Brexit Update - Triggering Article 50 and Negotiating with the European Union
In this podcast, EisnerAmper Transfer Pricing Practice Leader Henric Adey gives us the latest on Brexit. He breaks down the fallout from British Prime Minister Theresa May’s triggering of Article 50 of the European Union. Henric covers key negotiation points, the likelihood of a compromise and important dates going forward.
Dave Plaskow: Henric, welcome, and thanks for being here.
Henric Adey: Hey, Dave, thanks for having me. It’s been a long time since we last spoke. I think it was in 2016, and since then a lot of things have happened. In mid-March, we saw the Brexit bill receiving the royal ascent, allowing Teresa May to trigger Article 50, which happened on March 9th. So this gave the UK the ability to leave the EU and start the two-year negotiation process that might be only 18 months, depending on who you talk to. And, of course, we saw on April 29th the 27 EU leaders meeting in Brussels to adopt the Brexit negotiation guidelines.
Dave Plaskow: Since Great Britain first triggered Article 50, the US has seen a change in administration. Has that had any kind of impact on the Brexit landscape?
Henric Adey: I think it’s still very hard to say what the actual impact is. From the US perspective, many have speculated that it will be a more protectionist trade stance. If that comes to pass, you may see bilateral trade agreements replace more trilateral ones, but I think it’s still a little bit too early to see the exact impact.
DP: So here we are, May 10th, 2017. What are some key dates that are coming up for Brexit?
HA: We saw the adoption of the negotiation guidelines and the French elections, with Emmanuel Macron winning in France. So, that will impact the stance that Germany and France are going to take at the negotiation table. June 8th, was the UK parliamentary elections; Brexit talks will start soon after that vote. Then, of course, September 24 this the German parliamentary election and potentially the 4th term for Miss Merkel. In 2019, we have the deadlines to end talks on UK exit terms the extensions that may be required, and the European parliamentary elections. So there are a lot of key deadlines coming upon us that will change the landscape as we go forward.
DP: And what are some of the key negotiation points between Britain and the EU?
HA: Miss Merkel has taken a key stance on a lot of these topics recently. First and foremost, there are the European citizens that reside in the UK, and their position of staying within the UK is an important negotiation point, as well as the financial aspect of Britain leaving the EU. There might be a bill as big as $60 to $100 billion dollars that might be at stake here.
DP: Now, would you call this a winner take all, or will there be some horse trading involved?
HA: I think it will really depend on the various political strengths and cards that can be played from a European perspective. If Miss Merkel is going to win her 4th term, we will still probably see a very strong alliance between France and Germany, and negotiations might be slightly harder for Teresa May. But, of course, it’s not a winner takes all. I think a lot of bargaining chips are on the table, and we will see how the discussion will progress as we go forward.
DP: Now, what concerns, if any, are you hearing from clients?
HA: Already, a lot of multinational companies, in particular – banks – are talking about moving key employees out of the UK and into different offices in Paris, Frankfurt, Dublin, and so forth. So, there’s definitely a concern about labor movement that is already on the table. Employment contractors are going to matter. How are we going to attract key talent into companies operating in the UK? And, of course, there are broader questions on how the VAT system, for example, is going to change as the UK exits the EU, and so forth. There is a potential for the UK to offer more beneficial tax legislation going forward in order to attract companies to stay. Again, a lot of things are going to be seen on both sides of the table.
DP: So, Henric, clearly over the past year, a lot has happened and there’s a lot still to come with Brexit. But at this point in time, what kind of guidance are you giving clients?
HA: I think that’s a very important point that you’re raising here. Usually what I say is stay informed and up to date as the negotiations are progressing. Prepare a risk analysis of the key issues concerning your business relating to Brexit and a lot of work that can be done now, rather have an ex-ante or exposed position. Do an in-depth analysis of the factors that impact your business resulting from the UK exiting Europe. Collaboration with the trusted advisors can certainly help there. In summary, start now rather than later.
DP: Well, Henric, thank you for this great expertise and insight.
HA: Thank you, Dave, for having me, and I’m sure we have not talked about this for the last time. I think there’s a lot to come, and we will regroup when we know more.