If there is one certainty about Brexit, it's the uncertainty that it has ushered in across almost all industries in the UK. With discussions still on the table, and a number of options still open for the final formal agreement between Britain and the Bloc, it is safe to say that many business owners are actively exploring their options – ones which will ensure that their business remains stable, lucrative and will future potential.
Pharma and life sciences are not exempt from this uncertainty, and impact is expected in many areas of the sector including product development, packaging, R&D, shipping, and market approval. Pharma is a highly regulated market in the EU and it stands to reason that impacts will be significant.
Research and development
When the UK stops being a member state, pharma and life sciences organisations will no longer be automatically eligible for the EU's R&D schemes such as Horizon 2020. Eligibility will have to be renegotiated as an associate country or similar arrangement, under which the amount of funding may decrease. In a scenario where the UK is not obliged to contribute to the EU budget, funds may decrease overall.
The UK is a popular location for clinical trials. After Brexit, the UK clinical trials industry may see a drop as suppliers may prefer running tests in EU member states where the market is larger. Moreover, the UK will no longer be part of the EU regulatory system so setting up trials in the UK might prove longer and costlier.
Medical devices are required to pass EU quality benchmarks. The CE mark that indicates this, will no longer be given automatically outside the EU market. Out of the single market, the UK might need to set up its own authorisation, quality control and approval processes, and companies might find themselves needing to make two applications for the same product. Timeframes and costs in these scenarios are expected to increase significantly.
Patents and intellectual property are inextricably part of the pharma and life sciences sector. Brexit has thrown a spotlight on the geographical validity of patents and protection of UK patents across the EU. Brexit might mean UK companies would need a double application – one for a UK IP registration and another for an EU IP registration. Once again, increased costs and timeframes come into play.
In pharma and the life sciences, many products do not carry duty related to customs, while VAT is usually managed so that it is not a cost, so not much change is expected in this regard. However, after Brexit, as products are traded between the UK and the EU, it is anticipated that costs related to compliance will increase, as declarations for customs and other procedures are ushered in.
At present, EU directives facilitate payments between companies in different member states without incremental tax cost. Depending on the final Brexit agreement negotiated, this scenario might shift. Despite impacts still unknown, tax treaties between individual countries might mitigate incremental tax.
Change in business structures might result in changes to tax consequences. As assets are transferred and supply arrangements are re-negotiated, the impact of tax costs, loss of tax incentives and foreign exchange fluctuations all need to be considered.
Relocating to an EU jurisdiction
Pharma and life sciences companies in the UK have long started weighing their business options, to ensure that Brexit impact on their future operations is minimised, and their risk mitigated. For many UK businesses, continuity of their operations within the EU is critical. One viable option is to transfer all or part of a business to an EU jurisdiction. This ensures accessibility to the market and to all the benefits that have been garnered from membership to date. When a UK pharma company is domiciled in an EU member state, it will be able to continue participating in international research programmes. It will have accessibility to the employment of EU nationals, its patent rights will be clear and there will be no change to the processes and paperwork required for any kind of application.
Doing business in the EU
Malta's ties with the UK go far back and the relationship between the countries is a strong one. Malta is fast becoming a popular relocation destination among UK entrepreneurs, for the far-reaching benefits it offers, in terms of company relocation and doing business in the EU.
With a resilient economy, the fastest growing in the EU alongside Germany, a stable political milieu, a pro-business eco-system, a favourable tax regime and an English speaking skilled workforce, considering Malta as a means of having full and automatic access to the EU single market should make for a strong consideration.
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.