Strategy-Brexecution Approach

 Planning and delivering a successful Brexit program

2017 closed with severe warnings coming in the year-end reports from across UK Industry Groups. 18 months on from the Referendum, and 9 months into the Article 50 timetable, the ability to plan and execute an orderly for industry and commerce is now critically hampered by lack of clear decisions and signposting from politicians.

For more than 20 years, members of Brexit-Partners have an unparalleled track record as specialists in developing and executing business change programs during times of upheaval and uncertainty.

Brexit-Partners have developed a process that brings insight of the issues combined with an understanding of how to implement change whilst the operating environment is in a state of flux.

January 2018 – Status update

The British Chambers of Commerce, representing 75,000 businesses with five million employees, in their end of 2017 review attacked the country's political leaders over Brexit - accusing them of "division and disorganisation" that is putting the economy at serious risk.

In its year-end letter to members the Confederation of British Industry, representing 190,000 businesses and around 7 million workers, said that that the Government needs to provide "unity, clarity and certainty" rather than "a different opinion every day".

On Christmas Eve, the Parliamentary Committee responsible for scrutiny and oversight for Exiting the EU, published 39 'sector specific impact analyses'. The scope spanned all aspects of commercial, financial and industrial life. The terms of reference were clear - and the finding demonstrated painstaking work by Parliament and a host of business representatives. However, publication had been delayed at the request of the Secretary of State for Exiting the EU pending Government review. The result was a heavily redacted set of papers – excluding the very information that organisations need in order to plan. Stating that: 'This information was provided by the Government to the Committee, but the Committee has decided not to publish this section' the apparent aim is to keep the negotiating hand of David Davis close to his chest.

Organisations no longer have the option of waiting to do their Brexit planning until we get a steer from the negotiators. The lead time to develop and implement new procedures and working arrangements to meet new regulatory compliance and trading requirements is now greater than the time available. This imperative is becomes grave in some of the 'scenarios' that we need to be included within contingency planning.

The remainder of this page provides a starting point and generalised route map for Brexit planning and introduces an approach to tracking and management reporting - and creating a document of record to meets Corporate Governance and regulatory reporting requirements.

 

Part 1: Setting the Scene

Capture analysis and thoughts to date and some high level answers:

  • How dependent are we as a business on the EU market. What proportion of our business comes from or is reliant on the EU?
  • What impact will Brexit have on freedom of movement within the EU and how would it affect our ability to attract and retain the best talent from the EU?
  • Do we rely on EU "passporting" for provision of goods and services - or on other forms of mutual recognition of standards or qualifications?
  • Will our strategy on currency risk and hedging change? Does a weaker or stronger pound create investment opportunities?
  • Is EU legislation important to our business – and is this likely to change in the event of Brexit?
  • What regulatory changes are likely to occur in our sector? Is regulatory relaxation in our sector/industry a possibility?
  • To what extent might changes to international trade agreements affect us? Consider duties, tariffs, quotas?
  • What impact will uncertainty have on business growth and investment?
  • What is our exposure in relation to the financial health of our counterparties (such as customers, suppliers, financiers)? Are we likely to be impacted by any change to the future financial health of the UK and its credit rating?
  • What are our options for an investment, merger or joint venture? Could and should this be in the UK, EU, or elsewhere? Should we be relocating any activities ahead of Brexit?
  • Do we receive or depend on grants or funding from the EU? How might that be impacted by Brexit - and what is the impact on us?
  • How will Brexit impact our particular sector? Parliament has analysed Brexit impact across 39 sectors, including for example: Technology, Media and Communications, Life Sciences, Private Wealth or Energy. Have we worked through the papers to identify economic impacts that we may not have identified for ourselves?
  • Will Brexit cut across any of our important contractual arrangements e.g. pricing, territorial restrictions, regulatory oversight?
  • Will Brexit affect the way in which we can protect or exploit intellectual property?
  • What should we be communicating internally to our staff on the subject?
  • What should we be communicating externally on the subject – investors, suppliers, customers, trade associations...?

 

Part 2: Planning a Brexit program and timeline

What scenarios should we consider – actively and as a contingency? Weight the scenarios and assess the impact against the high level criteria. Combine the score to decide how much effort to expend against each scenario.

i. Staying in the single market and customs union

The UK could sign up to all the EU's rules and regulations, staying in the single market – which provides: free movement of goods, services, finance and people – and the customs union, in which EU members agree tariffs on external states. Freedom of movement would continue and the UK would keep paying into the Brussels pot for shared interests and investments. We would continue to have unfettered access to EU trade. Some argue that the pledge to "take back control" of laws, borders and money would not have been fulfilled. This is an outcome and may be possible only by reversing the Brexit decision – by Parliament, after a second referendum, or a general election.

ii. The Norway model

UK could follow Norway, which is in the single market, is subject to freedom of movement rules and pays a "fee" to Brussels – but is outside the customs union. This scenario ties Britain to EU regulations, but allow it to sign trade deals of its own. A "Norway-minus" deal may be more likely. This would see the UK leave the single market and customs union and end free movement of people. However, UK would align its rules and regulations with Brussels, hoping this would allow a greater degree of market access. The UK would still be subject to EU rules for goods and services provided to Europe.

iii. The Canada deal

A comprehensive trade deal like the one handed to Canada would help British traders, as it would lower or eliminate tariffs. But there would be little on offer for the UK services industry. It is a bad outcome for financial services. Such a deal would leave Britain free to diverge from EU rules and regulations but that in turn would lead to border checks and the rise of other "non-tariff barriers" to trade. It would leave Britain free to forge new trade deals with other nations. Many in Brussels see this as a likely outcome, based on Theresa May's direction so far.

iv. No deal

Britain leaves on 29 March 2019 with no deal reached. From 23:00 on 29 March, all trade is by default governed under the World Trade Organisation rules. Tariffs would become effective. All goods will be subject to border clearance. No services will be automatically passported. This applies to people, goods, finances and services moving in either direction between the UK and the EU. The UK will need to establish bilateral agreements to deal with the consequences – however, the country would be free to take whatever future direction it wishes. It means a lot of disruption and chaotic situation in the short term. It is unlikely that the necessary systems, procedures and personnel will be in place by Spring 2019.

 

Part 3: Timing and contingency planning

There are presently 3 potential scenarios regarding timing for the completion of Article 50:

i. "Hard Brexit" - per the European Union (Withdrawal) Bill

23:00 on 29 March 2019 with no further transition

ii. 2-Year Transition Period – preferred position of UK negotiation team but now referred to by them as "Implementation Period

2 years of working under EU regulations and 4 freedoms, but without a place in the European Council
23:00 on 29 March 2021

iii. "Limited Transition Period" – preferred position of the EU negotiation team

Timed to end with at close of present EU 7-year budget – funding round
23:00 on 31 December 2020