EU Commission: Keep calm and brace for hard Brexit

In a style recalling the iconic 'Keep Calm and Carry On' poster produced by the British government in 1939 in preparation for World War II, the Commission said: “It is important that businesses of all sizes, including small and medium-sized enterprises (SMEs), prepare and that they take action now. "

The European Commission published on Thursday (19 July) a 17-page communication to businesses in the EU warning them of the consequences of a ‘no deal’ Brexit if the UK crashes out of the bloc next March .

The paper was published hours before Britain’s new Brexit Secretary Dominic Raab was due in Brussels for his first meeting with the European Commission’s chief negotiator Michel Barnier.

Brexit minister Davis steps down in big blow to May

Britain’s Brexit minister David Davis resigned yesterday (8 July) in a major blow for Prime Minister Theresa May as she struggles to unite her party behind a plan to retain strong economic ties to the European Union even after leaving the bloc.

The Commission said there is still no certainty that there will be a ratified withdrawal agreement in place by 30 March 2019, and that preparations should proceed so that the EU’s institutions  as well as citizens and  businesses are ready for a ‘no deal’ scenario.

Two scenarios

If the Withdrawal Agreement is ratified before 30 March, EU law will continue to apply for the United Kingdom for a 21 month transition period, the terms of which are set out in the Withdrawal Agreement, ending in December 2020.

If there is no withdrawal agreement, there will be no transition period and EU law will immediately cease to apply to and in the UK.

The main consequences of the ‘no deal’ scenario are outlined as follows:

  • Citizens: There would be no specific arrangement in place for EU citizens in the UK, or for UK citizens in the EU.
  • Border issues: The EU must apply its regulation and tariffs at borders with the UK as a third country, including checks and controls for customs, sanitary and phytosanitary standards and verification of compliance with EU norms. Transport between the UK and the EU would be severely impacted. Customs, sanitary and phytosanitary controls at borders could cause significant delays, e.g. in road transport, and difficulties for ports.
  • Trade and regulatory issues: The UK’s relations with the EU would be governed by general international public law, including rules of the World Trade Organisation. In particular, in heavily regulated sectors, this would represent a significant drawback compared to the current level of market integration.
  • Negotiations with the UK: Depending on the circumstances leading to the withdrawal without an agreement, the EU may wish to launch negotiations with the UK as a third country.
  • EU funding: UK entities would cease to be eligible for receiving EU grants and participating in EU procurement procedures. Unless otherwise provided for by the legal provisions in force, candidates or tenderers from the UK could be rejected.

In a style recalling the iconic ‘Keep Calm and Carry On’ motivational poster produced by the British government in 1939 in preparation for World War II, the Commission said:

“It is important that businesses of all sizes, including small and medium-sized enterprises (SMEs), prepare and that they take action now. Private actors, business operators and professionals need to take responsibility for their individual situation, assess the potential impacts of a cliff-edge scenario on their business model, make the necessary economic decisions and take and conclude all required administrative steps before 30 March 2019.”

“The citizens who will be affected by the withdrawal of the United Kingdom, as well as the public administrations that serve them, should also prepare for 30 March 2019.”

Seven areas are identified for businesses to prepare, ranging from customs, VAT and excise, to rules of origin and the transfer of personal data.

UK businesses are now also bracing themselves for the prospect of a ‘no deal’ Brexit.

“With eight months until we exit the European Union in March 2019, it is important we all — regulators and industry — continue to plan for a range of scenarios,” said Nausicaa Delfas, head of international strategy at the Financial Conduct Authority, as quoted by Reuters.

“Across the FCA, together with colleagues from the Bank of England and the government, we have been working to develop a number of safeguards and contingencies, in the event of a hard Brexit, to ensure that ‘day 1’ works smoothly,” Delfas told an event held by TheCityUK.

The UK government is expected to publish similar advice to its own businesses in the coming days, as it steps up its own planning for ‘no deal’.

UK and Commission officials concede that further rounds of talks are likely to take place during the summer recess having made little progress on the withdrawal agreement or future trade and security relations since March.

The two sides are seeking completion of the Withdrawal agreement and a ‘Political Declaration’ on the future EU-UK relationship by October, that will include a protocol on the backstop for Northern Ireland.

“We haven’t been making much progress,” admitted a UK official.

European economy to lose 1.5% of GDP with ‘no-deal’ Brexit

EU member states will suffer long-term damage equivalent to about 1.5% of annual economic output by 2030 if Britain leaves the bloc without a free trade deal next year, the International Monetary Fund warned on Thursday (19 July).

The chances of the Article 50 talks collapsing have dramatically increased over the past two weeks, during which Theresa May’s government finally published its long-awaited White Paper on post-Brexit relations with the EU.

Eleven UK ministers and ministerial aides, including Foreign Secretary Boris Johnson and Brexit Secretary David Davis have resigned since the Chequers agreement on which the White Paper was based. That has prompted increased speculation that May could soon face a ‘no confidence’ challenge from her Conservative MPs.

Following an angry reaction by Brexiteer MPs to the White Paper, on Monday the May government supported amendments by the hard-Brexit supporting European Research Group of MPs to its Customs Bill that would stop the UK from collecting tariffs for the EU, part of May’s Chequers plan, unless the rest of the EU reciprocates, and could make the EU’s ‘backstop’ on customs impossible by ruling out a border in the Irish Sea.

The following day, the government passed its Trade bill but saw its majority on a number of votes cut to 3.

Customs checkpoints with Northern Ireland

Yesterday, the Irish government said it had stepped up preparations for Britain’s departure, including what it called the “unlikely case of a ‘no deal’ Brexit.”

These include Ireland’s plans to deploy at least 902 new customs and veterinary inspectors at ports and airports to address changes in the trading relations with Britain.

Barnier is due to brief the 27 European affairs ministers on Friday about the progress of the Brexit negotiations.

UK Brexit Paper backs Ukraine-style association pact

The UK outlined plans for a Ukraine-style association agreement with the EU on Thursday (12 July) as it published its long-awaited White Paper on relations with the EU after Brexit.

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