Following the European Council Meeting on 10 April, the UK has been granted an extension to Article 50 until 31 October. It is not clear that this reduces the risk of a no-deal Brexit.
We advise businesses in Ireland to continue to plan for a hard (no-deal) exit. We believe this continues to be a risk.
Why do we believe this?
While it is good news for businesses that a no-deal Brexit has been taken off the table for now, there is still no certainty as to the final Brexit outcome. EU leaders at the European Council meeting offered Theresa May a further extension to the Article 50 process, moving the UK departure date to 31 October at the latest.
While we hope that a positive outcome can be agreed in this timeframe, it cannot be taken for granted given the political uncertainties in Westminster.
What are the options?
- Hard exit
Likely. To avoid this option, the UK either has to pass the Withdrawal Agreement and agree on a way forward for the future trade relationship, or revoke Article 50.
- Withdrawal Agreement is passed
Unlikely. At the last vote, the gap had narrowed to 58 votes. The WA is set to go before Parliament again in the week commencing 3 June.
- Revocation of A50
Possible but unlikely. Parliament could step in and do this but it is the "nuclear" option.
- Second referendum
What are the implications for business?
Businesses still don't have certainty on the eventual Brexit outcome. It is good news that a hard exit did not occur on 12 April, as it would have had disastrous consequences for business and the economy. However, a no-deal exit remains a possibility.
For firms in the Financial Services sector, a no-deal outcome remains the core assumption governing activation of plans. If a Custom Union was to be agreed between the EU and the UK (watch this short explanation of the EU Customs Union) this would not address the Brexit risks faced by financial services firms arising from the loss of access to the EU Single Market.
Financial Services firms which have readied themselves for no deal will be concerned about what their next steps should be: what will be their new options and requirements for shifting business, operational infrastructure and people between UK and EU-27 entities?
On 1 April, the Irish Government issued important advice for companies who store personal data in the UK. This was followed up by important advice for companies buying goods from the UK.
The extension to 31 October allows a degree of breathing space. We recommend using the available time for regulatory compliance such as customs and VAT authorisations. We would urge trading entities to apply for EORI registration with the Revenue Commissioners. Companies should leverage this extension to advance their preparations. Even if you are well prepared, reassess your plans in the light of the extra time.