Even If A Deal Is Struck, Most Aspects Will Be On World Trade Organisation Standards, So It Is Sensible To Finish Your Preparations Now On That Basis

As the EU and UK embark on a fresh round of trade talks, and with a limited number of working days left to implement whatever deal - or no deal is decided lawyers at Irwin Mitchell say the decision to extend negotiations does not change the fact, that even if a deal is concluded, the vast majority of its arrangements will be on WTO terms.

In relation to their dealings with the EU and the Rest of the World, businesses would be sensible now to complete their preparations for the end of the Transition Period on that basis.

UK Prime Minister Boris Johnson is reported to be preparing this week to communicate with business on this basis  and notwithstanding the possibility of further dialogue between the EU and the UK on a limited number of intractable and long standing issues, the overall future picture of “WTO” plus, possibly, a few extra arrangements, is looking increasingly clear.

Irwin Mitchell, which recently launched an online hub to highlight the key areas to consider in relation to Brexit over the coming weeks, with some reports suggesting that just one in four businesses are fully ready for trade post Brexit.

More are still needing time to prepare for the implications of a no deal scenario and while it is tempting to postpone decisions in the hope that a more comprehensive trade outcome may result, this does not now seem likely and firms need enough time to make changes.

Bruce Macmillan, a specialist lawyer at Irwin Mitchell, said: “It is now fairly clear that any deal will not be significantly beyond World Trade Organisation terms for many sectors, there is still a lack of clarity on many critical areas for many businesses.

“Business cannot wait indefinitely and for some, any answer would be better than prolonging the uncertainty – which is why increasing numbers are being forced to conclude that a no deal outcome is likely and to plan on the basis of that assumption. It is important to note that this applies to all international trade and not just with the EU and to think about the impact on your supplier’s suppliers and your customers’ customers in completing your plans

“Although the 15 October was always the UK date for a deal rather than a hard deadline set by the EU and both sides will probably seek quietly to continue the search for a breakthrough; in absolute terms, the end position on the vast majority of things that affect most businesses day to day are likely to end up at the WTO level.

“The government says it can live with no deal politically and some businesses probably can economically but only if they have planned and prepared properly ahead of time. It’s the unknown that makes planning harder, with firms stretched in two directions, not helped by concerns over the introduction of new COVID restrictions. It is sensible now for business to make planning decisions so that they can be as prepared as they can be across all of their areas of commercial activity internationally – and the related laws, tariffs and processes ranging from cross border data transfer and IP licensing via supply chain delays, tax liabilities and cost increases to supplier and customer insolvency and international debt collection.

“For some time we have been seeing businesses taking decisions to close operations and/or to relocate into the EU, not only because they fear no deal and/or because they know that what they need is already definitively off the agenda in any event. Sometimes any decision is better than none for those looking at their risk management strategies and when much is riding on the outcome.”

Honda announced the closure of its Swindon site from July 2021 with the loss of 3,500 jobs, while JP Morgan is an example of a firm that has told up to 200 staff that they will have to relocate to European offices amid mounting fears of a no deal being realised.

The EU and the UK look likely to continue informal talks but it remains unclear if this will be enough to break the deadlock on the disputed areas:  fishing rights and state aid remain key stumbling blocks to a deal, coupled with how any deal would ultimately be enforced. There are also concerns about whether the EU would be able to ratify and implement a deal at such a late stage.

Both sides would have liked to have seen the issues resolved by the October summit and without that, it remains to be seen if informal dialogue can lead both to a deal and to that deal being ready for ratification by early November, no matter how much importance both sides attach to a successful resolution.

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“It is prudent that both sides appear to be continuing informal dialogue to attempt to secure a deal but there are real risks of damage to business and the wider economy the longer this drags on which are impossible to ignore.

“It is also important to reiterate that this uncertainty also affects how businesses trade out of and into the UK with much of the Rest of the World as those arrangements largely (with some notable but economically small exceptions like Japan and Switzerland) still need to be agreed between the UK and other countries to replace the arrangements that the UK currently has in place via the EU.

“There is unlikely to be much progress on many of these deals until the definitive position between the UK and the EU has been determined by agreement or by ending up by default with WTO rules – on the things that those rules cover.

“Consequently, not only is the absence of clarity a significant source of problems, uncertainties and costs for the half of UK exports that go to Europe and the imports that come from there – such as food, pharmaceuticals and labour, but also without clarity, many firms will face significant problems uncertainties and costs with their exports to other locations too. With the end of the Transition Period less than 12 weeks away, time is not now on anyone’s side.” Bruce Macmillan - Group General Counsel

For further information and a clear guide on the areas that you should be focussing on in relation to Brexit, visit our Brexit hub.