Theresa May recently stated, “We’re getting on with Brexit.”, but… are they really? Over the last several months, the UK’s plan to leave the European Union seems to have only become even more opaque. Not only are there extremely complex logistical hurdles to overcome, new legal challenges are also arising that might halt Brexit in its tracks entirely. This wildly uncertain situation is exactly the opposite of what both European politicians, and businesses around the world had hoped for.
Let’s take a look at some of the issues that are getting in the way of a clean break, and how they’re creating a nightmare scenario for businesses.
Getting UK law in order
Great Britain can’t withdraw from the EU and then fill in the legislative gaps at their leisure. A significant portion of the UK’s current legal framework is actually EU law, and simply allowing all those laws to lose force would throw the entire legal code into chaos. Because of this, EU law needs to be enshrined into British law before it can be altered or abolished after Brexit.
Unfortunately, doing this is much more difficult in practice than it sounds in theory. The Department for Exiting the European Union has been described as not having “the faintest clue” as to what it’s doing. EU law is inherently designed to work internationally, and can’t simply be transposed into domestic policy. According to The Times, legal experts have to analyse over 120,000 individual pieces of EU law that range over a 40 year period to get a workable result. This massive task is likely to simply be beyond the scope of what can be delivered within a reasonable time frame.
This poses an enormous problem for businesses because it’s now impossible to predict what UK trade policies will look like when (and if) Britain leaves the single market. Worse, it’s unclear how long it will take the country to update their laws to the point where they’ll even be able to move forward. Since the UK is extremely unlikely to actually leave the EU before this is resolved, it’s becoming even more unclear when Brexit will actually happen.
The EU wants things to move along
The European Parliament’s chief negotiator Guy Verhofstadt wants the deal to be completed before the next European Parliament election in 2019, which gives Britain until mid 2017 to trigger Article 50. That’s well within Theresa May’s plan to start negotiations at the end of March, but experts doubt it will be possible.
Several key EU countries have major elections in 2017, which could muddy the waters even more, especially as Marine Le Pen’s eurosceptic National Front party is currently gaining steam. In order to minimise economic damage, the UK needs to approach Brexit methodically; however, the EU can’t afford to allow Britain to take its time. This conflict of interest places the UK in a precarious position, and could destabilise European sharemarkets as well as investor confidence in the UK.
The ECJ could cause a “Hard Brexit”
Discussion has begun over whether the European Court of Justice (ECJ) could be called upon to rule on whether the process of leaving the union could be aborted once article 50 is triggered. If they ruled in the affirmative, we could be looking forward to another 2 years of complete uncertainty as to how and whether the UK will even leave the European Union.
It’s also been suggested that the ECJ could rule on the content of any Brexit deal that was negotiated during that 2-year negotiation period. This adds an additional layer of bureaucracy that the deal would need to pass before it could be implemented, which increases the chance of any deal being rejected. A rejected deal could result in a “hard Brexit”, which would mean that the UK loses access to the EU’s single market entirely and has to begin trade negotiations from scratch after leaving the union.
Is Brexit in doubt?
In early November, a UK high court justice ruled that Parliament will need to approve the decision to leave the EU, regardless of the results of the referendum. Since the vast majority of MPs opposed leaving the EU, this risks derailing Brexit entirely. Of course, this decision isn’t going unopposed. The government is appealing the ruling in the Supreme Court, in what is being described as the most important constitutional matter in a generation.
This has major implications for businesses, especially London’s massive financial sector. Major banks and large businesses that have been planning to move their headquarters out of London to continental Europe are now thrown into limbo. Moving is extremely expensive, and businesses now have no way to determine whether it’s truly necessary. Additionally politicians and government employees who are spending vast amounts of time and resources preparing for Brexit in the UK and in the EU could see their work wasted entirely.
While keeping the UK in the EU would be economically beneficial, it would also set a dangerous precedent where decisions can be easily made and reversed at the last minute. This could embolden other countries to try something similar, which EU leaders are definitely seeking to discourage in order to maintain European stability.
Instead of the emergence of a cohesive plan for Brexit, we’ve watched as the situation has only become more convoluted and uncertain than it was immediately after the referendum. The financial sector and international businesses all over the world are forced to operate in ever more uncertain conditions. We’ll continue to update our readers as the situation develops further. Stay tuned!