What Does Brexit Mean for Businesses?

 

Allen Smith, J.D. By Allen Smith, J.D. June 26, 2019
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LAS VEGAS — When British citizens voted to leave the European Union (EU) on June 23, 2016, they didn't have a clear idea what departure from the EU meant, according to Julia Onslow-Cole, an attorney with Fragomen in London.

Speaking at "Brexit and Other Mobility Issues in the United Kingdom and European Union," a concurrent session held June 25 at the Society for Human Resource Management (SHRM) 2019 Annual Conference & Exposition, Onslow-Cole shared her thoughts on "how the U.K. ended up in the mess of Brexit" and explained what it might mean, particularly for businesses and workers in the region.

The EU is a single market with all 28 countries sharing four freedoms of movement: people, capital, goods and services.

Iceland, Norway and Liechtenstein are members of the European Economic Area (EEA) and closely aligned with the EU. Switzerland has a similar membership with the single market.

Some countries, like Turkey, are in customs unions and have a looser connection to the EU.

In addition, 40 countries, including Canada, have trade deals with the EU. Other countries have no deal with the EU and must rely on World Trade Organization (WTO) tariffs.

Trade deals require the agreement of all countries in the EU, Onslow-Cole pointed out, and can take a long time to negotiate.

What kind of trade relationship the U.K. will have with the EU—something like the EEA or something different—is what lawmakers have been trying to figure out since that vote on June 23, 2016. They are discussing a "soft Brexit," a "hard Brexit" and something between.

Onslow-Cole explained that with a soft Brexit, the U.K. would stay in the single market, like the EEA countries.

With a harder version of Brexit, the U.K. might be in a customs union or form a trade agreement with the EU.

Or there might be a hard Brexit with the U.K. exiting the EU on Oct. 31 with no trade deal and instead relying in the future on WTO tariffs.

Conference attendee Mary Anne Hoffman, SHRM-SCP, vice president of human resources for Allison Transmission Inc. in Indianapolis and a member of SHRM for approximately 20 years, said her company recently bought a company in the U.K. She wondered what effect Brexit will have on employee retention.

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

Four Key Stages of Brexit

Onslow-Cole described Brexit as undergoing four key phases.

First, there was the referendum. London stood apart from the rest of the U.K. and voted heavily to remain in the EU. Many were surprised by the 51.9 percent vote to leave. Onslow-Cole was scheduled to give a webinar on Brexit the day after the vote. The night before the vote, her webinar had 100 registrants; after the vote, 50,000 people tuned in.

Following the referendum, David Cameron resigned as prime minister and Theresa May, who was a hard-line home secretary who did not support immigration, became prime minister. At a Conservative Party Conference, May announced that she did not support leaving the single market but also did not want the U.K. to be part of a customs union. This announcement "radicalized the conservative party," Onslow-Cole said.

May's aides recommended that she hold an election to solidify the conservatives' control of Parliament and she followed their advice, which turned out to be poor, as the election was "a disaster" for them, Onslow-Cole said.

The election led to phase two, the failure of compromise. One particularly thorny issue was Ireland, as the northern part of Ireland is part of the U.K., while Ireland is part of the EU. "No one wants to see a hard border," May noted.

In the third phase, members of Parliament put forward proposals that all failed. The EU granted an extension of the Brexit deadline from March 29 to April 12 and then until Oct. 31.

Now we're in the fourth phase, where public opinion has become polarized. The potential outcomes are:

  • A deal passed by Oct. 31.
  • No deal and a hard Brexit on Oct. 31.
  • Another extension if there is a general election or second referendum.

The U.K. has agreed that regardless of whether a deal is signed, EU citizens in the U.K. may register to work in the U.K. if they do so by June 30, 2021. It's easy to register, so employers in the U.K. should encourage EU citizens who work for them to act, though they can't force them to do so.

British Citizens in the UK

Onslow-Cole said the impact of Brexit will be harder on British citizens living in the EU.

If there's a Brexit deal, U.K. citizens in the EU will be able to register in the EU but will face 27 countries' different registration schemes.

If there's no deal, the 27 remaining EU countries will have to decide what to do.

Then there are U.K. nationals who live in one EU country, such as Germany, but work in another, such as France. So far there have been no provisions that take them into account.

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