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Brexit – the time is now!

Brexit – the time is now!

Brexit – the time is now!

The clock is ticking as the deadline of 29 March 2019 fast approaches. But how can you as a business leader prepare for Brexit while so much uncertainty hangs in the air? From navigating regulatory change to rethinking supply chains and reviewing strategies to minimize disruption, corporations trading in goods and/or services with the United Kingdom (UK) face a challenging journey ahead.

Where do we stand today?

EU withdrawal agreement: dead or still alive?

On 14 November 2018, the European Commission and the UK Government reached an agreement on the entirety of the Withdrawal Agreement of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, as provided for under Article 50 of the Treaty on European Union. This Agreement establishes the terms of the UK's withdrawal from the EU, and covers, inter alia, the following areas:

  • Citizens' rights;
  • A transition period up until 31 December 2020, during which the EU will treat the UK as if it were a Member State, with the exception of participation in the EU institutions and governance structures. This also includes the possibility of extending this transition once, for a limited period, by joint agreement;
  • The financial settlement, ensuring that the UK and the EU will honor all financial obligations undertaken while the UK was a member of the Union;
  • The overall governance structure of the Withdrawal Agreement, ensuring the effective management, implementation and enforcement of the agreement, including appropriate dispute settlement mechanisms;
  • The terms of a legally operational backstop to ensure that there will be no hard border between Ireland and Northern Ireland.

Future partnership

On the same date an outline of the Political Declaration was issued by the negotiators, setting out the future envisaged partnership: a free trade area based on deeper regulatory and customs cooperation with a view to supporting a level playing field. The aim is that all goods should be free from customs duties and quotas, building on the proposals in the Withdrawal Agreement for a single customs territory. In addition, it deals with sectoral cooperation (for example on transport or energy), cooperation on internal security, police and judicial cooperation and finally on foreign policy, external security and defense.

The Meaningful vote

In line with procedures, the UK Government must attain Parliamentary approval on the Withdrawal Agreement and Political Declaration; the so-called ‘meaningful vote’. On 15 January, this vote resulted in the UK House of Commons rejecting the Withdrawal Agreement by 432 votes to 202. After having survived a first no-confidence vote, the UK government presented a so-called Plan B on 22 January 2019, which would also be put to vote to the House of Commons. The amendments put forward in the Plan B, however, didn’t get sufficient support in a vote on 29 January. 

At this stage it is extremely difficult to predict the outcome of this political process in the UK, as in the end, the government or the parliament will have to come up with a plan that commands a majority in the House of Commons. And it is still doubtful as to whether a compromise can be found between supporters of a second referendum, a Common Market 2.0 option (Norway+) or any other proposal (including a request to extend the 29 March deadline or simply revoke Article 50).

The EU’s position remains firm that the negotiations on the EU withdrawal agreement remain locked, and that any further discussion will only move forward if the EU stakeholders have confidence that any movement will secure a majority in Westminster.

Meanwhile, the BREXIT clock keeps ticking. It follows that the chances of a cliff-edge come 29 March 2019 have increased significantly. In other words, contingency plans should now immediately be put into place by the EU, Member State’s governments and businesses.

The KPMG Approach

While we acknowledge that there is still quite some uncertainty on what the final Brexit solution will look like, one thing is already certain: Brexit will have a significant impact on your UK footprint and future trade flows. Based on the assumption of a “managed no-deal” scenario, KPMG can help you to map your UK footprint, identify and quantify your potential Brexit exposure. Working closely with our UK colleagues, we can help you assess the impact Brexit can have on your organization from our “six lenses principle” (i.e. trade & customs, integrated supply chain, regulatory, people & workforce, legal and pricing & exchange rate exposure). As Brexit will not only affect your business, but will of course also impact your UK suppliers and customers, both the direct and indirect impact should be within the scope of such an exercise.

Based on the outcome of our analysis, together with the relevant stakeholders in your business, the potential impact and mitigating actions are discussed in a collaborative workshop. During this session we will also help you to “triage” your mitigations to allow you to take the right business decisions at the right time. In our experience, these workshops are often an eye-opener for businesses and our “no-regret” decisions will allow you to take action amidst the ongoing uncertainty.

KPMG has developed a series of automated tools to help facilitate your Brexit exercise. Whether you are looking for a customs & supply chain analysis, a scanning of your commercial contracts or a follow-up on your workforce related issues, we are confident that our cutting-edge tools will bring you the added-value you need.

As the effective date of Brexit rapidly approaches, and as some of the potential solutions to mitigate the impact and disruption on your business take time to implement, we strongly advise you not to wait any longer and to start identifying your Brexit exposure today!

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