Theresa May invoked Article 50 of the Lisbon Treaty on 29th March, giving the UK two years to leave the EU – on Friday 29th March 2019.
The government’s focus over the period is on laws, transferring EU law into UK law and deciding what to keep and what to scrap.
What are the really big issues from the UK’s point of view?
There are 3 things that come out of the withdrawal letter sent to the EU.
- If the UK leaves the EU without an agreement, trade will continue on default World Trade Organisation (WTO) terms but it would be good to have a free trade agreement.
- We have to work out what happens to citizens currently living and working in different countries.
- It would help to have an implementation period to avoid a cliff edge.
The negotiations between the UK and the EU need to unpick over 40 years of processes and go through thousands of points, but these are probably the most crucial overall.
What about individuals – what could happen to us?
Things will cost more
The fall in the value of the pound has made imported goods more expensive. People expect the currency to stay low for the long term now, so prices could increase rather than decrease.
Travelling could involve more checks
At the moment, there is visa free travel across the EU. In some countries, UK citizens can stay for up to 90 days without needing a visa, and that sort of arrangement would help with tourism.
If you are planning to stay for longer, that may require visas in the future.
Common services could change
There will be an impact on areas like health cards, insurance, car number plates and so on where the outcome of the negotiations will determine where you buy them and what it means for you.
What will happen to businesses?
The risks for businesses fall into three broad categories:
A number of industries depend on international labour
Sectors such as Accomodation and Food Services, Manufacturing and Transport have between 20 and 30% of their workforce made up of non-UK nationals.
These businesses will have to prepare for the cost of replacing or recruiting workers.
A trade deal is crucial for exporters and importers
Many products involve supply chains that criss cross the EU.
The Airbus supply chain, for example, has parts built in several different countries. Could the parts built in the UK have to pay additional tariffs? Or, could those manufacturing tasks be moved to Europe.
Four-fifths of cars made in the UK are exported and more than half of these go to the EU.
The financial sector is exposed to similar risks. Activities carried out in London may move to Hamburg or Paris.
The costs of doing business don’t look like they will go down
If the exchange rate remains low, companies that import will have problems while those that export could see increases in sales.
Wages, however, will probably rise if there are fewer workers available and the value of the remaining pool goes up.
Agriculture, in particular, could suffer both from a shortage of workers and from the loss of EU subsidies.
Summary – a model for assessing risks
As a starting point, it makes sense to fall back on Michael Porter’s value chain.
What are the things you do to deliver a product or service to your market?
How will you BREXIT affect you in each of these areas:
- Your infrastructure – office locations, equipment, materials.
- Your workforce.
- The technology you use.
- Procurement – how you buy everything you need.
- Inbound logistics.
- Outbound logistics.
- Marketing and sales.
Will BREXIT increase costs or decrease costs for you in these areas?
Will it create opportunities or result in lost business?
With less than two years to go, it is time to get busy planning for the future.
Drawing – inspired by the work of Chaz Hutton