Brexit Bulletin, 28 September 2018

Sep 27, 2018

Just a few weeks remain for the UK and EU to strike a Brexit deal.  And both sides seem to seriously examining what a no deal could really mean. The UK released the latest raft of guidance papers on what to do if the UK crash out of the EU, while there are reports that the EU is making plans to pass emergency legislation in just five days if there is no transitional arrangement beyond March 2019.

Major disruption if no deal

Minister for Finance Paschal Donohoe told the Oireachtas Budgetary Oversight committee this week that Ireland’s economy could face “major disruption” if the UK crashes out of the EU without a deal.  To counter this, Mr Donohoe said that the Government has put together a series of measures which include setting up a rainy day fund, targeting a balanced budget, using windfall gains to reduce public debt among other measures.  Minister Donohoe estimated that a hard Brexit could be the equivalent of reducing Ireland’s national income growth by between 0.75 percent and 1 percent.  To help cope with a border, the Minister said that customs officers are being recruited and the cost would be funded in the upcoming Budget.

Emergency legislation

The Financial Times has reported that the EU is making plans to pass emergency legislation in just five days in the event of a no-deal Brexit. This would mean that planes could still land and cross-border trade could continue after March 2019. This “fast-track” process would allow the EU some time to put in place contingency measures until a later date.

UK pledges to lower corporation tax rate even further

UK Prime Minister Theresa May has promised to reduce the UK’s rate of corporation tax after Brexit to one of the lowest of the G20 countries.  Speaking at the Bloomberg Business Forum in New York this week, Ms May told investors that the post Brexit UK would be a dynamic and “pro-business” country. 

“Whatever your business, investing in a post-Brexit Britain will give you the lowest rate of Corporation Tax in the G20. You will access service industries and a financial centre in London that are the envy of the world, some of the best Universities in the world, strong institutions, a sound approach to public finance and a consistent and dependable approach to high standards but intelligent regulation,” said the UK Prime Minister.

The UK’s corporation tax rate has been steadily falling in recent years; from 30 percent in 2007, 24 percent in 2012 and now stands at 19 percent.

NEXT to shelter against Brexit risk

NEXT plc, the major clothing retailer has set up an Irish subsidiary to reduce the effects of a no deal Brexit.  Going forward, Irish stores will receive stock directly from its German warehouse rather than via an operation in the UK. This would mean that any potential customs duties and border checks in place after Brexit would be avoided.

In the half year results to July 2018, NEXT plc said “There are significant challenges involved in preparing for a no-deal outcome and we would not want to understate the work we are doing to prepare for this eventuality.  However, we do not believe that the direct risks of a no-deal Brexit pose a material threat to the ongoing operations and profitability of NEXT’s business here in the UK or to our £190m turnover business in the EU.”

Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.