There have been a number of Brexit developments in the last week that should be factored into Brexit scenario planning by any organisations, particulary planning for No Deal.

UK Government guidance on No Deal

The UK government has now published a wide range of notices on planning for a No Deal Brexit. These include:

Customs and tax: As we expected there will be considerable additional customs and excise procedures for trade in goods between the UK and EU.

There was welcome news on import VAT in the UK: the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that, the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.

Funding: Other UK measures to reduce the impact of No Deal include the Uk government guaranteeing continued payments of EU subsidies and grants including common agricultural policy payments, and EU regional and research funding – all until December 2020 (when most current EU programmers end).

Markets and supply chains: By and large, it looks like the UK government is trying to unilaterally minimise obstacles to imports of goods and services into the UK – with continuation of EU standards and in sectors like financial services, a commitment to continue to recognise EU domiciled services serving UK customers for a period after Brexit. This is not – at least yet – a two way street as the EU has not offered reciprocal access in the event of no deal: so UK exporters of goods and services to the EU will face significant barriers as things stand.

Regulation and data: One of the most significant notices was on mutual recognition of products : for those products where there is no EU single market product standard, at present most products legally sold in one EU member state can be sold in all others (the national standard is ‘mutually recognised’ by all member states). This No Deal guidance states that this will come to an end for both imports from EU into the UK and exports from the UK into EU in the event of No Deal. This includes certain foodstuffs, furniture, bicycles, ladders and precious metals. Manufacturers and sellers of such products will need to meet UK standards to sell in UK or will need to meet the standards of one EU country to enable them to sell in all EU countries in the event of No Deal.

The government also confirmed that there could be implications for transfer of data between the UK and EU – but there are solutions organisations can apply under the GDPR framework. My colleague Iain Bourne, our data protection expert, has written this excellent summary of the issues here.

We also saw that there are a variety of sector specific impacts of No deal Brexit including:

  •  Tobacco: No Deal would mean the UK has to introduce new picture warnings for tobacco products as the copyright for the existing picture library is owned by the European Commission. In the event of No Deal, cigarette manufacturers will need to ensure that tobacco products which include picture warnings produced from Exit Day onwards will be labelled with the new picture warnings.
  • Organic products: UK exports to EU will need to certified by an organic control body recognised & approved by the EU. To do this, UK organic control bodies will need to apply to the European Commission. UK organic control bodies are not permitted to make these applications until the UK becomes a ‘third country’ - ie after 29 March 2019. Approval can take up to nine months.
  •  Licensed regulated activities including broadcasting, financial services and pharmaceuticals can not rely upon UK licenses to provide services and goods in the EU.

In other Brexit news:

Planning for economic impact: We had further warnings from the Chancellor, the governor of the Bank of England and the IMF that a No Deal Brexit will create a significant economic downturn in the UK. This economic impact should be factored into plans for No Deal Brexit – and organisations should reflect on how the 2008 recession impacted on their customers, suppliers and markets.

People and skills: Today the government’s Migration Advisory Committee reported its recommendations on post Brexit immigration policies (this will inform Government’s policy statement alter this year). Key points include recommendations on:

  •  A focus on allowing immigration for skilled roles but not low skilled roles: and a view that most low skilled roles can be filled by UK citizens.
  •  No sector exemptions except perhaps agriculture.
  •  A pay cap (i.e. immigration allowed above a certain pay level and not permitted below a pay threshold) rather than an absolute target for immigration.
  • If Immigration is not part of negotiations between the UK and EU, then there should be no preferential access for EU citizens.
  •  They do not propose any change to change to the way the current IntraCompany Transfer (ICT) scheme works
  • This confirms what many businesses have been planning for; a tightening on immigration for lower skilled roles and a need to consider further ways of developing and hiring a ‘home-grown’ workforce.

Supply chain, operations and logistics contingency plans:   Finally, today BMW announced MINI production in UK would stop for one month around Brexit day in March next year, to minimise disruption caused by border delays and enabling maintenance. This is another example of business plans designed to tackle the potential disruption of a No Deal Brexit in the period around March 2019. Others ae looking at how to stockpile components to enable manufacture to continue if there are border delays and to get finished products to overseas markets in advance of March 2019 to ensure they can fulfil customer demand if it proves difficult to ship products out of the UK in the initial aftermath of a No Deal Brexit.