While the political Brexit cauldron keeps churning, seething and frothing, UK businesses of every size and in every sector are expected to remain calm. Panicking is not an option when we need to prepare for the compliance, regulatory and marketplace effects of Britain’s departure from the EU in six weeks’ time.
For those of us in the global language industry – who trade in services rather than in goods – the biggest questions are not about supply chains or cross-border transit but about how to maintain a robust, qualified workforce in the UK in the future. Nevertheless, clients and suppliers outside the UK are looking for information on how they can keep doing business with us after March 2019, and rightfully so.
State of negotiations
The UK will leave the EU at midnight CET on 30 March 2019. To mitigate disruption, a Withdrawal Agreement has been negotiated that provides for a transition period lasting until 31 December 2020, the intention of which is to give enough time to conclude an agreement on the future relationship between the UK and the EU. EU law will continue to apply to the UK during the transition period.
The UK government has so far failed to get the UK Parliament to approve the Withdrawal Agreement due to concerns from around one third of the governing party’s MPs about the backstop arrangement on the UK–EU border in Ireland.
The latest from the UK Parliament
On 29 January, the UK Parliament held votes on seven amendments to find a way forward after the proposed Withdrawal Agreement was soundly rejected (two to one) in a vote on 15 January. Two of these amendments were approved: one requiring the backstop arrangement on the UK–EU border in Ireland to be renegotiated, and another requiring no deal to be removed as an option. Neither of these amendments are legally binding, but are guiding the UK government’s next steps. With time running out, MPs are likely to be focusing their energy on preventing a no-deal Brexit due to the disruption and economic damage this would entail.
What might still happen in the UK before the Brexit deadline? These options are possible, at least in theory:
- The UK revokes Article 50 unilaterally before 29 March 2019 (i.e. the UK decides not to leave after all)
- The Withdrawal Agreement is accepted by the UK Parliament
- Article 50 is extended to allow a new referendum to be held in the UK
- Article 50 is extended to allow a general election to be held in the UK
- The UK leaves the EU with no deal on 29 March (this is the default option if no action is taken to prevent it)
Impact on the language industry
There are no language industry businesses in the UK that will not be affected by Brexit – the question is rather the degree to which we will be affected. Services exports do not face tariffs like goods do, but there are regulatory barriers that may apply. Whilst we cannot yet issue instructions to our European clients and suppliers on what may change in our collaboration, we know which areas will need to be reviewed once the final outcome is clear. Here are a few of them:
Rates – exchange rate volatility affecting revenue and costs
All companies with clients and/or suppliers in different countries will need to analyse the effect that the various Brexit scenarios will have on their revenue and costs. The precise effect will depend on the mixture of currencies involved. The possible effects on the pound are:
- Remaining in the EU would likely see the pound rise in value back to pre-referendum levels
- Agreeing an orderly withdrawal would likely see a moderate increase in the value of the pound due to increased certainty, though of course there is still long-term uncertainty around the future partnership agreement
- Extending Article 50 would likely leave exchange rates hovering around their current levels, rising and falling in line with published opinion polls as the campaigns play out
- Leaving the EU without a deal would likely see the pound fall in value, possibly even to parity with the dollar and euro
VAT – uncertainty around processing
The UK government’s website does not shed much light on how VAT on invoices will be treated post-Brexit. Again, it depends on the possible outcomes:
- Remaining in the EU will obviously mean no change to the current VAT rules
- Agreeing an orderly withdrawal would likely see VAT rules remain as they are for the transition period, which should give the UK government time to agree on new rules and communicate them in good time for businesses to prepare
- Any extension of Article 50 would see VAT rules stay as they are, albeit for a much shorter period, and what happens to the rules after a referendum or general election would very much depend on the outcome; an outcome other than remaining in the EU would bring us back to the current state of uncertainty
- Leaving the EU without a deal would see us treating EU clients as out-of-scope for VAT purposes, and the same for EU suppliers treating us as non-EU clients; VAT would still not be charged, but any references to the reverse-charge procedure would need to be omitted
Local advice – variations in business advice given across the EU and EEA
The UK is Norway’s first, Denmark’s third, Germany’s fourth, France’s and Sweden’s sixth and Finland’s seventh biggest trade partner. Each EU27 country has prepared advice for their citizens and businesses on the future of their relationship with the UK, but since such relationship negotiations will only begin in earnest after the UK’s departure, no conclusive guidelines are currently available. See links to the current information at the end of this article.
The UK is currently experiencing a healthy demand for professional services. Exporters and importers rely on globally sourced language solutions for their multilingual content management. Courts, hospitals and law enforcement units depend on the day-to-day availability of translators and interpreters. The UK is also the second largest exporter of services in the world, and our European clients are keen to be reassured that their business with us can continue as usual. One thing is clear: consumers of language industry services cannot prepare for Brexit by stockpiling.
Update on 4 March 2019
On 27 February, the UK Parliament had been due to vote on the Withdrawal Agreement again. However, Prime Minister Theresa May delayed this vote until the second week of March due to a lack of progress on trying to renegotiate the Withdrawal Agreement. She has proposed three votes: one on 12 March, to approve the Withdrawal Agreement as it is, then if that fails, one on 13 March, to approve a no-deal exit from the EU, and then if that fails, one on 14 March to extend Article 50 for a short period.
However, MPs did vote that day on five amendments to an amendable motion put forward by the Prime Minister, two of which were approved. The first amendment, protecting EU citizens’ rights in the event of a no-deal exit, was unanimously passed. The second amendment, forcing the Prime Minister to follow the schedule that she has proposed, was passed with a significant majority. This should make it difficult for the Prime Minister to delay the decision much further.
Links to guidelines