Brexit - Frequently Asked Questions
Brexit - Frequently Asked Questions
EACA has prepared this FAQ page on Brexit with the purpose of answering questions of general interest (state of affairs of negotiations etc.) and questions of particular interest/concern to communications agencies (doing business in the EU, sectors affected, recruiting talent, etc.).
Input for some of the questions has been received from the UK-based Advertising Association and their Strategic Policy Advisor Konrad Shek.
Agencies are encouraged to send additional questions to sofia.karttunen[at]eaca.eu.
The information below does not constitute legal advice but rather an overview of issues to take into account and pointers to additional insight. For detailed information and clarifications, we highly recommend that you consult your government authorities or seek advice from a legal adviser.
Last updated on 16 April 2019
Section I: Overview and state of affairs
The UK served its EU withdrawal notice under Article 50 of the Treaty on European Union on 29 March 2017. The official period for negotiation under the Treaty is two years from notification, meaning that the UK would have left the EU at 11:00 pm (GMT) on 29 March 2019.
However, the EU leaders have granted already two extensions to the deadline, first until 12 April and most recently, until 31 October 2019.
The Withdrawal Agreement negotiated between UK Prime Minister Theresa May and the EU has been overwhelmingly rejected by the UK Parliament on two occasions (15 January and 12 March 2019). A key problem for the UK remains the contentious 'Irish backstop clause' under which Northern Ireland would stay in the EU Customs Union, large parts of the Single Market and the EU VAT system. Although the UK is committed to ensuring an open border between Northern Ireland and the Republic of Ireland, the backstop arrangement could leave the UK tied indefinitely to many EU laws and possibly imply a regulatory barrier between Northern Ireland and the rest of the UK.
Giving time for further negotiations, two extensions for Article 50 have been accepted by the leaders of the remaining EU member states - first, until 12 April and most recently, until 31 October 2019. The UK is currently preparing to take part in the next European Parliament elections in May.
As a result of Brexit, the UK will become a 'third country' in relation to the EU and its cross border services. UK firms may face additional legal, regulatory and administrative barriers so it is important to check national regulations.
Should the EU-UK Withdrawal agreement still be ratified, the Brexit arrangement provides for a transition period with the UK remaining in the EU Internal Market and the Customs Union until the end of 2020.
However, without a deal in place, there is a risk of a cliff edge that could result in a 'Hard Brexit', whereby the UK would e.g. lose access to the EU Internal Market and Customs Union overnight. The country would fall back on the rules of the World Trade Organisation (WTO) while having to reformulate its trade deals with the rest of the world. The UK Government has warned that it could cause delays in deliveries, shortages and increased prices of certain products and services. There would also be legal uncertainty regarding the rights and obligations of EU workers in the UK and vice versa.
Some temporary arrangements in specific areas are expected to be put in place between the UK and the EU to mitigate the worst effects of a 'no-deal' scenario. Preparations are currently accelerating on both sides.
As a result of Brexit, EEA businesses will no longer have preferential access rights and protections provided for under UK regulations.
The impact of Brexit will vary across the European Union, with some regions facing significant costs and others being less exposed. According to a report by the Committee of the Regions in the EU, the biggest concerns relate to future trade, agriculture, fisheries, citizens returning from the UK and cuts to the EU budget post-Brexit.
From the EU27, Ireland, Germany, France, Belgium and the Netherlands are likely to be the most heavily affected countries. Importing and exporting are likely to take a major hit in the case of a no-deal Brexit, especially in the main European gateways to the UK with repercussions on several industry sectors. However, these countries and cities like Frankfurt, Dublin, Paris and Amsterdam have potential to attract companies that are leaving the UK due to Brexit, seeking to regain access to the EU Single Market. For Ireland, there are, however, additional social and political consequences with peace in Northern Ireland at stake.
The UK Government has been continually updating its Brexit advice on what to do in a no-deal scenario (see here). The UK Government has also published a dedicated website providing practical information on how to prepare for Brexit.
The European Commission has started in December 2018 to implement a ‘no-deal’ Contingency Action Plan. The Brexit preparedness page contains (1) the list of notices issued by the Commission’s different departments on specific topics that are affected; (2) the list of the Commission’s ongoing legislative initiatives and other legal acts to ensure that the future EU27 framework is operational after the withdrawal of the UK (open for citizen and stakeholder consultation); and (3) information on other preparedness activities.
