The Home Office has recently issued a factsheet indicating that freedom of movement as it currently stands will end on 31 October 2019 and that arrangements for people coming to the UK for longer periods for work or study will change. Annabel Mace looks at what this means in practice and how employers should prepare.
Prime Minister Boris Johnson promises that the UK will leave the EU on 31 October with “no ifs or buts”. With three months left until the UK is due to leave the EU, the Prime Minister states that he hopes to negotiate a better deal, but concern remains that the UK will leave the EU with no deal. Are UK businesses prepared for that? The majority are not.
Our UK restructuring team have published a post that considers the issues businesses may face if the UK leaves the EU without a deal, why they need to prepare and what steps they can take now.
The new Prime Minister of the UK, Boris Johnson, has taken up office following his decisive (66% : 34%) victory in the contest among Conservative Party members who were presented with a choice between him and the Foreign Secretary, Jeremy Hunt. He promised during the campaign to take the UK out of the EU by 31 October (when the extension to the Article 50 Brexit process expires) “do or die”. In his first speech as PM, he again underlined his determination that the UK should leave the EU by 31 October. He said that his intention was that this should be with a new deal – “no deal” was a remote possibility which would only happen if the EU refused to negotiate. But it was right to intensify preparations for “no deal”, which could be lubricated by retaining the £39 billion financial settlement previously agreed with the EU.
So the starting gun for the next phase of Brexit has fired.
On 24 May, Prime Minister Theresa May announced her intention to resign as Prime Minister. She will stand down as leader of the Conservative Party on 7 June (after President Trump’s visit and the D-Day commemorations), and as Prime Minister as soon as the Conservative Party has chosen a successor. Her tenure in office had been looking increasingly challenged for some time. The immediate trigger for her resignation was her final attempt to get her Brexit deal done, which included the offer of the possibility of a further referendum. This proved more than her Party could accept, and the Party would have forced her out of office had she not agreed to resign.
The previous day, 23 May, the UK electorate voted in the European Parliament elections. The results were announced on 26 May after polling had closed across the EU. Turnout was slightly up on immediate previous EP elections, but at 37% below the EU average and well below both UK General Election and 2016 Referendum turnout. The results were:
|Share of vote||EP seats|
|Others||2.5%||Plaid Cymru 1,
NI Parties 3
This represents a notable success for Nigel Farage’s Brexit Party (which was only publicly launched on 12 April), a very bad result for Labour and a catastrophe for the Conservatives (their worst result in modern democratic history). It also represented a very strong performance for the overtly anti-Brexit parties (Lib Dems, Greens, and Change UK, between them secured over 35% of the vote). The immediate conclusion is that both the main parties have been punished by their electorate specifically for their indecisive stance on Brexit, and the division between those who favour a “pure Brexit” (no deal Brexit unless the EU agrees to a much better deal), and those who favour a further referendum in the hope of reversing the Brexit decision, or indeed an immediate Parliamentary revocation of Article 50, has sharpened in a country that remains deeply divided. But neither “no deal” nor “people’s vote” secured anything close to a clear majority. Both Conservatives and Labour have a lot of thinking to do. In the case of the Conservatives, this will happen during the forthcoming leadership election.
The next Prime Minister…
In March 2019, the Spanish government adopted a set of contingency measures in case the UK would leave the EU without reaching an agreement.
UK financial market entities in Poland – A Polish Brexit bill, passed on 15 March 2019, provides a transition period for the business operations of UK financial market entities in Poland, starting from the date of a “no-deal” Brexit. This period will allow businesses to conduct any legal operations needed to cease legal relationships entered into before the day of “no-deal” Brexit, or to establish a legal basis to continue to operate in Poland (i.e. by obtaining the correct permit). The Polish Brexit bill names specific financial market business types and contains details on permitted and forbidden activities within the transition period. The length of the transition period differs depending on business type, but typically does not exceed 12 to 24 months. The approach of the Polish authorities is intended to create a mechanism for UK entities to cease their activities and allow them time to do this. This is a different mechanism from the one applied, for example, in Germany, according to which, the German financial market supervision authority shall grant the extension of passporting rights resulting from EU laws. The Polish Brexit bill seems to be stricter, but creates a clear and transparent set of rules for the contingency of a “no-deal” Brexit, at least with regard to the time aspect of the transition period for the UK firms.
German legislators have adopted a number of Acts of Parliament in relation to Brexit both on the federal level and on the level of the 16 German states. Some of these regulate the “deal” scenario where the Withdrawal Agreement is ratified by the UK, and some of these regulate the “no-deal” scenario.
The so-called Brexit Steuerbegleitgesetz (Brexit Tax Accompanying Act) was adopted on 25 March 2019 and provides for a number of tax contingency rules in the areas of corporate tax, income tax, real estate transfer tax, inheritance tax and transformation tax, as well as contingency rules for the financial services sector, including banks, insurance companies, pension funds, payment services providers and other financial services providers, as well as special rules for German Covered Bond Banks. The act in particular contains a statutory authorisation for the German regulator BaFin to adopt further regulations, which BaFin will, however, only exercise if and once the UK ceases to be a member state of the EU without a deal.
The French Parliament authorised the government to take measures – known as orders (ordonnance) – which should otherwise be taken pursuant to law, in order to map out the consequences of a “no-deal” Brexit. The government had either six months or a year to pass those orders, following publication of the law.
The government was authorised to take any measure relating to the control of goods to and from the UK and relating to the administrative status of legal entities established in the UK and carrying out business in France. The orders define the conditions pursuant to which economic activities related to the UK and goods flowing to and from the UK can carry on.
The orders provide, in some instances, pragmatic adjustments to existing French legislation, unusual exemptions, and simplified administrative procedures and shorter delays to allow regularisation of the status of corporates or individuals concerned.
The Czech government adopted the Act No. 74/2019 Coll., which aims to soften the possible negative consequences of a “no-deal” Brexit. The act is intended to be a temporary measure, and all the instruments within it will last only until the long-term measures are adopted.
The act is to be effective from the day the Treaty on the Functioning of the European Union and the Treaty on the European Union cease to be applicable to the UK and, simultaneously, if no agreement on the terms of the UK’s withdrawal from the EU (i.e. the Withdrawal Agreement) is adopted. Nevertheless, the act sets the deadline to 31 December 2020 at the latest. During this period, British citizens will be guaranteed equal treatment in 18 selected areas as if they were still European Union citizens. The Czech government expects that there will be reciprocity from the British side.
The areas dealt with by the act include regulation of obtaining Czech citizenship; marriage and registered partnership issues; access to the labour market and eligibility for unemployment benefits; income tax; recognition of professional qualifications; and provision of legal services by citizens of the UK and similar.
While US policymakers are eager to set out trade relations with the UK post-Brexit, the UK cannot begin its own bilateral talks with trading partners until it has formally exited the EU, as the bloc has exclusive competence over trade matters.
Furthermore, the final form of the UK-EU trade relationship will inform how other trade agreements are structured, including a trade agreement with the US. If the UK opts, colloquially speaking, to remain in the EU’s Customs Union, its negotiations with the US would be limited to those areas outside the scope of the union. But in a “no-deal” Brexit, or with changes to the current deal on the Irish border issue, the UK would not be part of the EU’s Customs Union, allowing it to negotiate with greater freedom with new trading partners.