Brexit has, with effect from 1 January 2021, moved into full blown reality. Whilst the Deal agreed on the terms of future trade and cooperation was very welcome, particularly as compared to a No Deal outcome, it does not replicate the frictionless trade arrangements that previously existed. Brian Daly, Head of Brexit at KPMG in Ireland, discusses what Irish business leaders need to be thinking about.
We recommend that all our clients build a Brexit Response into your business planning for the next few years so as to be as prepared as possible for the challenges and opportunities ahead.
The legal agreements underpinning what has been described as a thin deal as far as trade is concerned, covering goods and certain aspects of services, run to thousands of pages of new laws and regulations. They will have material consequences from a strategic and operational perspective for businesses on the island of Ireland. Some of these consequences are more immediate whilst others will take longer to play out.
Some of the key consequences to take note of include:
- Irish businesses will have quota and tariff free access to the UK – this is a key benefit of the deal.
- There will be new non-tariffs costs on trade between the EU and the UK – more forms to be filled in, more tests and new labelling requirements for many products. There is also time and cost involved in getting used to the new rules and putting new systems and processes in place.
- There are new Rules of Origin – these determine if a good qualifies for tariff free treatment. Many businesses have already seen these rules may require them to reconfigure their supply chains.
- Under the Protocol special rules for trading in goods apply to Northern Ireland, the effect of which is to ensure that NI businesses can continue to trade with the EU on a tariff free basis without any customs declarations or border checks whilst also enjoying unfettered access selling into the GB market.
- Purchasing goods online from the UK has become more expensive and complicated.
- The lack of extensive coverage in the deal on services may affect the provision of services between the EU and the UK. This will depend on the nature of the service and on what agreements are reached in the future between the professional bodies in the UK and each EU country on the recognition of professional qualifications.
- There are important provisions for sectors including aviation, energy, fishing and road transport.
- There is very little in the deal on financial services – the next key development will be the outcome of discussions in relation to establishing structured regulatory cooperation arrangements, with a view to signing a Memorandum of Understanding for this framework by end- March 2021.
- There is an extensive new governance framework involving the establishment of a Partnership Council and many new Committees and Working groups to oversee the implementation of the agreement.
- There are provisions dealing with State Aid and what has become known as Level Playing Field conditions in areas such as labour laws, environmental standards and taxation, with specific provisions to deal with disputes in relation to these matters. Time will tell how they operate in practice.
- And as if all of this isn’t enough to get used to, it should be borne in mind that the other agreements will be needed in the future to deal with Brexit, and the Trade and Cooperation Agreement itself will be reviewed every 5 years, with the first general review taking place by end 2025.
To assist you in understanding, planning and adjusting to this new reality the experts in our Brexit Response team have set out our analysis of some of the key aspects of the Deal and key issues business can focus on.
If you have any questions on any of the issues addressed here please make contact with me or any member of our Brexit Response Team.
Head of Brexit Response Team
KPMG in Ireland