It’s been another interesting week in politics. Chancellor, Philip Hammond, has stated that the Treasury is willing to spend on preparing for a “no deal” Brexit if necessary.
Theresa May has refused to say if she would still vote for Brexit if the referendum was today and also warned the British public to prepare for crashing out of the EU with no deal, setting out emergency plans to avoid border meltdown for businesses and travellers.
So what does ‘no deal’ look like?
A ‘no deal’ scenario would effectively be realised if the UK and the EU failed to reach a formal agreement by the end of the stated period of negotiations which is due to expire in March 2019. There are, however, a wide-ranging number of potential implications - ranging from relatively minor, to seemingly catastrophic in nature.
For example, The Chancellor this morning has been stating that it is “theoretically possible” that a “no deal” scenario could lead to there being no air traffic between the UK and the EU on the day after Brexit. This is a position which the British Airline Passengers Association (BALPA) agrees with. However, both parties have expressed their expectation that pragmatism would prevail, and some ‘arrangement’ would likely be met. What this does highlight however, is the wide range of uncertainty, and significant potential impact to both commerce and consumers.
There are other uncertainties - all of which will impact upon procurement.
A ‘no deal’ scenario could mean that the entitlement of EU nationals to reside in the UK, or of UK nationals to reside elsewhere in the EU, could technically disappear overnight. This would impact more than 3 million EU nationals in the UK, and a further 1 million UK nationals in the EU. The repercussions on the labour market within the UK, which heavily relies upon EU nationals could be significant. This would impact upon contract pricing, salary costs, and the ability to attract and retain staff.
A ‘no deal’ scenario would also obviously mean no trade deal with the EU. Whilst this might appear to be another black hole of uncertainty – it might not be. At least, in this situation, we have clarity on what the fall-back position would be. The UK would then use the World Trade Organisation (WTO) rules. These are already in place, and the UK would simply begin applying them instead of the previous EU agreements. The WTO rules would impose tariffs on goods that the UK sends to the EU and vice versa. These tariffs would be around 2% on most goods and services, but up to 10% on cars, and 20% on agricultural products.
From a regulatory perspective, whilst the UK would suddenly cease to be a member of dozens of regulatory agencies that govern many aspects of daily life if a ‘no deal’ scenario was a reality, the cessation of the EU Procurement legislation (OJEU), would not have any immediate impact. This is because the EU procurement legislation is codified into UK law, in the form of the Public Contracts Regulations, so there would be some stability there, until the Government has either the appetite or the capacity to look at amending these post-Brexit.
A “cloud of uncertainty” caused by Brexit is acting as a damper on the UK economy, the chancellor has said. Philip Hammond told the House of Commons Treasury committee that businesses and consumers were holding back on spending decisions until they see the outcome of Brexit talks in Brussels. Progress in negotiations needs to come “as soon as possible” to remove the drag on growth, he said.
The chancellor’s comments came after the UK was the only major economy not to see its growth forecast upgraded in an International Monetary Fund (IMF) report, which predicted it would slow from 1.8% in 2016 to 1.7% this year and 1.5% in 2018.
When it comes to Brexit, it seems that the only constant we have is change – and a ‘no deal’ scenario would only accentuate that.
Procurement Hub’s innovative approach to tailored procurement solutions ensures that we remain flexible and dynamic. This, coupled with our in–house expertise, enables us to be best placed to deliver the solutions that reflect the changing face of EU procurement, ensuring the impact on small or large scale business projects is managed effectively.
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