Chapter 1

What Is Brexit and What Does It Mean for You?

IN THIS CHAPTER

Bullet Breaking down the UK referendum result and key issues that led to the result

Bullet Setting out the timeline for the UK’s exit from the EU

Bullet Delving into the key negotiation points for the UK’s withdrawal agreement

Bullet Attempting to get parliamentary consensus on the withdrawal agreement

Bullet Looking at the reaction from business leaders

Bullet Preparing your business for Brexit and looking to the future

In 2016, the United Kingdom (UK), which comprises Great Britain and Northern Ireland, voted to leave the European Union (EU).

Europe had become a bitterly divisive issue in the country, and especially within the ruling Conservative Party. The country was essentially split down the middle, with “Remainers” on one side, arguing that the UK benefited greatly from membership in the EU, and “Leavers” (“Brexiters” or the even more jaunty-sounding “Brexiteers”) on the other, arguing that it was time to take back control from the EU.

The prime minister at the time, David Cameron, hoped that a referendum would settle the issue for at least a generation. Firmly on the Remain side, he took a gamble that the voting public would choose to stay in the EU, and the more Eurosceptic elements of his party would have to put up and shut up. But things didn’t quite work out the way he planned, and the public voted, albeit by a narrow margin, to say au revoir, adios, and auf Wiedersehen to the EU. And so began the British exit from the EU: Brexit.

In this chapter, I take you on a whistle-stop tour through the referendum, the Brexit process, and what the UK’s departure from the EU means for the UK and Europe — not to mention us regular folk who have to navigate this incredibly complex labyrinth.

The Votes Are In, But How Did We Get Here?

The 2016 referendum wasn’t the UK’s first vote on Europe. In 1975, there was a referendum on whether the UK should stay in the European Economic Community (EEC; see the sidebar “Do you speak Brexit?,” later in this chapter, for a breakdown of all the Brexit lingo you need to know). The result of that referendum was a firm “Yes, please, we’d like to stay in,” with 67.2 percent of voters voting in favor.

Looking at the 2016 results in more detail

Fast-forward a generation, and the 2016 referendum turned the previous result on its head, but by a narrower margin. Overall, 51.89 percent voted to leave the EU, while 48.11 percent voted to stay in.

But the UK is made up of four different countries, and, interestingly, the individual countries voted in quite different ways:

  • England voted Leave, by 53.38 percent to 46.62 percent.
  • Scotland voted Remain, by 62 percent to 38 percent.
  • Wales voted Leave, by 52.53 percent to 47.47 percent.
  • Northern Ireland voted Remain, by 55.78 percent to 44.22 percent.

Remember Why did people vote to leave? Well, the answer will vary depending on who you ask. But some of the key reasons Leavers wanted out of the EU included the following:

  • Having to make financial contributions to the EU’s annual budget
  • Free movement of people and the perception that immigration from Europe was too high
  • Wanting the UK to be able to negotiate its own trade deals, instead of negotiating as part of the EU bloc
  • Perceived lack of UK “sovereignty” or control, with the UK being bound by EU rules and regulations

Meanwhile, those on the Remain side pointed out that, as with any EU member, the UK directly benefited from the EU budget — and from free movement of people and the EU single market, for that matter. Many Remainers also felt that the UK should be integrating closer with Europe, not distancing itself from its closest neighbours and biggest trading partner. Read more about these knotty referendum issues in Chapter 2.

Understanding the UK’s complex relationship with Europe

It’s fair to say that the UK never really bought into the dream of a fully integrated Europe, and it kept Europe at arm’s length whenever possible. When the EEC was formed in 1957, the UK didn’t sign up. And when the UK did apply, in the 1960s, its entry was vetoed by a skeptical France.

Remember The UK eventually joined the club in the 1970s but remained, in its own way, distant from Europe. Over the years, the UK has voted against or opted out of key EU arrangements, such as the euro single currency or the Schengen passport-free travel area (see the nearby sidebar “Do you speak Brexit?”).

Throughout the 1990s and later, as Europe moved toward greater integration (political and social integration, as well as economic integration), Euroscepticism really began to grow in the UK. Nationalist parties like the UK Independence Party (UKIP), whose main mission was to get the UK out of the EU, grew in popularity and tapped into voter concerns around immigration in a very effective way. UKIP finally won a seat in the UK Parliament in 2014; a year later, in the run-up to the UK general election, the Conservative Party manifesto included the promise of an EU referendum. The Conservatives won, and the referendum took place a year later.

Read more about the UK’s past relationship with Europe in Chapter 2.

