Apr 30, 2019

EMERGO BY UL SUMMARY OF KEY POINTS:

  • Art. 50 is extended till October 31st 2019.
  • It appears the UK doesn’t want to jump and the EU doesn’t want to push, so for now the UK is balancing on the cliff-edge of Brexit.
  • The real problem is that UK negotiators do not have a clear mandate.
  • Any result is still possible, so Emergo’s advice remains: prepare for the worst, hope for the best.
  • We see UK companies being cut out of EU networks due to this uncertainty.

The British government has asked for – and the EU Member States unanimously agreed to– a further extension of the article 50 procedure, by which a Member State can leave the EU in two years’ time. The previous date had been set at March 29th, then it was extended until April 12th; the new Brexit date is now set on October 31st 2019. This is a sensitive date because in this period most warehouse capacity in the UK is used for Christmas-related merchandise. It would be most inconvenient having a no-deal Brexit go into effect in that same time period.

Mandate for negotiating

There is another reason why it is likely Brexit will be extended further. For now it appears the British negotiators in Brussels do not have a clear mandate from the UK Parliament. European negotiators knows very well what they want, and have unanimous support by the Member States. The goals of the British team are unclear, and whatever has been agreed to in Brussels so far has not been accepted by the UK Parliament. In general it appears that in Parliament “the no’s have it,”  meaning that they can agree on what they don’t want (no agreement, no Cliff Edge Brexit, no new referendum, no customs union etc.). But when it comes to being clear about what Brexit should look like, the quote by Prime Minister Theresa May in June 2016 – “Brexit means Brexit” – has not yet been specified in terms of legal wording.

A new referendum could provide a way out. One argument against that is that the British people have given their opinion in 2016 and they should not be asked again; such a move would be considered undemocratic. Another way out could be new general elections. But that could lead to the Conservative party losing their majority in Parliament. Some might consider that one of the risks of being a politician in a democracy, but for now it appears no new elections can be expected soon. Without a new referendum or new general elections it may not be possible to craft a clear mandate for the British negotiators. This also means that EU negotiators are hesitant to reopen the current agreement.

Will Brexit ever happen?

It is very unclear how the Brexit process will continue. Right now the UK is preparing for elections to the European Parliament, where the new Brexit Party, led by Nigel Farage, appears to be doing well in the polls. He is well aware that if he is disruptive enough, Member States may get so annoyed that they veto a further extension of the Article 50 procedure. This would result in a no-deal Brexit in October. Therefore a Cliff Edge, no-deal Brexit on October 31st is a realistic option. On the other hand, many politicians would rather not have a Brexit at all, favoring to ask the British people for a new mandate by organizing new elections. The new government may organize a new referendum and if that results in a cancellation of Article 50, Brexit will not happen at all. And of course an agreement, a customs union or another form of cooperation are also still on the table.

Prepare for the worst

This leaves us with another six months of uncertainty regarding Brexit. A no-deal scenario is still a realistic option, so all should prepare for this worst-case situation. That means that our industry must investigate their dependence on supplies that would cross the potential new EU outer border, as well as the risks of disruptions in those supplies. We currently see that European industry now more carefully evaluates their British partners . This leads to a prisoners’ dilemma. If a supplier loses too many of their clients, they may go out of business. If that happens, their trading partners must quickly look for alternative suppliers, who may by then be fully booked, and therefore more expensive. The smart choice would of course be to switch as early as possible. As a result the chances of survival for British companies will be reduced. In other words, it appears that for British industry, Brexit is already happening.

Therefore, let’s hope for the best. British politicians should strive to end to the uncertainty as soon as possible. In, out or something halfway is probably better than remaining in limbo for too long.

Additional European and UK medical device regulatory resources:

  • Brexit transition consulting and in-country representation for medical device and IVD companies
  • European Authorized Representative in-country representation
  • EU Medical Devices Regulation (MDR) gap assessment and CE Mark transition strategy
  • Webinar: Impact of a no-deal Brexit