What does Brexit mean for businesses?

The United Kingdom’s withdrawal from the European Union will affect companies that trade with the UK or are affected by UK participation in the single market in other ways. The business sector must follow the development of negotiations and prepare for all conceivable outcomes. The main scenario is an orderly withdrawal based on a withdrawal agreement that includes provisions on a transition period that runs until the end of 2020. However, a there is a clear risk for a no-deal withdrawal cannot be ruled out.

According to the current timetable, the UK will leave the EU on 30 March 2019. The negotiation process between the EU and the UK ended on 25 November when the European Council backed the negotiated Withdrawal Agreement and approved the parties’ joint political declaration on the framework of the future relationship. Now an approval process is to be conducted in the European Parliament and the UK parliament before the agreement can be concluded and enter into force.

Main scenario: transition period until 2020

If the Withdrawal Agreement enters into force, a transition period will begin when the UK leaves. This is intended to provide time for adjustment to what will eventually become the future relationship between the EU and the UK. During the transition period, the UK will proceed as if it were still an EU Member State, but without taking part in the EU’s decision-making. Thus, the country will be included in the EU’s legal system and be part of the single market and customs union. The period will run from withdrawal on 30 March 2019 until the end of 2020. If the parties agree to it, the period can be extended once, until the end of 2022 at the latest.

Subsequently, the intention is for the future relationship between the EU and the UK to take effect. The framework for this has been outlined in the parties’ joint political declaration. Negotiations on agreements to regulate the future relationship can begin as soon as the UK has left the EU.

With regard to the future relationship, it is the parties’ objective to forge as close a relationship as possible given their negotiating positions. The UK Government has made it clear that it wants the UK to leave the EU single market and customs union. Even if the parties have agreed to create an arrangement that minimises the consequences of this as far as possible, it must be expected that it will be more complicated for EU-based companies to trade with the UK.

Scenario 2: no-deal withdrawal on 30 March 2019

It cannot be ruled out that the withdrawal process will be concluded without it having been possible to bring any agreement into force. In this event, the UK will officially become a ‘third country’ in relation to the EU. There will be no transition period and EU law will cease to apply in relation to the UK on 30 March 2019. Trade with the UK will be regulated on the basis of applicable international principles and rules from the WTO, for example. The EU will apply third country rules to the UK in relation to, for example, customs controls and checks that EU requirements on goods are met. This may involve delays in transportation.

When will the outcome be known with certainty?

In accordance with the parties’ joint ambitions, the negotiation process was concluded at the end of November 2018. The next step for the EU is that the Council takes the decision to conclude the agreement when it has been approved by the European Parliament. For the UK’s part, approval by the UK parliament is required. The risk of a no-deal withdrawal cannot be ruled out before an agreement has actually entered into force.

How should companies get ready for Brexit?

The Swedish Government urges all concerned companies to take necessary measures to prepare for Brexit. In view of the remaining uncertainty, this should involve contingency planning to handle a no-deal withdrawal.

It is important that individual companies keep up-to-date with developments, analyse their specific risks and take necessary measures.

The Swedish Government is continuously assessing developments and will inform the public via the usual channels when new information is available.