Breaking Down the Brexit Timeline

Although the UK voted to leave the EU back in 2016, so far, the Brexit process has taken longer than most people ever imagined — and, factoring in future trade negotiations, may not be properly concluded for years.

Interestingly, the word Brexit pre-dates the 2016 referendum by a few years — check out the sidebar “Where did the word Brexit come from?” to discover more.

Remember The basic timeline is as follows:

  • June 23, 2016: The British public votes to leave the EU.
  • March 29, 2017: Prime Minister Theresa May (who took over after David Cameron quit in the wake of the referendum result) triggers Article 50, giving the UK two years to negotiate its exit from the EU.
  • April 18, 2017: Theresa May calls a surprise general election, hoping a big win will give her greater negotiating power with the EU. But her plan backfires, and the election (held on June 8, 2017) sees her Conservative party actually lose its majority. The Conservatives remain in power, just about, by forming a minority government with the Democratic Unionist Party from Northern Ireland, although May was politically weakened by the result.
  • June 2017: Three months after triggering Article 50, the UK formally begins negotiating the terms of its withdrawal with the EU. Read more about both sides’ crack teams of negotiators in Chapter 3.
  • November 2018: The EU and the UK publish their draft withdrawal agreement and a non-binding political declaration on future EU–UK relations. Both are swiftly approved by EU27 leaders.
  • January 15, 2019: The UK Parliament finally gets to vote on whether to approve the negotiated deal (the original vote, scheduled for December 2018 was postponed). The deal is rejected by an overwhelming majority.
  • March 29, 2019: Two years after Article 50, this is supposed to be the date that the UK actually leaves the EU. However, amidst chaotic scenes in the UK Parliament as the withdrawal deal was repeatedly rejected by Members of Parliament (MPs), Article 50 had to be extended and the UK’s exit was postponed by a couple of weeks.
  • April 12, 2019: The new Brexit date … but not for long.
  • October 31, 2019: The new, new Brexit date, as agreed between the EU27 and the UK at an emergency summit on April 10, 2019. With no immediate solutions in sight, and both sides wanting to avoid a no-deal Brexit, the delay is inevitable. However, should May manage to get her deal through Parliament before October 2019, the UK will be able to leave early.
  • December 31, 2020: The transition period, as set out in the withdrawal agreement, ends. (Although, given the delay to Brexit, it’s likely we may see the transition period change as well.) During the transition period, the UK is still bound by EU rules and is part of the single market; free movement of people, goods, services, and capital can continue as normal. However, the transition period is dependent on approval of the withdrawal agreement. (Therefore, a no-deal Brexit means no transition period.)
  • December 31, 2022: The transition period could be extended until this date, if both sides agree.

Turn to Chapter 3 to read more about the negotiation process, terms of the withdrawal agreement, and the chaotic parliamentary approval process. In Chapter 4, you can read more about the much-less-talked-about political declaration on future relations, and take a peek at how our future relationship might evolve.

Looking at the Key Elements of the Brexit Negotiations

The withdrawal negotiations between the UK and the EU seemed to go on forever, but really they’re just the tip of the iceberg.

Remember That’s because the withdrawal agreement only covers the UK’s departure from the EU. It doesn’t agree on critical elements of the future relationship between the two, such as trade. The withdrawal agreement is purely about getting the UK out of the EU in an orderly manner. Trade negotiations — and agreements that cover cooperation in areas like security and defense — will not begin until after the UK has left the EU. This was a big area of misunderstanding for a lot of people, who assumed the “Brexit deal” was essentially a trade deal.

So, what does this orderly exit involve? To ensure the UK’s exit would be as smooth as possible, the two sides negotiated the following key points as part of the withdrawal agreement (you can read more about these points in Chapter 3):

  • The divorce bill, or how much the UK has to pay to cover its existing commitments to the EU.
  • The transition period (also known as implementation period), which is designed to ensure a controlled transfer, and give governments and businesses time to prepare for life after Brexit.
  • The rights of EU citizens already living in the UK (and the rights of UK citizens living in the EU) to retain their residency status after Brexit. Also, that the free movement of people would continue until the end of the transition period. Theresa May had made it clear during negotiations that free movement of people would have to end after the transition period — it was one of her “red lines” that she refused to budge on.
  • The fact that the UK will have to abide by EU laws for the duration of the transition period — something that raised a lot of eyebrows among Brexiteers.
  • How to avoid a hard border between Northern Ireland and the Republic of Ireland. The withdrawal agreement includes a provision for a temporary customs union between the UK and the EU until a trade deal is agreed upon, and this is known as the backstop. This backstop measure proved extremely unpopular among Brexiteers (and even many Remainers), even though it was designed to prevent a hard border and protect peace on the island of Ireland.

