Brexit – What now?

With Boris Johnston newly appointed as the UK’s Prime Minister, it seems more likely that the UK will leave the EU on 31 October 2019 without a deal, and even if there is a deal, they will not be part of the EU Customs Union in the future.

History has often changed the relationship between Australia and the UK; however, we can’t change geography and given the distance (goods shipments take about 40 days), we are not natural supply chain partners for global value chains. Our common heritage and the UK’s proximity and integration with the EU has meant that many Australian companies have used the UK as their EU base. The departure of the UK from the EU will mean that many Australian companies will need to review that decision, if they haven’t already.

The EU agreement covers everything from product standards and regulations to the movement of people, money, goods and data, not to mention aeroplanes. This means that just when companies think that they have a grasp of what they need to do to mitigate the negative impact of Brexit, some unintended consequences will emerge. Fortunately, the UK has attempted to address all these concerns.

The UK-Australia economic partnership is based in services, not goods, and data will be the big issue. The EU famously has the General Data Protection Regulation system that captures all data going to or through the EU. Once the UK leaves the EU, companies based in the UK will need to ensure separately that they comply with the GDPR; they will no longer enjoy the general protection they received from being located in a country whose regulations are already compliant with the EU. This means that they are at risk of complaints from EU citizens that they are not protecting personal data appropriately. Feedback from some members is that they have already moved their European data operations out of the UK and into the EU simply on the strength of GDPR compliance.

Once the UK leaves the EU with no deal, the only other country with the same trade privileges with the EU will be North Korea. This will be a new and unfamiliar operating environment for companies accustomed to streamlined customs procedures. Much of the trade destined for the UK is transhipped by land through the EU from Antwerp and Rotterdam. This means that Australian trade will be captured in the backlog caused by increased customs and border inspections.

However, there are some bright spots.

The Australian Government has been proactive in locking in as much as it can before Brexit and has negotiated status quo regulations for Australian Wine Exports, and mutual recognition on standards, markings and certificates for industrial goods. This provides some certainty for Australian Exporters.

The UK has also published the tariff rates that it will apply to all imports if it leaves the EU without a deal. These tariff rates would also apply to Australian goods.

Brexit comes at a time when the global trading environment is already difficult and complex, and there is a general feeling of fatigue among companies when facing these issues. However, the race isn’t run yet, and companies need to be alert to any changes to the regulatory environment as they prepare their strategies.

What part of BREXIT will affect your company most?

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Louise McGrath
Having joined Ai Group in 2000, Louise has managed a number of trade-related projects including trade missions, business matching and the development of export-related training programs. Since 2009 she has led Ai Group's service delivery to our smaller associations, providing governance, policy and business development support, and is Executive Officer of the Australia Saudi Business Council and the Australian Russian Dialogue.

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