5 things UK companies need to know about Brexit and the EU
After a turbulent couple of weeks in UK politics, the UK goverment finally produced a white paper. This document is an outline of how the UK wants to trade with the EU 27 states after Brexit. The UK is way behind schedule on this and a number of items from the first round of negotiations remain outstanding.
1. The EU is not happy with the progress so far.
Last week the European Commission published a paper outlining the ongoing work it is doing in relation it's preparation for all possible Brexit outcomes.
It does not make pretty reading for the UK. The last section of the executive summary is extremely direct and succinct:
"Everybody concerned needs to be prepared for the withdrawal of the United Kingdom from the European Union on 30 March 2019. This Communication is to be seen in the light of the call of the EU27 Leaders to intensify preparedness at all levels and encourages all stakeholders that may be affected by the United Kingdom’s withdrawal to take the necessary preparedness actions and to take them now"
The 21-month extension is no longer being factored in. The EU is telling its members to plan for the UK crashing out of the Union in 8 months time - 30/03/2019.
The full document is available here:
Conclusion – This is very direct language from the EU. They are naturally very concerned and unhappy with the progress made by the UK.
2. Under the GDPR – the UK becomes a 3rd country
Currently, personal data can flow freely between the Member States of the EU as per the GDPR. When Brexit happens (30/03/2019) the transfer of personal data from the EU to the United Kingdom will still be possible, but it will be subject to specific conditions set in EU law.
Companies that are currently transmitting personal data to the UK should, therefore, be aware that this will become a "transfer" of personal data to a 3rd country and explore if it could be permitted under relevant provisions of EU legislation – they will have to demonstrate this in writing.
If the UK's level of personal data protection is essentially equivalent to that of the EU, the Commission would adopt an adequacy decision which allows for the transfer of personal data to the United Kingdom without restrictions. However, this decision could only be taken once the United Kingdom becomes a third country. The timeline is important here – this will only start when the UK leaves on the 30/03/2019.
Conclusion – UK companies might be prohibited from transferring EU personal data post Brexit. UK companies need to look at EU based contingencies.
3. Financial Passporting rights will cease after Brexit
The provision of financial services from the United Kingdom to EU27 will be regulated by the third country regimes in EU law and in the national legal frameworks of the respective Member State of the EU customers.
There will be no Single Market access.
Operators in all financial services sectors need to prepare for this scenario if they wish to ensure that there is no disruption in their current business model and that they are in a position to continue serving their clients.
Conclusion – This seems clear from both sides as the UK is not looking for access to passporting. There will be a new deal but there will be losers here. As the FT recently put it - “Some parts of the City will lose out. That’s a difficult conversation for the Treasury to have.” (https://www.ft.com/content/b29ebdb8-8e8d-11e8-bb8f-a6a2f7bca546)
4. What about Pharma & Biotech with UK authorisation holders?
EU pharmaceutical law requires the marketing authorisation holder for a medicine to be established in the EU. This also applies to medical devices & cosmetics.
Moreover, medicines manufactured in a third country undergo specific controls upon importation. Marketing authorisation holders and actors in the supply chain have to prepare for this situation, in particular by ensuring that the necessary testing facilities are available in the EU.
Matthew Hancock (Secretary of State for Health) admitted he had already met with industry leaders to discuss stockpiling NHS reserves of vaccinations and other medical supplies. (https://www.independent.co.uk/news/uk/politics/no-deal-brexit-blood-medicine-stockpile-nhs-health-secretary-matt-hancock-a8462531.html)
In addition, a technical expert seminar with the EU27 Member States and meetings with stakeholders were organised. Finally, the European Medicines Agency has carried out a survey of critical medicinal products as part of its broader preparedness planning.
Conclusion – The UK is clearly planning for the worst with the stockpiling of medicines and the EU is unlikely to compromise the need to have an EU representative. Any company that is regulated via the UK – needs to move quickly if they want to continue to have access to the EU market.
5. A lot of companies have already acted and put their contingency in place
There is a lot of activity in the space – here is a small example of what is currently happening:
May - Thomson Reuters has applied to the Irish central bank to move its foreign exchange Multilateral Trading Facility (MTF) to Dublin so that it can continue to sell into the EU’s single market post Brexit, the company said in a statement. (https://www.reuters.com/article/us-britain-eu-thomsonreuters-ireland/thomson-reuters-to-move-forex-derivatives-to-dublin-due-to-brexit-idUSKCN1IG19L)
May - Goldman Sachs is starting to move some senior bankers to Frankfurt in preparation for Britain’s exit from the European Union, the investment bank’s co-chief for Germany said on Wednesday. (https://www.independent.co.uk/news/business/news/goldman-sachs-london-staff-relocate-frankfurt-banking-brexit-a8244076.html )
July - JPMorgan asked “several dozen” employees to lead the first wave of relocations from Britain to continental Europe by early 2019, kicking off plans to protect its business post-Brexit, a memo to staff shows. (https://www.reuters.com/article/uk-britain-eu-jpmorgan-exclusive/exclusive-jpmorgan-triggers-eu-talent-transfer-as-dozens-prepare-for-brexit-move-idUSKBN1JV1RM)
July - CEO of Azimo (UK Fintech) confirmed that they have “working on this for many months" (http://uk.businessinsider.com/transferwise-new-europe-hq-brexit-fintech-brain-drain-2017-4)
July - Bank of America Merrill Lynch announced its intention to recruit more staff in Dublin last year when it unveiled its Brexit plans. The group's decision to pick Ireland as its new EU hub. BAML will relocate 125 jobs to Dublin as it overhauls its banking business in the UK and Europe in preparation for Brexit. (https://www.independent.ie/business/brexit/merrill-lynch-to-move-125-jobs-to-dublin-after-brexit-36867563.html)
July - Deutsche Bank has moved almost half of its euro clearing business from London to Frankfurt because of Brexit, with all new business set to be cleared via Frankfurt. (http://uk.businessinsider.com/deutsche-bank-shifts-clearing-london-to-frankfurt-brexit-2018-7?r=US&IR=T)
Get in contact with us using the form below if you are looking to put a Brexit Contingency in place.