Remember The UK’s ongoing relationship with the EU in areas such as trade is not part of the withdrawal deal because, at the time of writing, none of that has been negotiated yet. The political declaration (see Chapter 4) sets out a vague aim to agree on a trading relationship that’s as close as possible, but it avoids any specific details.

Deal or No Deal? Brexit Goes Down to the Wire

Although the EU27 leaders signed off on the withdrawal agreement and political declaration, Theresa May had her hands full trying to get approval from the UK Parliament.

The original parliamentary vote, which was scheduled for December 2018, was postponed at the last minute when it became obvious that almost no one in Parliament was prepared to support the deal. The Irish backstop was the main objection for most people, amidst concerns that it could inadvertently trap the UK in a permanent customs union with the EU — without the option to withdraw from that customs union in the future.

Remember The vote eventually took place in January 2019, at which point the UK Parliament spectacularly rejected (by a record majority) the deal that May and her team had spent almost 18 months negotiating.

But, like a fading Hollywood franchise that refuses to die, Theresa May brought the withdrawal deal back for a second vote, and a third, both in March 2019. Both times, Parliament rejected the deal. With just a couple of weeks to go until the intended exit date, the UK was on the verge of crashing out of the EU with no approved deal, meaning no transition period and potential chaos for UK businesses.

The EU looked on open-mouthed as chaotic scenes unfolded in Parliament. Meanwhile, the British public (and their Parliament) split further into factions: Some wanted to leave the EU with no deal, some wanted to delay Brexit and start negotiations again, some called for Brexit to be canceled altogether (a prospect that the EU had paved the way for when it agreed that the UK could just revoke Article 50 without getting the EU’s agreement), and many called for a second EU referendum.

Remember At this point, MPs voted to wrestle control of the Brexit process from Theresa May and her government, meaning they could begin to debate their own ideas on how to get Brexit done. Unfortunately, this didn’t work out either — it became glaringly obvious that there was no consensus on how best to leave the EU. All sorts of options were proposed: Leave the single market but remain in the customs union, leave the customs union but remain in the single market, have a second referendum on whatever deal is agreed upon, have a nice cup of tea and watch Killing Eve. (Okay, I made that last one up, but you get the idea — it seemed everyone had a different idea on how best to proceed.) All options were rejected. So, they voted again. And all options were rejected again.

As one British newspaper put it at the time, MPs took back control of the Brexit process, only to discover that they didn’t know what it was they wanted.

Amidst all the confusion, the EU took matters into its own hands and decided to extend Article 50 until April 12, 2019 — an extension of two weeks to help get something, anything, through Parliament. This short extension wasn’t enough, though, and the EU and the UK then agreed on another extension, pushing the Brexit date back to October 31, 2019.

Remember If this painful process proved anything (beyond the UK’s incredible talent for comedy), it’s that Brexit means different things to different people. Remember that the referendum was a simple in/out vote. People were asked, should the UK remain in the EU or leave? Those who voted leave weren’t voting for a particular type of Brexit on the ballot sheet; they were just voting to leave. Therefore, some of those who voted out undoubtedly had a hard Brexit in mind, while others will have leaned more toward a softer Brexit and maintaining close ties with Europe.

Therefore, when politicians talk about Brexit being “the will of the people,” what they’re really doing is interpreting their own version of the referendum result in line with their political position on Europe. As such, “the will of the people” has been used as an argument for a no-deal Brexit by hardliner Conservatives. Meanwhile, the opposition Labour Party, has interpreted the “will of the people” as meaning a softer Brexit.

With such disagreement on Brexit, it’s hard to imagine at this point how the UK government and Parliament will find a way through this mess and reach a consensus on what sort of Brexit is best.

At the time of writing, Theresa May and Jeremy Corbyn, leader of the Labour Party, have been engaged in negotiations to try to reach a compromise solution that can get through Parliament. This may involve plans for the UK to join a customs union with the EU. We’ve yet to see whether these discussions will get anywhere, and whether the UK Parliament will ever approve the Brexit deal, so that the UK can finally leave the EU. As of this writing, everything’s still on the table, including the unlikely prospect of a no-deal Brexit, or the (arguably more likely) prospect of Brexit being delayed into 2020. As with everything about Brexit, it’s a case of watch this space!

Read more about the twists and turns of the parliamentary approval process in Chapter 3.

