Results of the European elections held in the UK on 23 May resulted in a significant defeat for the ruling Conservative party and a win for the Brexit Party, a single issue political group seeking for the UK to withdraw from the European Union. Several contenders, including former Foreign Secretary Boris Johnson, are taking a hard-line approach to Brexit and have pledged that under their leadership the UK will leave the EU with or without a deal on Brexit day. Other candidates, such as Environment Secretary Michael Gove and Home Secretary Sajid Javid, promise to unite Brexiteers and Remainers and “deliver Brexit”. Whomever succeeds May will inherit a daunting task. For business, the latest developments mean prolonged uncertainty and an increased fear of an abrupt departure from the EU with trade on World Trade Organization terms.

In an attempt to create a majority in the UK Parliament to ratify the withdrawal agreement she negotiated with the EU, Prime Minister May intended to made certain concessions. Among them was the idea of negotiating a new and separate customs union with the EU that would take effect when the UK is no longer part of the EU internal market. The Brexit Party rejects this proposal and it may not be tenable for the next Conservative Party leader. Nevertheless, pressure to avoid a hemorrhaging hard Brexit, may yet result in further consideration of a separate customs union with the EU. It is useful then to consider what a customs union without single market access and EU membership might look like and how it could affect business.


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With Brexit on the horizon, UK representatives are reinvigorating relationships with key trading partners on every continent.  On 24 July, UK International Trade Secretary Liam Fox and U.S. Trade Representative Robert Lighthizer and U.S. Commerce Secretary Wilbur Ross launched a Trade and Investment Working Group to lay the groundwork for a trade deal to be negotiated after the UK exits the EU.  Fox reportedly arrived in Washington with a list of “confidence building” measures outside the EU’s purview that could be undertaken without violating the prohibition on negotiations with third countries while still an EU Member State. Initial talks are said to focus on “commercial continuity” and increasing bilateral trade.

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The basics are well-known:  having triggered Article 50 to terminate its membership in the European Union, the United Kingdom has a precious 18 months to get a deal done.  Unless every one of the 27 other Member States approve an extension of time, the UK will be a so-called “third country” vis-à-vis the EU on 30 March 2019.   The UK Government, under the leadership of Prime Minister Theresa May, has proposed a “hard Brexit” that enables the EU to conclude trade agreements with other countries in what has become known as the “Global Britain” approach.   Aspirations aside, the deal to be negotiated between the EU and the UK can range from virtually no change to the status quo for years to come to a quick and risky departure that greatly increases the pressure on the UK to negotiate favorable trade agreements with the EU and other trading partners.
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