Note that the UK's Information Commissioner's Office (ICO) also regularly publishes guidelines regarding the flow of personal data after Brexit (see here).
The European Data Protection Board (EDPB) has also published an information note for commercial and public organisations concerning data transfers under the GDPR in case of a no-deal Brexit.
Section II: Questions of relevance to agencies
Once the UK leaves the EU, citizens of the UK will become third country nationals in the EU and vice versa. This will have an impact on their rights to social benefits and/or pension, their residency rights, the recognition of qualifications, requirements for visa/work permit and the minimum salary threshold. Future arrangements are not yet certain. The EU-UK withdrawal agreement does offer temporary guarantees for UK citizens living or working in the EU and EU citizens in the UK but this withdrawal agreement needs to be approved by UK Parliament.
When it comes to employees’ residency rights, the European Commission, in its contingency plan for no-deal Brexit, has urged the EU27 to “take a generous approach to the rights of UK citizens in the EU, provided that this approach is reciprocated by the UK”, ensuring continued legal residency of UK nationals on the date of withdrawal. For citizens moving after this date, the Commission calls upon Member States to “adopt a pragmatic approach to granting temporary residence status”. The Commission has adopted a proposal for a Regulation, which exempts UK nationals from visa requirements, provided that all EU citizens are equally exempt from UK visa requirements.
The Council of the EU has also approved a draft regulation that would guarantee that EU27 and UK nationals, who moved freely within the Union, will continue to benefit from their social security rights acquired before the UK's withdrawal from the Union. The regulation will enter into force if the UK leaves the Union with no withdrawal agreement in place.
The UK Government has laucnhed its EU Settlement Scheme, which will allow EU citizens resident in the UK to stay beyond 30 June 2021, and has published a step-by-step process. Applications are free and successful applicants will be granted settled or pre-settled status. Settled status will be granted if applicants were living in the UK by 31 December 2020 and have lived continuously in the UK for 5 years or more. The deadline for application will be 30 June 2021 if there is a deal, but 31 December 2020 if the UK leaves without a deal. Employers can find information on how to communicate clearly and consistently about the Scheme here. The UK Government has reached a separate deal with Norway, Iceland, Liechtenstein and another agreement with Switzerland.
From a practical perspective, agency professionals travelling across the EU-UK border have a few things to consider.
In a no-deal scenario, UK citizens may need to renew their passports earlier than planned, making sure that they remain valid at least three months after leaving their EU destination. UK citizens are also recommended to take out comprehensive travel insurance including health cover before their travel to the EU and prepare for additional checks at border crossing points. UK nationals will no longer be entitled to use the EU/EEA/CH lanes and they might have to undergo customs checks for their luggage and other goods. Subject to agreement on both sides, both UK and EU citizens should be able to travel visa-free for periods up to three months.
If you travel by train (Eurostar), it is recommended that you get appropriate travel insurance and check online for the latest Eurostar travel information. Passengers on cross-border rail services will continue to be protected by EU regulation on rail passengers’ rights, which will be brought into UK law.
Regarding buses, if there is no EU Exit deal, passengers on cross-border bus and coach services will continue to be protected by the EU regulation on bus and coach passengers’ rights, which will be brought into UK law.
Flights are expected to continue as today, even in the event of a 'no-deal' Brexit. Both the UK and EU are committed to flights continuing without disruption. The European Commission has proposed measures to avoid extra security screening of passengers from the UK who have a connecting flight in Europe. UK citizens flying with an EU airline will continue to be protected by EU passenger rights both on flights from a UK airport to an airport in the EU, and vice versa.
Regarding mobile usage, travellers on both sides should be aware of the potential changes to mobile roaming. In the event of a deal, surcharge free roaming will be guaranteed during the transition period. If there is no deal, operators would no longer be bound to “surcharge free roaming”. Three, EE, O2, Vodafone have announced that they would not to reimpose roaming, but this is not guaranteed. Also keep in mind that your online content subscriptions (e.g. Netflix, Spotify) would no longer be accessible outside the country of subscription (no portability).
Driving licences, bank cards, insurances, insolvency protections for package holidays or other financial services may also be affected.
If you are processing data of EU citizens, you will have to comply with the General Data Protection Regulation (GDPR) – no matter whether the UK remains an EU Member State or not. The data of UK citizens, however, will be covered under the UK’s version of the GDPR, which has been incorporated into the Data Protection Act 2018. This means UK regulation will be aligned with that of the EU and transfers from the UK to the EEA will not be restricted.
