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Another step closer to Brexit

Blog post   •   Jun 21, 2017 16:13 BST

Almost a year to the day since the referendum took place that will ultimately lead to the United Kingdom exiting the European Union, the negotiations have finally begun on how this divorce will take place and what future relationship will exist between the two.

A few weeks ago I wrote about the changing landscape of global politics, a landscape that arguably led to Brexit as many countries in recent years have become more nationalist with their governments embracing protectionist ideals.

In today’s world however, true protectionism is not a realistic option, certainly not in the short-term, as most countries, perhaps especially the UK, are dependent on others. For example, the UK relies on other countries for 40% of food consumed. We have developed such a reliance on our global supply chains that to suddenly restrict access to our own market would be taking a big risk.

As the negotiations begin we need to consider what the main options are. If the UK wants to remain part of the single market with access to the free movement of goods and services within the EU that this entails, then it will need to allow for other freedoms like the free movement of people. This is currently a line in the sand for the UK, so in all likelihood the UK will not be part of the single market. In 2016, nearly half of exports from the UK went to other EU countries, and over half of goods and services imported to the UK came from EU countries, so how will this be affected?

Then you have to consider the UK’s relationship with the rest of the world. All the UK’s current trade deals exist through the EU, so exiting the EU means those deals are no longer valid, and will therefore have to be renegotiated. The EU, as one of the largest economic blocks in the world, has an incredible amount of bargaining power in order to get the best deal. The UK on the other hand is just one country, and while it is still has a sizeable economy in its own right, it doesn’t have anywhere near the negotiating power that the EU has.

What will these trade deals mean for those organizations based in the UK looking to trade goods and services with the rest of the world, and what will it mean for those organization elsewhere in the world who are looking to trade with UK? Will trade deals prove to be favourable, or will you have to consider that your market may soon change?

Then there are those non-EU countries that have offices in the UK in order to provide access to the EU. Soon that access may no longer exist so is there any reason for them to stay in the UK if it no longer provides access to what is effectively the second largest economy in the world. Will they now be looking to relocate?

In the last year it doesn’t feel like we’ve come very far, or perhaps it would be more accurate to say that we haven’t moved at all, but the next year is likely to get more interesting. Those of us who operate globally, which includes most organizations, either directly or indirectly, will need to keep a close eye on the negotiations to see how our organizations will be affected.

David Thorp
Executive Director of the Business Continuity Institute.

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