Article 50 - Business needs to plan for Brexit

Article 50 - Business needs to plan for Brexit

The UK government has invoked Article 50 of the Lisbon treaty, formally commencing the process of its exit from the EU

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Article 50 - Business needs to plan for Brexit

If a deal between the EU and the UK is to be reached, the negotiations will involve compromises that will affect existing trading and political arrangements. No deal, which is certainly possible, will create a cliff edge impact for all parties. Either way, there will be significant consequences for business. 

The Time to Act is Now

In our conversations with Irish business, it is clear that many companies have put a Brexit plan in place so they are ready to respond to the challenges and opportunities Brexit will create – regardless of the uncertainty over the eventual outcome. We are working with them to assess the implications in terms of:

  • The strategic and operational impact
  • the tax impact on their business
  • supply chain issues 
  • regulatory and legal issues 
  • data protection matters 
  • employee mobility and immigration 
  • financing arrangements and 
  • transactional and deal opportunities. 

We encourage those Irish businesses who to date have adopted a ‘wait and see’ approach to act now and put a Brexit plan in place using these areas as a framework for their plans. 

We are also working with Government, businesses and representative bodies in both the Republic of Ireland and Northern Ireland to help identify solutions to the challenges posed by Brexit and to identify opportunities that may arise. If there are particular views you would like us to consider or represent in any of these discussions please let us know. 

A Matter of Politics

Inevitably the outcome of the negotiations between the EU and the UK will be determined by politics. This is likely to mean that what could be seen as shorter term goals of certain sectoral interests will be sacrificed in the longer term interests of EU unity. The British Government has stressed its desire for agreement which will see a strong partnership between the EU and the UK, whilst committing to negotiate in its own best interests. In response, EU President Donald Tusk notes a determined and united group of Member States seeking to protect the interests of the 27. 

Ireland is mentioned specifically in the UK notification document with the aspiration that the UK’s departure “does not harm the Republic of Ireland.” Whilst there are very strong arguments to ensure that arrangements specific to Ireland’s particular relationship with the United Kingdom are not disrupted – notably the Good Friday Agreement and the Common Travel Area, ultimately pan-EU considerations will play the key role in determining the overall outcome. 

The Irish Government has committed to publishing a consolidated paper providing more detail about its priorities and approach to the negotiations before the European Council meeting on 29 April. The challenges facing individual states or sectors in seeking special treatment are significant. For example it has been reported that the German car industry has already accepted that a special deal for their sector will not be prioritised in the interests of EU unity.

What Next?

Donald Tusk has stressed that EU law will continue to apply to and within the UK for the time being. He intends to proceed with an orderly withdrawal and will provide guidelines for the EU Council to adopt on 29 April. Michel Barnier will lead negotiations on behalf of the EU. 

Reaching agreement will not be easy. Angela Merkel’s statement on 29 March that she wants the divorce arrangement to be agreed before the terms of a future relationship should be negotiated, notwithstanding the UK’s stated desire for these negotiations to run concurrently, is an early indication of the challenges ahead. 

To achieve agreement, the withdrawal agreement would need to be ratified by the UK, approved by the European Parliament, as well as by at least 20 out of 27 Member States represented in the Council. These countries will need to make up at least 65% of the population of the EU, or account for around 290 million of the EU’s population without the UK. Hence there is likely to be significant interaction between the EU Commission, the EU Council and the EU Parliament throughout the negotiations. If the deal on the future relationship impacts policy areas that EU Member States are primarily responsible for, that agreement would have to be signed off by all of the national Parliaments of the 27 EU Member States. 

Ultimately, the implications of Brexit for businesses in Ireland (North and South) depend on the terms of the future EU-UK relationship and on the structure of each individual business as well as the sector in which it operates. Notwithstanding the uncertainty, having a plan in place will help you manage the challenges and hopefully the opportunities that Brexit will bring. If you would like to discuss these or indeed other related business issues, please get in touch with your usual KPMG contact.

 

Brian Daly
Head of Brexit Group
KPMG in Ireland 

Brexit: risks & opportunities

Brexit: risks & opportunities

Irish business is entering a new era. KPMG is here to work with you to help prepare for any scenario and to provide support in the months ahead.

© 2017 KPMG, an Ireland partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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