The result of the British referendum has shocked the whole
world. However it must be remembered that an official withdrawal
from the EU has not taken place yet, changes in laws, regulations,
taxes and other legal conditions are difficult to estimate at the
moment. In any case it can be assumed that these changes would lead
to additional costs and work efforts for both sides, the UK and the
Experts have estimated the trade volume (mostly import/export of
goods and commodities) between the United Kingdom and the EU to
about 1196 billion euros before exit. In terms of subsidiaries,
there are estimated 1,300 German subsidiaries in the UK and 25,000
British companies with a branch in Germany with an overall of 2.6
In a worst case scenario, the UK leaving the European Market
will likely mean that UK companies will no longer be able to get
into EU-market on a cross-border or branch basis and vice versa.
There are no immediate changes, the UK will continue to be a full
member of the EU for at least 2 years in which new agreements must
be negotiated between the two parties.
In the short term, UK regulatory laws should remain
correspondent to the EU regulations. But for the future. there are
various conceivable models for the definition of the bilateral
relationship like the Turkish way by means of an EEA membership or
like Switzerland by bi-lateral agreements or by independent free
trade agreements, which all will change the current way of doing
Risk factors for companies with branches in each others
Increasing bureaucracy and higher
administrative expenses, even with conclusion of expected agreement
for facilitating the economic relationship between UK and EU.
higher fluctuations in foreign
exchange rates, which influences directly the product pricing and
increases the competition pressure.
revaluation of supply chains to be
eventually made on the basis of their risk assessment (costs and
delivery times, standards and regulations)
higher logistics costs for
intercompany transport as a result of burdensome customs
Risk factors for companies with marketplace in each others
territory-specific requirements may
lead to specific testing and certification request
high import duties with direct impact
on selling prices and marketing
preference of the products
manufactured in the own territory with effect on the sales
risks for freedom of movement for
workers with influence to the possibility of commitment of
employees within the European Union.
The legal and regulatory position will undoubtedly be more
complex as careful analysis of each jurisdiction will be required
in the absence of new treaty access rights. Given the additional
bureaucratic burden as a result of the more complex legal and
regulatory framework, which is to be expected after the exit of the
UK from the EU and its associated additional costs, it is already,
in this early stage, advisable, especially for manufacturing
companies, to prepare for reorganisation as the probability of a
restricted access to the EU internal market as well as the British
market is quite high.
In order to position the company for the future successfully in
the changed market, current operating organisations and companies
structures need to be reconsidered and examined in the respective
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On 16 March 2017, the European Union (Notification of Withdrawal) Act 2017 gave the Prime Minister the power to trigger the Brexit process by giving notice under Article 50(2) of the UK's intention to leave the EU.
With the dawning of a new age, that of the separation of the UK from the EU and all that it entails, British businesses that depend on the European market must find ways of maintaining a foothold in Europe.
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