In terms of data transfers, the UK – after exiting the EU – would be treated as a third country. This means that any personal data transfer from the EU/EEA to that country is by default restricted unless the country can demonstrate an “adequate level of data protection”. The European Commission has the authority to make an “adequacy decision” (e.g. with Switzerland, the US, Canada). This will not be in place at the point the UK leaves the EU and may take some time to conclude, although there was a commitment from both sides that this process would be concluded by the end of the transition period i.e. 31 December 2020. Meanwhile, personal data transfers from the UK to the EU/EEA will continue uninterrupted even in the event of a no-deal.
To maintain data transfers from the EU/EEA to the UK, companies may consider using Standard Contractual Clauses (SCCs, see here ICO's tool on when to use them), Binding Corporate Rules or other appropriate safeguards. This could ensure the legality of European data processors moving data to UK data controllers. The European Data Protection Board has listed all the possible data transfer instruments in its information notice issued in February 2019, along with other things agencies should take into consideration.
The UK Government has advised businesses to follow data protection guidance issued by the UK Information Commissioner's Office (ICO). In December, the ICO issued advice for organisations on how to ensure that personal data continues to flow lawfully - even in the case of a no-deal Brexit. You can access it here. If your company is a small or medium sized enterprise, the ICO has an interactive tool to generate an SCC for straightforward cases. Please see ICO's frequently asked questions page here.
It is important to check who your lead data authority will be, post-Brexit. If the UK is the lead authority for your organisation, it will mean you will no longer have access to the EU’s ‘One Stop Shop’, post-Brexit, and you will have to deal with every data protection authority in each Member State where your data subjects reside. If your company is not established in the EU/EEA, you will be required to designate a data protection representative, who is established in the Member State where the data subject resides, to deal with the appropriate data protection authority.
It is important that you audit your UK/EU contracts and check whether any territorial references to the EU will cover the UK. You will probably need to clarify how contractual obligations derived from EU law will apply after Brexit, too.
If there are any requirements to deliver services through the movement of people, it is worth bearing in mind that performance of a contract may be harder due to a loss of freedom of movement of people and services between the UK and the EU.
Depending on the currency denominated in the contract, this could expose the business currency risk given the large movements in exchange rates directly linked to Brexit uncertainty.
In case of a no-deal Brexit, UK businesses will have to begin paying VAT on the goods that they trade in the EU. According to the European Commission’s notice, VAT will be payable to customs authorities at the time of importation, unless the EU Member State of importation allows to enter import VAT in the periodical VAT return. Companies established in the UK may also be required to designate tax representatives for countries in which they are trading.
Reciprocally, import VAT will apply to goods sold from the EU to the UK. In an attempt to mitigate adverse cash-flow impacts and keeping VAT processes as close as possible to what they are now, the UK Government is planning to allow all EU and non-EU companies that are UK VAT registered to account for their import VAT on their VAT return, rather than paying when the goods arrive at the UK border.
It has further been specified that if the UK leaves the EU without an agreement, sellers of goods outside the UK must pay the import VAT for any parcels worth £135 or less. This will include parcels worth £15 or less as the existing Low Value Consignment Relief (LVCR) will no longer apply.
For parcel consignments valued up to and including £135, which do not contain excise goods and are customs-declared for release to free circulation, an online service will allow VAT to be collected from the overseas business selling the goods into the UK.
In case of a no-deal Brexit, agencies will only be able to use authorised nutrition and health claims in the UK. Please find the register here. The annex to the register lists health claims authorised on the basis of proprietary (privately owned) data. The register should be used with the following guidance: The Nutrition (Amendment etc.) (EU Exit) Regulations 2019: practical changes for industry.
In December 2018, the UK Government warned local digital companies may need to designate a representative in one of the EU Member States if they wished to continue offering digital services to the EU in case of a no-deal Brexit. The guidance applies to so-called ‘relevant digital service providers’, or companies that have at least 50 employees with an annual revenue of EUR 10 million, are legally domiciled in the UK and offer services within the EU.
As the UK leaves the EU, it will also leave a number of international agreements to which it is a party through its EU membership, including trade deals with countries outside the EU. This could result in trade barriers and raised tariffs for agencies that deal with clients or partners in these countries.
