UK leaving Europe has confused many, on the different implications, we are to expect now, in terms of Legal, Social and Economic impact it will have on Irish Businesses. Many questions will need to be asked, such as ‘Will a post- Brexit UK need a new trade deal with the European Union?’, ‘Will tariffs be imposed on UK goods and services under a new trade deal with the EU?’, ‘ Will the negotiations take place on a country-by-country basis?’ and these are only, but the few questions, we will discuss here in this blog about Brexit.
Legal, Social and Economic impact:
Will a post- Brexit UK need a new trade deal with the European Union?
Once the UK’s formal decision to leave the EU is notified to the European council of EU leaders, under article 50 of the Lisbon treaty, the UK will be giving formal notice that it will be leaving the EU. Article 50 sets a two-year window to renegotiate a new legal basis for Britain’s trade relationship with the EU – although it also allows for an extension.
These discussions will need to review the framework for importing and exporting goods (anything from food to cars) and the basis for continued services trade (such as legal advice on big company takeovers) to and from the EU. In addition, negotiations will have to cover customs procedures, passport controls for business travellers and regulation on issues such as environmental, health and safety standards.
Will tariffs be imposed on UK goods and services under a new trade deal with the EU?
This is entirely possible and up for discussion under a grand UK-EU deal. Currently, UK companies are able to trade with the EU on a tariff free and quota free basis. During negotiations for a new trade deal, there is nothing to stop Brussels seeking to impose a 5% tariff on all UK car exports (more than eight out of 10 UK-made cars are sold abroad). The UK can, of course, threaten tit-for-tat tariffs on BMW or Fiat cars, but it means consumers on both sides of the Channel suffer. There is also the risk that the EU will impose quotas, which limit the amount of goods and services that can be sold into Europe, which can create business borders for everybody.
Will the negotiations take place on a country-by-country basis?
No. According to John Forrest, the head of international trade at law firm DLA Piper, the UK will simply be required to negotiate a single deal with each of the 27 remaining EU states under the EU’s common commercial policy. “It will definitely not be on a country-by-country basis. The EU maintains a single harmonised customs border and the UK will simply negotiate with the EU the continued terms of trade with the EU,” he says.
Impact for Ireland and potential to capitalise on the move of multinationals out of the UK
The volume of trade between Ireland and the UK, estimated at over €1 billion in goods and services being exchanged between our countries on a weekly basis, means that Ireland will wish to keep trade with the UK as open as possible. At the same time there is likely to be a wish to capitalise on the move of multinationals out of the UK, should this arise. It was reported over the weekend that the IDA have approached 1,200 multinationals to assure them that Ireland’s future remains aligned with the EU. Government sources have also reiterated Ireland’s commitment to the 12.5% rate of corporation tax.
Key advantages of Ireland that might be highlighted to multinationals headquartered in the UK include its attractive headline 12.5% corporate tax rate; a comprehensive tax treaty network; its status as a common law jurisdiction that is similar to the UK’s legal system; its status as the fastest growing economy in the EU; its highly skilled and educated workforce allied to stable labour costs.
Some commentators are highlighting the potential for investment banks to move from London to other centres including Dublin and Frankfurt. A report in Saturday’s Financial Times suggested that some moves are imminent.
Reasons for this, and also for moves by other firms in the financial services sector including insurance companies, is the ability for certain financial firms who have a base and are regulated in one EU country to do business throughout the EU without having to obtain an authorisation or registration on a country-by-country basis. It is likely that the asset management sector in the UK will be significantly impacted and it was reported prior to the referendum that the Irish Central Bank was preparing for an increase in applications for authorisation from asset management companies due to fears from asset managers that they would no longer be able to sell UK regulated funds into the EU following a Brexit.
It is forecast that Brexit will mean lower economic growth in Ireland, which may have implications for the tax giveaways, as being possible in Budget 2017 due for release in October.
Some reliefs and exemptions contained in Irish tax legislation will no longer apply to the UK following their exit from the EU. Others apply within both the EU and EEA and so will continue to apply should the UK leave the EU while retaining membership of the EEA.
Brexit effect expected to shrink economy by nearly 4%
The paper, which focuses on the period after Britain’s planned departure from the EU in 2019, also warns of negative consequences for employment, wages and the public finances lasting for at least 10 years.
The study says the initial shock to the Irish economy will be transmitted via the trade sector in the form of a drop in export demand from the UK. This will stem from lower economic growth in the UK itself and the potentially damaging effects of a new tariff regime.
The fall in output and employment is also likely to translate into reduced Government revenue from a range of taxes, while the increase in unemployment will necessitate greater Government spending on welfare, both of which will place further pressure on State finances. The projections are based on a zero policy response from the Government.
The department’s study, while acknowledging the high degree of uncertainty around Brexit, provides the first comprehensive long-term post-Brexit outlook for the Irish economy.
It is based on research by Britain’s National Institute for Economic and Social Research (NIESR), which assessed the impact of Brexit on Britain and the world.
The ESRI ran these projections through its own model to calculate the likely effects on the Irish economy. The study assumes that tariffs and other trade restrictions would apply immediately on Britain’s exit.
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In conclusion from the sources found, really questions the many angles, that the different businesses must now consider, but the most important thing is to remember, that where are negatives, there are also positives and one must shapeshift into the mind of an entrepreneur and learn to see the opportunities of this new venture in Ireland, safe to say, Ireland will be ok, with the powerful education system and strong bonds with other countries, I am sure loop holes will be found and implemented, please leave your comments below about what your views are, would love to hear it, until next time, cheers for reading!
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