Beyond Brexit - Time to Act: Cutting through the complexity (video)

14/05/18

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Our senior advisors, Michael Moore and Phil Brown, take us through the three elements of the Brexit negotiations that need to happen and the two main likely outcomes. And most importantly why now is the time for businesses to act.

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Michael Moore: It’s less than a year until the United Kingdom leaves the European Union, so, it’s pretty essential and increasingly urgent that people are preparing for Brexit and they act now

To do so requires you to be able to cut through the political and negotiating fog. So, how do you understand what’s going on? Essentially, what’s happening in the negotiations between the UK and the EU is to prepare for an orderly withdrawal, and there are three different channels to those negotiations:

  • Getting the exit terms sorted - so, what happens with the amount of money we pay to the EU, what happens to EU citizens, and, of course, what happens on the island of Ireland.
  • We need to work out the detail of transition - how long we’ll get to adapt from today’s set of arrangements to what will happen in the future.
  • And finally, of course, we need to get ourselves a new trade relationship with the European Union.

Now, in the last few months we’ve made a lot of progress on that, there’s been a lot of success to notch up, but there’s still a long way to go. However, we believe there’s now sufficient clarity about the shape of the talks and the progress made to date to have a good sense of what the future outcomes will be. So, Phil, what do those future outcomes feel like to you and how can people prepare?

Phil Brown: Well Michael, we’re clear that there’s two main likely outcomes to the negotiations. The first  is what’s called a Canada+ deal, so it’s building upon the EU/Canada free trade agreements. And the second, unlikely, outcome, but potentially very high impact, is that there’s no deal, and we end up trading on WTO terms.

So what does a Canada+ deal mean for companies? Well, as you’ve indicated, it means a lot of change for most companies but it will depend on the sector and the specific company. So, for example, in terms of tariffs manufacturing tariffs will be at zero duty rate; agricultural tariffs will, for the most part, be the same, but not necessarily all of them. Crucially, rules of origin will kick in, which means that only products proven to be of UK or EU origin will benefit from that tariff reduction. Customs will be introduced, on a similar basis to other third countries, which means increased bureaucracy, increased costs, and potentially some risk of delays, even in a highly streamlined arrangement, which is the desired outcome.

And companies operating in highly regulated, or restricted or sensitive sectors will probably not get the market access they have currently through the single market.

So why should companies act now? Well, I think there’s three key reasons:

  • I think the first one is political paths and business paths are diverging and companies can’t afford to wait for political and legal certainty before taking action, as you well know
  • The second one, and I think this is really important, it’s possible to get highly granular now about the end states of negotiations. On that basis companies can get a grip of Brexit, they can assess the risks, they can evaluate mitigations, and they can, crucially, make a plan and take action.
  • And third, time is short. So in the case of no deal Brexit becomes a hard reality next March. Even if we get a transition, which looks highly probable, that’s less than three years for companies to make very major changes to supply chains, to processes, and to systems.

Either way, time is short, so it’s clear to me that now is the time for businesses to act.

Michael Moore: And that really underlines the key message, now is the time to act. And if you want some more detail please look up our website pwc.co.uk/Brexit to learn more.

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Contact us

Michael Moore
Senior Adviser, PwC United Kingdom
Tel: +44 7803 726179
Email

Phil Brown
Senior Trade Adviser
Tel: +44 (0)77 5346 0118
Email

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