December 17, 2018

The Brexit Deal – Current Status

In June 2016, 51.9 percent of Britons voted for the United Kingdom to leave the European Union. On 29 March 2017, the British government invoked Article 50 of the EU Treaty and set in motion the withdrawal process. The UK will remain a full member of the EU until 29 March 2019 and will lose membership on 30 March.

Current Situation

On 14 November, European and British negotiators announced that they had finally reached consent on all aspects of the Withdrawal Agreement and the Political Declaration. The Withdrawal Agreement provides for a transition period until 31 December 2020. Till then, EU laws will continue to apply to the UK. The country loses its right to vote on EU matters but retains access to the Common Market, remains in the Customs Union and must contribute financially.

The heads of states of the remaining 27 Member States of the European Union approved the agreement on 25 November. The agreement still needs to be ratified by the European Parliament and the British Parliament. A scheduled British parliamentary vote was called off on the eve of the vote by the Prime Minister because she feared she did not have the votes to pass the measure. She will seek to have the entire agreement renegotiated. The EU had earlier stated that there will be no renegotiation of the agreement.

What happens next is anyone’s guess. At the same time, the European Court of Justice issued a ruling stating that Great Britain can unilaterally stop the Brexit process any time on or before the legal withdrawal deadline. The ruling was based on a question submitted to it by a cross-party group of Scottish politicians and the Good Law Project.

No-deal scenario

If it comes to a “hard Brexit” without a withdrawal agreement, the economic relationship between the EU and the UK will be based on that of third countries with duties on goods and services from both sides. Estimated annual costs for EU companies could be over 10 billion euros, with German companies accounting for more than 3 billion euros of that. The consequences would be price increases and disruptions in production, supply chains and the flow of goods and services.

Preparation for a no-deal

Multinationals are actively making contingency plans. On the other hand, small and medium-sized enterprises (SMEs) are falling behind in this aspect. They are more exposed to an uncertain outcome of the Brexit and suffer from information deficits. To help remedy this, the Bavarian Industry Association (vbw) conducts Brexit workshops in cooperation with Ernest & Young in several Bavarian cities in November and December 2018.

In addition, the vbw has published an orientation guide that outlines different scenarios and provides practical advice on how companies can mitigate grave ramifications of the Brexit.


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Tatjana Marcukov

Außenwirtschaft

Tatjana Marcukov
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