Out-Law News 2 min. read

BREXIT: UK triggers article 50 and sets two year process of leaving EU in motion

UK prime minister Theresa May has delivered formal notification to the EU of the UK's intention to leave the EU under article 50 of the Treaty on European Union . This notification begins a formal two-year process of withdrawal from the trading bloc, subject to an extension which must be agreed by all member states.

If no extension is agreed, the UK will cease to be an EU member state by the end of March 2019.

In a statement to the UK parliament, May reiterated her intention to negotiate "a new deep and special partnership" between the UK and EU. The terms of the final deal will be put to a vote in both Houses of Parliament before coming into force, she said.

She added that the government would publish a paper tomorrow setting out its plans for a 'Great Repeal Bill', which would convert all existing EU laws to UK law at the point that Brexit takes effect.

EU expert Guy Lougher of Pinsent Masons said that the announcement "brings the rules of play for UK business into sharp focus".

"Brexit will change how businesses deal with customers, suppliers, partners and how they compete with rivals," he said. "It will change the fundamentals underpinning business relationships. The bottom line is those relationships will need to change."

"Businesses with critical supply chains have developed them to be highly efficient and resilient within the EU, but they may soon be subject to stresses that they were not designed to withstand. Customer propositions may need to change to take account of new supply chain requirements. For example, a next-day delivery service that works at the moment could very possibly become unsustainable with customs clearances and rules of origin applied," he said.

"In today's world of global supply chains, even sourcing from a 'tier one' supplier in the UK may not be sufficient to protect against currency movements, a new tariff regime and untried customs systems. Businesses need to map, understand and work with their wider supply chains in order to identify, understand and mitigate their risks," he said.

In the longer term, Brexit would impact contracts, approaches to business processes and exploiting opportunity, and ways of calculating risk, Lougher said.

"The starting place should be existing arrangements with the aim of developing a collaborative approach with business partners," he said.

"The priority must be to introduce flexibility and clarity into existing and future contractual agreements. Then, as the UK's and EU's positions become clear, you can take a more strategic view of the impact on your relationships and where opportunities lie," he said.

Former Europe and trade minister Douglas Alexander, who is an adviser to Pinsent Masons, said that anxiety over the "rise of populism" in Europe will force EU leaders to take a tougher stance when negotiating the UK's exit from the trading bloc than they otherwise would.

He said that negotiators would be keen to ensure that the UK's future relationship with the EU was "less favourable" than full membership.

"It's hard to over-state the anxiety with which German, French and European politicians generally look at the rise of populism, nationalism and xenophobia," the former EU minister said. "That's why it is so important in the minds of European politicians to take what actions are necessary to stop that populist wave."

"That will have a very real bearing on the negotiating strategy of [chief EU negotiator] Michel Barnier, who seems determined to ensure that Britain ends up with a less favourable arrangement as a result of Brexit than full European membership which preceded the vote on 23 June," he said.

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