FSB wants to see a good pro-business deal reached with the EU. We firmly believe this will be in the best interests of smaller businesses in both the UK and the EU. However, with the day on which the UK exits the EU fast approaching, we have a responsibility to help our smaller businesses:
a) Understand the Withdrawal Agreement including EU Commission and UK Government ‘backstop’ propositions to avoid a hard border on the Island of Ireland;
b) Understand the range of ‘end state’ scenarios that are possible including;
c) Prepare for the scenario that would cause the most disruption to the business continuity of small businesses in the short to medium term.
This document is not intended to make a judgement about the medium to longer term risks and opportunities of each Brexit scenario described.
The most disruptive scenario for business continuity in the short term would be that of a ‘no-deal’ with no transition period. In this scenario the UK leaves the EU without a Withdrawal Agreement (WA), on 29 March 2019. The Withdrawal Agreement is the mechanism through which the UK and the EU 27 are seeking to agree, amongst other issues, a transition period, the rights of EU 27 citizens living in the UK and of UK Citizens living in EU 27 countries, how to avoid a hard border on the Island of Ireland and the financial settlement between the UK and the EU 27. A ‘no-deal‘ scenario would also mean there is no agreement on the framework for the future partnership between the UK and the EU 27 at the point at which we leave the EU. It is this framework (set out in a non binding political declaration) which would shape any future trade deal / trading arrangements between the UK and the EU 27. A no-deal Brexit would place the UK outside of the EU Customs Union and the Single Market, leaving small businesses to trade with the EU under World Trade Organisation Rules (which don’t cover all sectors of the economy).
One of the purposes of this pack is to clearly set out what smaller businesses should be thinking about in the event of a disorderly no-deal scenario. The decision on when to enact a contingency plan is a matter for each individual business. But FSB believes all smaller businesses should now be acting to mitigate the consequences of a no-deal scenario (without a transition period) because, while it remains an unlikely eventuality, its impact on business continuity for many small businesses, in the short term, would be significant.
Of course the Brexit negotiations are fast moving and dynamic. Therefore, we will update this information pack as required and look at other ways of supporting our members in addressing the consequences of whatever the Brexit outcome will be.
This document sets out some of the possible scenarios as a result of Brexit, particularly for businesses that are:
This list is not exhaustive and does not include some possibilities such as an extension of the negotiations under Article 50.
This section also explains the concepts of the Northern Ireland (NI) backstop and UK backstop.
The UK Government’s technical notices aimed at providing information to businesses and others to enable them to make preparations for a no-deal scenario relate to the UK as a whole, rather than each of the devolved nations of Scotland, Wales and Northern Ireland.
The Government has emphasized its commitment to upholding the Belfast/Good Friday Assessment, including the consent principle on which Northern Ireland’s constitutional status rests, the deep economic and social cooperation on the Island of Ireland and North-South cooperation between Northern Ireland and Ireland.
Jump to End State Brexit Scenarios
Contingency planning or business continuity planning for any extreme scenario, for example an economic shock as a result of a sharp increase in oil prices, is good business practice There, will be some small businesses who already undertake business continuity planning as a matter of course and will be looking at many of the areas we have outlined as being particularly exposed to a no-deal Brexit outcome, as part of their normal business planning. There are others, however, that may not normally engage in business continuity planning.
As part of this pack we are setting out some principles to support our members in undertaking business continuity /contingency planning, for a variety of Brexit and non-Brexit related eventualities
Jump to Business Continuity Planning
Many of our members want to know if the rules and regulation will change immediately post our departure from the EU. In both a deal and no-deal scenario, directly afterwards, the rules will by the same as before 29 March. This is because the EU (Withdrawal) Act 2018 (formerly known as the ‘Repeal Bill’) transposes EU rules into domestic law in order to provide certainty and continuity for business in the short-term. FSB supported the purpose of this Bill. In the medium to longer term, FSB supports reviewing the entirety of the UK’s regulatory framework to ensure it supports productivity, innovation and the UK’s wider economic and social model.
However, while the EU (Withdrawal) Act 2018 and the transposition of EU law into UK law does resolve most continuity issues, it does not solve them all. This includes in relation to regulations that have been passed by or are specific to each of the devolved administrations.
Another aspect that remains unclear is whether UK regulatory agencies will be able to provide licenses and certificates that will be recognised by the EU for goods and services that are exported to the EU. Even if, in the event of no deal, the UK decides to keep all the EU rules aligned and up to date, the EU could respond by stating that they cannot guarantee that the UK complies with EU rules as the UK is outside the jurisdiction of the EU (the area where EU laws apply) and is thus no longer part of the EU enforcement system. This could mean that the licenses for goods and services issued by the UK’s regulatory agencies may no longer be recognised by the EU even if they are issued on the basis of EU rules. For example, the Vehicle Certification Agency allows UK automotive companies to sell their cars in the EU and vice versa. In the event of no-deal (unless a separate bi lateral agreement is concluded on this issue), reciprocal licensing will disappear. Also, UK bodies may not be able to conduct conformity assessment checks on goods destined for the EU market. If there is a transition period; these issues would not arise at this point. Post the transition period how rules change or stay the same will depend on what the UK negotiates with regard to regulation in a trade deal with the EU (harmonisation/ regulatory alignment, equivalence or mutual recognition of rules).
If you have any comments or feedback on this document please forward this to Sonali Parekh, Head of Policy