Brexit – so what happens now?
Smith Partnership, one of largest firms of solicitors in the East Midlands, offers some explanation as to what happens now Britain has voted to leave the EU and the consequences for businesses.
Britain’s vote to leave the EU on 23 June 2016 caused shockwaves across the country and the rest
of the world. Most commentators predicted a narrow win for the Remain campaign but an alliance of older voters, the Midlands and North of England and Wales was enough to create a cataclysmic scenario leading to the collapse of the pound, the reduction in the value of the FTSE (Financial Times Stock Exchange) and widespread resignations amongst political parties of all colour.
Russell Davies, Partner and Head of Commercial Litigation answers the question…so what happens next?
“Article 50 of the 2009 Lisbon Treaty allows a country to give notice to leave the EU and is the only mechanism by which a country can leave the EU. There is a two year notice period although that can be extended if all remaining 27 members of the EU consent.
“Brexiters are suggesting that there is no need for the UK to rush to serve its notice under Article 50 and that they could enter into informal discussions with the EU to seek to agree a deal before activating the Notice Provision. European leaders, so far, seem reluctant to agree to that idea although it is still too early to predict when the two year timeframe will start to run.
“That leaves businesses in a very difficult position. Perhaps surprisingly given the momentous nature of the decision, nobody really knew what trade deal could be negotiated with the EU if the UK did seek to leave.
“Various options were suggested with the more optimistic Brexiters believing that Britain’s strong economic position would militate against the EU seeking to drive too hard a bargain. It is suggested that at its most basic level, the UK could trade with the EU based on the World Trade Organisation model but that would be likely to result in tariffs both ways pushing up prices for consumers in the UK and making UK exports less attractive to the European market.
“The most favourable outcome for the UK would be some kind of free trade agreement allowing us access to the EU free market. It is, however, unclear what price would be extracted for access to that particular club. Ironically, given the significance of immigration in the Leave Debate, the price of access to the free market may be free movement of labour.
How will the UK parliament deal with the exit?
“It must also be remembered that around three-quarters of British MPs are in favour of remaining in the EU. They now have an instruction from the people of the UK (albeit a narrow one) to negotiate an exit. It is unlikely that voters will accept a deliberate sabotaging of the vote to leave but given that Parliament will oversee, and be responsible for, a negotiation of the exit, there is much that could be done to slow the process down in the hope, perhaps, of lessening the impact of Brexit.
“Many commentators are predicting a snap election, given David Cameron’s impending resignation and chaos in the Labour party. Will such a General Election campaign become, in effect, a second referendum on the UK’s membership of the EU?
“The biggest problem faced by business over the next few years is the uncertainty of the position. Foreign investment is unlikely to be encouraged over the course of the next few years whilst any such investor waits to see what happens. Employers are also in a difficult position given that it is, at present, unclear which, if any of the EU legislation relating to worker’s rights, will be retained. Similarly consumer rights (which are generally well protected by the EU) will be uncertain over the course of the next few years.
“Significant foreign employers already based in the UK may also review their position. Some may elect to wait to see what happens, others will feel that they need to move quickly, given that a two year negotiation period is in fact not a great deal of time if a factory and suppliers have to be sourced elsewhere.
How can we help?
“At Smith Partnership, we will endeavour to provide our Clients with regular updates on the legal position as soon as we become aware of any changes. For the time being, however, it is very difficult to offer any definitive advice other than that any commercial contract of any duration ought probably to incorporate some provisions relating to Brexit and the effect on the contract should it occur during the lifetime of the contract.”
If you need any legal advice call the team at Smith Partnership on 0330 123 1229.