How Businesses Reacted to the Brexit Decision

During the referendum campaign, Team Leave made some optimistic predictions about the UK’s post-Brexit trading prospects. There were promises of swiftly agreeing on attractive trade deals with the EU, the United States, and other global players, with little disruption for British businesses. After all, while governments may talk about trade deals like they’re badges to collect and show off, it’s everyday businesses that benefit (or don’t) from the trade deals that are agreed upon.

Meanwhile, Team Remain was quick to point out that not being able to trade smoothly with the EU would hit British businesses hard, because Europe is a major export customer for the UK. There were warnings of chaos at British ports and an overall negative impact on imports and exports.

Remember After the 2016 referendum result, and throughout the Brexit negotiation process and beyond, businesses and the organizations that support businesses in the UK reacted with some grim predictions and threats, including the following:

  • Telecoms giant Vodafone warned it might move its headquarters out of the UK and into Europe. (At the time of writing, it hadn’t made such a move, but the company made a big acquisition in Europe in 2018, when it acquired Liberty Global’s cable network in Germany and Eastern Europe.)
  • Jaguar Land Rover warned of potential job losses, which sadly came to pass in 2018 (1,500 job losses) and early 2019 (4,500 job losses).
  • Airbus warned that it might pull its wing building out of the UK in the event of a no-deal Brexit, and branded ongoing Brexit uncertainty “a disgrace” in January 2019.
  • Retailer John Lewis ended up in a public spat with then–Brexit Minister Dominic Raab when it said Brexit uncertainty and the devalued pound were contributing to poor trading results.
  • Lloyds Banking Group (and many other financial services companies) secured a banking license in Germany, paving the way to turn its Berlin branch into a full subsidiary company after Brexit.
  • Nissan confirmed that it wouldn’t be building the flagship X Trail SUV at its Sunderland plant, as originally planned, and warned that continued Brexit uncertainty “is not helping companies like ours to plan for the future.”
  • Dyson founder Sir James Dyson, who had openly backed leaving the EU, announced in January 2019 that, although manufacturing would stay in England, he would be relocating the company’s headquarters from England to Singapore — which had recently signed a trade agreement with the EU.
  • Ferry company P&O re-registered its entire fleet of ferries under the flag of Cyprus as a direct result of concerns over Brexit.
  • Sony confirmed that it would be moving its European headquarters out of the UK and into the Netherlands.
  • Numerous other companies warned of potential price rises and delays as a result of Brexit.

In short, many business leaders felt that Brexit was a mistake for the UK. Whether they’re right in the long term remains to be seen.

Remember In March and April 2019, as Parliament struggled to reach consensus on a way forward and the clock ticked down toward the original day of the departure, business associations reacted with increasing dismay and frustration, particularly at the lack of clarity on the UK’s future trading relationship with the EU.

The director general of the Confederation of British Industry (which represents almost 200,000 UK businesses), described Westminster as a “circus” and said that “jobs and livelihoods” depended on finding a new approach.

Meanwhile, the director general of the British Chambers of Commerce warned that businesses in the UK were not prepared for the consequences of a “messy and disorderly exit” (exiting the EU without agreeing on a withdrawal agreement). He said, “Government agencies are not ready, many businesses are not ready, and despite two and half years passing since the referendum, there is no clear plan to support communities at the sharp end of such an abrupt change.”

For non-British readers, I should point out that, by normally polite British standards, these quotes represent pretty stiff language!

Remember It’s clear, then, that Brexit will have some impact on businesses, whether it’s minor inconvenience or major upheaval. Therefore, all businesses should prepare for Brexit and assess the potential impact that Brexit may have on their operations.

Assessing the Potential Impact of Brexit on Your Business

Whatever happens with Brexit, whatever happens with any future trade agreement between the UK and the EU, business will continue. As with any business change, evolution or disruption, it’s about finding ways to adapt, ride out uncertainty, and future-proof your business as much as possible.

Remember At the time of writing, we don’t know for sure what the full impact of Brexit will be — depending on the type of business and industry you’re in, your company may hardly be affected. Regardless, it’s important to plan for potential changes or disruptions so that your company isn’t caught unawares.

If you were around in the late 1990s, you might remember talk of the “millennium bug.” We were all told our computers would stop working as the new millennium dawned, that public services would grind to a halt and planes would fall out of the sky. None of it came to pass. So, although I don’t want to downplay very real Brexit concerns, I think it’s important to maintain a level head and approach Brexit as you would any period of business change, evolution, or uncertainty.

In the following sections, I look at some of the key business activities that may be affected by Brexit.

