Brexit: No-deal warning
The government yesterday spelt out the potential impact of a no-deal Brexit on the legal services sector, saying that it risked a loss of market access and an increase in non-tariff barriers.
Its paper on the implications for business and trade of a no-deal Brexit [1] estimated that the UK economy would be 6.3%-9% smaller after around 15 years than it otherwise would have been as a result.
It noted that the services sector – which makes up around 80% of UK GDP – was supported by free movement of people and a range of cross-cutting regulation such as mutual recognition of qualifications.
“In a no deal scenario, UK businesses would be treated as third-country service providers by the EU. The UK would risk a loss of market access and increase in non-tariff barriers.
“UK businesses would face barriers to establishment and service provisions in the EU which they had not previously faced, including nationality requirements, mobility, recognition of qualifications and regulatory barriers when setting up subsidiaries in EU member states.”
Using legal services as a case study, the paper noted that sector generated £31.5bn in revenue in the UK in 2016, and underpinned other service sectors, including the financial industry.
“UK legal professionals benefit from being able to provide full service to clients, across the EU as well as domestically. In a no-deal scenario, the EU has said that UK nationals would be treated in the same was as third country nationals with regards to recognition of their professional qualifications.
“This would mean the loss of the automatic right to provide short term ‘fly in fly out’ services, as the type of work lawyers can do in each individual member state may vary, and the loss of rights of audience in EU courts.
“UK lawyers and businesses would be responsible for ensuring they can operate in each member state they want to work in.”
Last autumn, MPs warned the government about the “devastating impact” [2] no deal would have on law firms. There were also warnings that clients were already turning away from English law [3] due to Brexit.
Previous government papers have outlined the impact of no deal [4] on European Economic Area (EEA) lawyers working in the UK.
The latest paper said that “notwithstanding very significant efforts to prepare for a ‘no deal’ scenario, the latest internal government-wide delivery reporting reveals the scale of risk remaining in the limited time available.
“In February, departments reported being on track for just under 85% of no-deal projects but, within that, on track for just over two-thirds of the most critical projects.”
There are around 40 trade agreements between the EU and third countries which the government has been working to replicate, as they will fall away once the UK leaves the EU.
To date, the UK has signed trade agreements with Switzerland, Chile, the Faroe Islands, members of the Eastern and Southern Africa Economic Partnership Agreement, Israel and the Palestinian Authority.
“Intensive discussions” are happening with the Southern African Customs Union, European countries in EFTA, Canada and South Korea.
“Agreements which will clearly not be in place for exit day are Andorra, Japan, Turkey, and San Marino…
“Where discussions are off track, the government is looking urgently at contingency options, such as provisional application and bridging mechanisms (e.g. memoranda of understanding) to bring agreements into force on exit.”