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A hard Brexit is the most likely outcome – PwC

Apr 13, 2018
With less than one year to Brexit, PwC lists its 10 ‘no risk actions’ for businesses to consider.

While recent progress on the draft Withdrawal Agreement and the proposed EU-UK agreement on a transition period are welcome news, nothing is guaranteed at this point in the process and a hard Brexit remains the most likely outcome. This is according to PwC’s Brexit: Spring 2018 Update report, which was published last week.

The draft Withdrawal Agreement, the Treaty covering the UK’s exit from the EU, along with its accompanying political declaration ‘Framework of Future Relations’ (FFR) which outlines the proposed shape of future EU-UK trade relations, must be agreed by March 2019 for the transition period to proceed.

To achieve this, the full legal text of the draft Withdrawal Agreement must be agreed by October 2018. Significant uncertainties remain concerning the draft Withdrawal Agreement, including the border between Northern Ireland and the Republic of Ireland and issues over governance, specifically around the role of the European Court of Justice, all of which must be resolved by October 2018. The toughest parts of the negotiations are probably still to come.

Considering these issues, as well as the tight negotiation timeline and the uncertain political climate in the UK, PwC Ireland’s view remains the same as last year – namely, that a hard Brexit is the most likely outcome. Such a hard Brexit would mean that the UK would leave the EU at the end of March 2019 with no future trade agreement, World Trade Organisation tariffs and possible lengthy customs checks at ports/airports. PwC consequently advises businesses to prepare immediately for such an outcome.

Launching the report, Feargal O’Rourke, PwC Ireland’s Managing Partner, said: “As I meet with clients, one thing they want is clarity on the post-Brexit trading relationships. The UK’s current unwillingness to consider a Customs Union, and continuing talk of ‘cherry-picking’ which arrangements it does or does not want to retain, means that a hard Brexit remains too likely for businesses to ignore.

“The only thing we can be sure of is that disruption and change is inevitable – firms need to prepare now for additional costs, border issues, disruption to supply chains and people mobility issues. We therefore strongly advise Irish businesses to plan for a hard Brexit scenario taking effect at the end of March 2019.”

With less than one year to go, PwC has listed its 10 Brexit ‘no risk actions’ for businesses to consider:
 
  1. Assess which customs and trade registrations, authorisations and reliefs are required to enable customs clearance;
  2. Map and validate supply chain models to understand direct and indirect exposure;
  3. Invest in customs experience;
  4. Obtain Authorised Economic Operator (AEO) status;
  5. Assess the ‘Brexit readiness’ of appropriate contracts;
  6. Ensure adequate cash flow for VAT and additional inventory;
  7. Develop a contingency plan to mitigate the risk of delay at borders;
  8. Monitor your workforce;
  9. Monitor your intellectual property as in many cases, European trademarks and designs may lapse after Brexit; and
  10. Consider applying for Government/Enterprise Ireland funding to support diversification of business models, including exploring new markets.
Source: PwC.