“May you live in interesting times”
The infamous phrase, usually referred to as a curse, has not been more relevant than it is today. The 23rd of June, 2016 is a historic date – the British have decided that the UK shall leave the European Union. For the last few months, the nation has literally been flooded with information and speculations about the consequences of a potential Brexit. Now that this precedent actually happened, the future is uncertain.
The UK has recently become the European hotspot for starting new businesses. With The United Kingdom leaving the EU, the question is, how would it affect businesses that trade with other European states? So far The United Kingdom has benefited from access to the single market, which meant access to more than 500 million consumers and potential customers.
Will UK businesses be able to retain their access to the European market, and what will happen with all EU consumer protection regulations?
The UK’s access to the single market is in serious doubt following the “Brexit” decision. According to Germany’s finance minister, Wolfgang Schäuble, the UK won’t be able to retain access to the single market. What this means in practice is that UK businesses may be able to trade freely within the UK, but will be subject to trade tariffs and barriers when trading with the EU. On the opposite side, “Brexit” supporters hope that The United Kingdom will retain access to the market like its counterparts Switzerland, Norway, Iceland and Liechtenstein, who are not members to the EU, however benefit from the single market and free movement of goods, services and movement. Nevertheless, the UK will have to negotiate this access – this may take time and cause significant inconveniences to the free trade.
Generally there are two possible positions – either to have a similar regime to the current one by signing a Free Trade Agreement with the EU, or becoming part of the EEA like Norway and Iceland. On the other hand, if Britain does sign any agreements with the EU, which will result in trade being governed by the World Trade Organisation. In this case, UK businesses will be treated the same way as US businesses and will have to pay tariffs to enter the EU market.
The belief that British businesses would not have to abide by the countless EU rules on standardization of goods was a big part of the “Leave” campaign. However, in order to be accepted to the EU market and be able to trade with consumers, UK traders will still have to follow these standards. Even if the UK adopts less stricter regulations, businesses who don’t want to limit themselves to the UK internal market only will still have to abide by the rules.
Moreover, with regard to consumer protection legislation, the current UK regulations mirrors the European law. The EU has a comprehensive framework of consumer protection rules, including the right to withdrawal, the information requirements every business should meet, the quality of goods as well as the recent introduction of alternative dispute resolution methods of redress. All these regulations have been implemented into UK law, so it may be said that the UK does not have a consumer protection legislation on its own.
A possible consequence is that the UK will adopt new rules with regards to consumer protection. What this means for businesses is that they may face double regulations which will likely overlap. If UK businesses have to abide to different rules within the UK market and within the EU market, this may seriously hamper their competitiveness compared to their EU rivals. What is more, this will greatly increase legal costs – just think about the fact that UK businesses will have to apply different contracts to UK and EU transactions. Moreover, legal advice would have to be sought separately concerning trade relations with either UK or EU customers, making the transactions even more costly overall.
On the other hand the UK government may decide not to change the existing legislation. This scenario seems more beneficial to the UK business community. Their current legal framework would not need to be drastically adjusted to the new realities.
What will happen remains to be seen. We can just hope that UK businesses will not be impeded from accessing the single market, and will not face additional excessive burdens from a legal point of view, which can seriously hamper the competitiveness of UK businesses.