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16 January 2019 / article

Brexit Blog: Ten weeks to go

Usually foreign parliamentary debates are not directly relevant or interesting for Dutch citizens and businesses.

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The debate in the British House of Commons last week was certainly an exception. In the run-up to the already historic date of 29 March 2019 (the date on which the withdrawal of the United Kingdom from the European Union takes place if no other solution has been provided) the agreement with the government of the United Kingdom approved by (the Council of) the European Union has been mercilessly dismissed. This has major consequences for the UK, but certainly also for the EU as a whole and the Netherlands in particular, considering that the UK is the Netherlands’ third most important export country (after Germany and Belgium).

Theatre

British politics has always had a high level of entertainment and yesterday’s debate and vote was no exception. The issue to be voted on was the Withdrawal Agreement, which should arrange for an orderly withdrawal of the UK from the EU. However, the MPs did not agree with this agreement: it was voted down by 432 votes to 202. The consequences of this vote for the Brexit remain unclear.

This important political topic has a lot in common with a soap opera. In the run-up to the vote (which had already been postponed by Prime Minister May in December) last-minute amendments were proposed in the last few days. The Speaker of the House of Commons refused to put several of these amendments to the vote (something that is inconceivable in the Netherlands). The only amendment (on ‘the Irish border’) that was put to the vote was voted against with 600 votes to 24.

The only outcome that could possibly provide certainty in this respect was linked to the acceptance of the Withdrawal Agreement, but that did not work out. The future and implementation of the Brexit are now very uncertain. The only certainty is that either ‘an’ agreement with the EU should be reached before 29 March 2019, or a hard Brexit will take place on 29 March 2019. The first option will bring further uncertainty for citizen and businesses across Europe, while a hard Brexit will entail many inconveniences, costs and delays.

The UK and the Netherlands

According to calculations, Dutch trade with the UK provides 200,000 jobs in the Netherlands. Trade between the UK and the Netherlands amounts to some 162,000 trucks per year and 54 million tonnes (from Rotterdam to the UK). The Dutch export value to the UK amounts EUR 39 billion (in 2015) and the import value from the UK amounts EUR 23 billion. The most important products were pharmaceutical, chemical and electrical products, but also fruit and vegetables.

Though the long-term consequences of a hard Brexit are difficult to predict, the short-term consequences will already have a major impact. The reintroduction of import duties by the EU and the UK will lead to higher import and export costs. The customs border between the UK and the Netherlands also revives, which means checks on products can (or will) be imposed again. In addition to possible delays in the supply chain, this means at least more paperwork such as customs declarations and new certificates for transport and quality (since British certificates will no longer apply in the EU and vice versa). Contracts with buyers and suppliers (and even labels) will have to be adjusted – or at least be reassessed. The exact consequences are still unclear (and will depend on both the EU and the UK), but it is obvious that a hard Brexit as worst-case scenario is no longer completely unrealistic.

What’s next

The proposal of the British government was rejected by a large majority. A new referendum on the Brexit will also be a realistic option. Prime Minister May has said that a Brexit remains the starting point, so a reversal of the Brexit decision is unlikely. After all, there are also plenty of British supporters of a hard Brexit (in parliament and elsewhere). Given the limited time remaining to arrange an orderly withdrawal before 29 March 2019, the risk of a hard Brexit is increasing considerably.

In the view of uncertainties as large and important as these, it is wise for companies to prepare for the worst (then the outcome can only be better than expected). The Regulatory Unit of Loyens & Loeff will explain the practical consequences of a (hard) Brexit for you over the next ten weeks until 29 March 2019, so that you are able to prepare sufficiently for what is (possibly) to come. Stay tuned.

If you already have questions about the consequences of the Brexit, please feel free to contact our Regulatory Unit.