The result of the UK referendum on EU membership has been confirmed, and the electorate has voted to leave the EU. We would like to talk to you about the effect this could have on U.S. businesses, so that you can minimize the negative impact of what is likely to be a prolonged period of uncertainty.
Here are some of the questions we are already discussing with clients:
What happens next? The EU exit procedure is not easy, and it has been exercised only once – by Greenland. It has been made difficult by design, to discourage member states from leaving. There will be a period of negotiations between the UK and the rest of the EU about the exact terms of an exit that may last up to two years – or even longer if all EU member states agree – from the moment the UK government notifies the EU of its intention to withdraw.
What will be the UK's trading arrangements with the EU and third countries? In the immediate future they will not change significantly. However, it is anticipated that the UK and the EU will negotiate a new trading arrangement as part of the exit negotiations. While this trade arrangement will likely provide some sort of preferential access to the EU market, it may not match the level of preferential access that the UK currently enjoys as a member of the EU. Additionally, the UK will likely have to negotiate its own free trade agreements (FTAs) with a number of third countries that the EU has FTAs with, likewise losing – as a result of weaker negotiating power – some of its current benefits. As a result, exports of U.S. businesses from the UK may, over time, become subject to trade restrictions.
What about UK laws based on EU law? It would be up to the UK whether to depart from harmonized rules and standards; however, it is anticipated that the UK will change at least some regulatory standards. Accordingly, U.S. businesses in the UK should be prepared to incur the cost that may be associated with such changes, and anticipate that selling to the EU from the UK will probably become more difficult over time.
What will be the status of EU citizens in the UK? While citizens from EU member states currently employed in the UK may be permitted to remain in the country, further migration of citizens from such states may be subject to serious restrictions. Accordingly, U.S. businesses may experience a shortage of talent from EU countries.
Venable's International Trade and Customs Group and Fieldfisher are closely monitoring any developments and are available to provide further information and guidance.