned if Britain were to exit the EU without any agreement, it could cause a recession and a collapse of the housing market. Over the long term, it could lead to an exodus of foreign firms currently located in the UK. An exit without an agreement would have many other consequences as well. One of the aspects that will be impacted on Brexit Day (11 p.m. on March 29, 2019) is that any Certificate of Coverage that applies to any UK citizen working in any country in Europe and any EU citizen working in the UK would cease to be effective. This would be catastrophic as it would mean companies would have to pay host country social security and could no longer keep UK and EU employees on their home country social security plan. Additionally, UK qualified lawyers would no longer be able to provide legal advice across the EU and will need to use an EU chaperone to continue to provide this advice. These are just some of the impacts of a “Hard Brexit.”