Trading across borders

If your UK business trades with customers in the EU, you may need to consider things like the following:

  • Whatever happens, trade between the UK and the EU will continue, but it may be subject to tariffs on goods, increased paperwork, and customs checks. The processes for customs duties and value-added tax (VAT) payments on imports from the EU may also change.
  • If the UK exits the EU with a withdrawal deal, then UK–EU trade will continue as normal for the duration of any agreed-upon transition period. During the transition period, both sides will start to negotiate a longer-term trade agreement.
  • However, if the UK exits the EU without a withdrawal deal, or if the UK and the EU can’t come to an agreement on future trade arrangements, then the UK will trade with the EU under World Trade Organization (WTO) rules.
  • The picture for services companies selling their services in Europe may be slightly more complicated, since the trading of services tends to rely on close regulatory compliance. So, the ability of UK service companies to easily do business in the EU will depend on what the UK and EU agree on as part of their trade negotiations.

Read more about these potential changes to importing and exporting, and learn how international trade deals work, in Chapter 5.

Dealing with logistics challenges

Increased paperwork. Customs checks at the border. Customs payments. All of these potential developments will inevitably lead to higher costs and logistics challenges for businesses. Some of the key logistics considerations include the following:

  • Goods may be subject to increased customs checks as they cross a UK–EU border.
  • We may see delays at UK ports (especially at busy, high-volume crossing points like Dover), which will mean it will take longer to transport goods in and out of the UK.
  • Warehousing is in higher demand as businesses look to stockpile goods in case of disruption.
  • Even if the UK exits with a withdrawal agreement and swiftly secures a free-trade agreement with the EU, it’s still likely that border controls may change in one way or another.
  • What’s more, there are still likely to be some teething problems as the UK and the EU adjust to their new relationship, so it’s wise to prepare for some level of disruption to your supply chain.

Turn to Chapter 6 to read more about these and other logistics challenges —plus tips on taking the family car to Europe.

Managing the impact on employees and access to labor

Brexit will prompt a change in UK immigration rules, because one of Theresa May’s “red lines” in the negotiations was the desire to end free movement between the UK and the EU. For those businesses that employ EU nationals or are dependent on short-term labor from Europe, this could cause problems. You may need to consider things like the following:

  • Your EU national employees will need to obtain settled status if they want to remain in the UK indefinitely after Brexit. Settled status is the name given to the government scheme that provides security for EU nationals living in the UK, allowing them to stay on indefinitely.
  • The UK government plans to allow unskilled workers from “low-risk countries” (likely to include all of the EU) to be allowed to come and work in the UK for up to 12 months without needing a visa.
  • However, in light of the devalued pound and uncertainty around Brexit, many European workers are choosing to earn their money elsewhere in Europe, leading some industries to voice concerns about access to labor in the future.
  • It’s vital that you support your employees through any period of business uncertainty or disruption.

Turn to Chapter 7 to read more about these and other employment-related issues, including potential changes to employment law, making sure you have continued access to the labor you need, and tips on how to engage and retain your employees in times of disruption.

Looking at other considerations

There are all sorts of other business considerations that don’t fall under the headings of people, logistics, and trade, but are nonetheless important for businesses. These include the following:

  • Potential impact on EU-based subsidiaries or branches
  • What happens to intellectual property after Brexit
  • What happens to environmental standards, product safety standards, and other legal or regulatory requirements that your business complies with
  • The need to take steps to retain any .eu domain names that your business has
  • The impact of Brexit on your General Data Protection Regulation (GDPR) practices
  • The need to review and update your business contracts

Delve into these issues in more detail in Chapter 8.

Planning for the impact on your business

Clearly, there are lots of things to think about when it comes to preparing your business for Brexit. That’s why I provide some handy checklists of questions to ask yourself — a sort of Brexit impact assessment in simple list form.

Tip Turn to Chapter 9 to start assessing your business and preparing for whatever may come your way after Brexit.

Looking to life after Brexit

This book isn’t about scaremongering or fueling fears that business will grind to a halt after Brexit. Quite the opposite. I like to think that Brexit, like any period of change, has the potential to lead businesses to new market opportunities, fresh ways of thinking, and better ways of doing business.

Remember However you feel about Brexit, it’s not going away anytime soon. Considering future trade talks between the UK and the EU, Brexit may dominate the news for some time to come. For this reason, it’s vital that UK businesses stay focused on, well, doing business.

That’s why, in Part 4 of this book, I look ahead to life beyond Brexit. There, you can find tips on how to protect your business against Brexit uncertainty, my ideas on what sort of opportunities may lie ahead for British businesses after Brexit, and a list of key Brexit developments to keep an eye on in the future.

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