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As we have reported previously, the result of the European Union referendum (Brexit) was announced on Friday, 24 June 2016 with a vote in favour of the United Kingdom exiting.
As has been the case since the date of the referendum, the main point to understand is that the referendum does not trigger any legal consequences and the timing for a UK exit from the EU remains uncertain - although there have been some recent developments (on which, there is more below). For now, legally, nothing has changed. The UK is still a member of the EU having the same rights and obligations as before the referendum. This will not change until there is an actual departure from the EU, which at this point, is not likely to happen before 2019.
At the Conservative Party conference on 2 October 2016, Prime Minister Theresa May spoke publicly for the first time in detail about the UK Government's plans for Brexit. She indicated that Article 50 would be invoked no later than the end of March 2017 (which we note would be in the middle of the French presidential campaign, with the election itself to be held in May 2017). The Prime Minister also indicated that the next Queen’s Speech will include a Great Repeal Bill to repeal the European Communities Act 1972 (which is the legislation pursuant to which the United Kingdom became a member of the EU in 1973).
The timing and implications of this are unclear but it is expected that the next Queen’s Speech will be in April or May 2017, after which the Great Repeal Bill will be debated by both Houses of Parliament. How individual MPs will vote on this Bill, whether the Bill will actually be voted through and what the rules relating to the vote will be, are all matters which are still very much open to debate. All of this remains quite uncertain, but it is expected that if the Great Repeal Bill is indeed passed, it will not come into effect until the expiration of the two year departure period as set out in Article 50 (i.e., Q1 2019 on the basis that an Article 50 notice is delivered next year and before the end of March).
The Prime Minister's public statements appear to make clear that she favours taking control of immigration and rejecting the jurisdiction of the European Court of Justice over single market access. At the same time, the Prime Minister and other ministers have made clear that there will not be a rollback of employment law rights in the UK and that EU citizens legally living and working in the UK will be allowed to stay as long as UK citizens in the EU are treated on an equal basis. One of the key tradeoffs that would appear to be at play in the Brexit negotiations is between access to the single market (including passporting of financial services) and the free movement of people. Currently, there are approximately 5,500 UK companies and just over 8,000 EU companies relying on passports to do business in the EU and the UK, respectively. Theresa May’s stated priority of curbing immigration makes it relatively clear where the UK Government stands on this particular tradeoff.
All of the foregoing is, of course, predicated on the assumption that the Government itself has authority to trigger Article 50 without the need for Parliamentary approval. As outlined in one of our prior updates, there is a range of constitutional implications arising out of Brexit, and this particular issue is front and centre. There is currently a case before the Divisional Court, and there may be an appeal directly to the Supreme Court, challenging the notion that Government can trigger Article 50 by virtue of royal prerogative. A decision on this matter is expected to be handed down in the coming weeks which should clarify matters.
Regarding the economy, there is no doubt that there have been some short term benefits due to the devaluation of the British Pound, including a boost for manufacturing businesses exporting at lower prices. However, on the flip side, there are almost certainly likely to be some painful inflationary effects coming on the price of imported goods and services, including key items such as petrol and natural gas.
The UK Chancellor, Philip Hammond, has made clear in public statements that the Government plans to ramp up spending on housing and infrastructure in the short and medium term - as well as guaranteeing all multi-year EU business funding agreed before Brexit, so long as such funding meets value-for-money criteria. The Chancellor reiterated that he would not be seeking a budget surplus before the end of this Parliament in 2020, presumably with a view to easing the impact on the market from the ongoing Brexit related uncertainty. This is a clear shift in approach from the previous Conservative Government where austerity and working towards a balanced budget were key priorities.
As before, it will still be some time before the terms of the UK's future relationship with the EU are determined. For now, it seems clear that the UK Government is making the point to the EU that it is ready for a clean break (while acknowledging that it would be better for everyone if the separation was amicable). As a result, uncertainty will continue to be the main theme for the foreseeable future until things are clearer in terms of the respective negotiating positions of the UK and the EU and how the process will play out in practice.
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In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit. The Brown Rudnick Brexit Team is available to advise on the issues across a broad range of sectors within our areas of expertise.
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