So far, the UK has secured reduced taxes on imports and exports and/or easier market access by agreeing "continuity" deals with the following countries: Israel, Palestinian Authority, Switzerland, the Faroe Islands, Eastern and Southern Africa and Chile. Furthermore, Mutual Recognition Agreements have been signed with the United States of America, Australia and New Zealand (see UK government information). However, deals with many countries are still missing and may not be concluded before the Brexit date, including Japan and Turkey.
With the countries where the UK has no formal trade agreement, both would have to trade under the rules of the World Trade Organisation (WTO). This does not mean that trade would stop, but agencies should prepare for additional barriers.
Section III: How do different sectors react to Brexit?
The UK food industry has threatened to pause its cooperation with the UK government regarding non-Brexit related consultations until the “catastrophic impact of a no-deal Brexit” is resolved. Their resources are needed to mitigate consequences of a no-deal Brexit, 30 business leaders from the food industry said in a letter (see article on sky.com).
A letter from the British Retail Consortium, signed by several major food retailers, such as Sainsbury’s and McDonald’s warned that stockpiling fresh food is impossible and that there will be “significant risks” to maintaining the choice, quality and shelf life of food. 50% of the food consumed in the UK in 2017 comes from the UK, 30% from the EU. Only 10% of food imports are currently subject to World Trade Organisation (WTO) rules. A full switch to WTO rules, retailers warn, would “greatly increase import costs that would in turn put upward pressure on food prices” (see article on bbc.com). UK Government guidance for the retail sector can be found here.
The UK will continue to adhere to the main international treaties on copyright and will ensure that the scope of protection for copyright works in the UK and for UK works abroad will remain largely unchanged. However, there are EU cross-border copyright mechanisms that go beyond the provisions of the international treaties and these will not apply to the UK after Brexit. The UK government has stated that it ‘looks forward to exploring arrangements on intellectual property cooperation that will provide mutual benefits to UK and EU rights holders’ (see UK government information (1 and 2).
The consumer goods sector should prepare for disruptions in imports and exports at the UK-EU border, i.e. recognised harmonised products must be assessed and marked by an EU recognised conformity assessment body. The new certification and labelling requirements could hinder small local or regional companies from selling their goods in the EU27 or in the UK, consequently affecting advertising.
There are several suggested steps for consumer good companies that can be taken to minimise the effects, including applying for an UK Economic Operator Registration and Identification (EORI) and potentially hiring an import agent to help make this process smoother (see UK government information).
For the pharmaceutical and health industry in the UK and neighbouring countries such as Ireland, there is a concern of immediate shortages of medicines in the case of a no-deal Brexit while the industry is simultaneously preparing for duplicate product testing and licensing arrangements. In order to avoid excessive hoarding of medicines by individuals, the UK government has been urged to be more transparent about their national stockpiles in the event of a no-deal Brexit. UK drug-makers have been asked to build an additional six weeks’ worth of stockpiles yet this has proven difficult especially for smaller firms which do not have the cash flow to meet the potential demand (see Guardian and BBC).
The impact of a no-deal Brexit on the automobile industry would be graver than for most other industries. This is largely due to highly complex supply chains stretching across Europe and production relying on fast delivery (see ACEA fact sheet). The no-deal scenario would lead to disruptions in importing and exporting as well as some complications with employment. If UK manufacturers want to sell their products in the EU, full testing and certification of products must be done by an EU-type approval authority and a technical service designated by that authority (see UK government guidelines).
Concerns in the travel industry are raised regarding the price of air travel and travel insurance, the need for visas, longer border controls, accessibility to healthcare and freedom of movement of seasonal workers. A potential reduction in visitors from the UK to the EU and vice versa could also negatively affect business (see article on statista.com). Despite the uncertainty surrounding post-Brexit travel rules, several British travel brands report that they have not yet noticed any notable changes in customer behaviour and have not made cuts on their ad spending (see article on warc.com and thedrum.com).
The International Air Transport Association (IATA) stresses that the UK has the largest aviation industry in Europe – Brexit could therefore have a significant impact on all those involved in the aviation market, including flight operations and safety, consumer protection, air service agreements, etc. A study published in October 2018, warns that in a no-deal scenario there won’t be time to negotiate a comprehensive air services agreement between the EU and the UK, which would mean significant changes to EU-UK operations. Border management would see uncertainty over customs and immigration processes. Through its EU membership, the UK has access to 44 countries, accounting for 85% of all international traffic from the UK (see airport-technology.com). The same article foresees an economic slowdown and consequent drop in traffic rates.
