The Brexit Newsletter: 17 May edition

17 May, 2019

With the announcement that the Meaningful Vote set to be held for a fourth time in June, what are the headlines dominating the news?

  • Labour-Conservative Brexit talks collapse
  • PM to try to get Brexit deal through Parliament in early June
  • Taoiseach identifies that risk of No Deal continues to be a possibility

 

Three young business people discussing a report in a sunny office.

Business insights

We believe that it is prudent for companies to continue to plan for a hard (no-deal) exit. It continues to be a risk despite the European Council granting the UK an extension to Article 50 until 31 October.

While it is good news that the UK did not leave the EU without a deal on 12 April, there is still no certainty as to the final shape and timing of Brexit. No deal remains a risk until withdrawal from the EU is formally agreed.

While we hope that a positive outcome can be agreed before 31 October, the political uncertainties at Westminster mean that the possibility of no deal cannot be completely removed.

Despite the Irish economy continuing to perform well, the National Competitiveness Council has warned of possible threats to the competitiveness of businesses in Ireland. Businesses need to keep a firm eye on being prepared for any outcome.

What are the implications for business?

While there is breathing space with no deal being avoided for the moment, we are entering a further prolonged period of uncertainty as to how and when the UK leaves the EU. The key thing is to use the time wisely. Businesses need to stay agile as Brexit stops being a moment in time and becomes the backdrop for strategy and investment decisions.

For some businesses, the wheels are already in motion. This extension will mean they need to decide whether to pause their Brexit preparations and keep their options open, roll back preparations, or re-evaluate their options on a more strategic basis. Many businesses now need to manage rolling, costly uncertainty as best they can, with no clarity as to when it might end. A challenge for businesses now is what to do and not to be complacent.

Many financial services firms had already pressed the button on moving part of their business to Dublin. They will likely continue to do so, but with a bit more time now given for them to complete transfers and get authorisations in place.

Another key risk factor for many Irish businesses is the value of Sterling. The Central Bank has warned that Sterling could fall close to parity with the Euro in the event of a no-deal crash out. This would cause significant competitive pressures and businesses will need to watch this space.

The UK leaving under the Withdrawal Agreement would be ideal for Irish businesses as the UK would enter the transition period. Our trading arrangements would remain as they are now until at least the end of 2020.

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.

While Irish businesses would hope the Withdrawal Agreement to be agreed or for a softer 'Customs Union or Single Market' style Brexit, nothing is certain. The granting of more time is good news. However, the long-term future UK-EU relationship remains unclear. It will be very important for Ireland to keep in close contact with our UK and European colleagues as developments unfold.

London developments

Fourth-time lucky

PM announced her intention to try for a fourth time to get her Brexit deal through Parliament. MPs will vote on the EU Withdrawal Agreement Bill, legislation required, for the first time in the week beginning June 3. As the Withdrawal Bill provides the enabling legislation to implement the Withdrawal Agreement in UK law, MPs' support for the Bill would automatically endorse the PM’s Brexit deal.

Following a meeting with the Conservatives 1922 Backbench Committee, the PM agreed to outline a timetable for finding her successor once the Withdrawal Agreement Bill vote has taken place. There is speculation that if the PM is defeated, she could be forced to resign immediately.

Cabinet members wasted little time in reminding MPs that the June vote represents the last chance to be guaranteed of delivering Brexit. International Trade Secretary Liam Fox said that if MPs do not support the Government’s Withdrawal Bill then it will "take us to either the potential of revocation of Article 50 or leaving without a deal". He said MPs will have to decide "if they want to vote for Brexit or not". Brexit Secretary Stephen Barclay also said the deal the PM negotiated with the EU would be "dead" if the bill did not pass.

Compromise Brexit talks collapse

Friday saw the official collapse of talks between Labour and the Conservatives over a compromise Brexit solution. In a letter sent by Jeremy Corbyn to the PM, the Labour leader outlined his belief that the talks had gone as far as they possibly could, on account of significant policy differences of which continue to persist between both parties. Corbyn singled out the weakness and instability of the Government as being more of a critical factor in the decision to end the talks. There is a concern within the Labour party that if a compromise agreement was reached between Labour and the Government, the imminent replacement of Teresa May as PM offers no guarantees that her successor would honour the agreement. To back up this point, Corbyn highlighted that while the PM’s negotiable team were putting forward proposals to Labour at the negotiation table, public statements by other members of the cabinet were openly contradicting such proposals.

Corbyn concluded his letter to the PM with the warning that without significant changes to the government’s Brexit deal, Labour will continue to oppose the deal on the basis that it does not safeguards jobs, living standards and manufacturing industry in Britain.

The collapse of the joint talks coupled with both Labour and the Conservatives, now formally being engaged with the upcoming EU elections, means businesses are once again caught in the vacuum of uncertainty as they await for the next sign of Brexit news.

Latest from Dublin

Reacting to the collapse of the Labour-government talks, the Taoiseach identified this as a very serious and negative development. The collapse of the talks served a reminder that Brexit has not gone away with the Taoiseach noting that a no-deal scenario remains a real possibility in October. The Government now intends to upgrade its no-deal contingency planning.

Contact us

David McGee

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 8785

John O'Loughlin

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6093

Andrew O'Callaghan

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6247

Owen McFeely

Director, PwC Ireland (Republic of)

Tel: 353 1 792 8162

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