The UK Prime Minister has said he is "absolutely committed" to leaving the EU on 31 October come what may. That will happen automatically if nothing further is done. With very few Parliamentary sitting days - and even fewer if Parliament is prorogued – the chances of the UK leaving the EU without a deal have never been higher. Coupled with changing Government policies in key areas such as migration and regulation, the potential impact on business of a no deal Brexit could be greater than ever.
Whilst there remains a great deal of uncertainty over Brexit we previously set out the 3 core scenarios that govern any Brexit planning undertaken by business. With 2 months to go until the end of October we consider some of the options available to Parliament and some of the potential impact this may have on business.
What can Parliament do?
Whilst the Prime Minister's EU adviser is undertaking negotiations in Brussels, discussions to date do not suggest there are grounds for a new deal that would be acceptable to both the UK Government and the EU.
In March 2019 we saw that the one thing the UK Parliament could agree on was that they did not want to see a no-deal Brexit. At the time Parliament was able to prevent the Government leaving without a deal and the EU were prepared to extend the two-year deadline to allow for further discussions in the UK. As we previously noted, however, circumstances change: the UK has a new Government; the Prime Minister with a 'hard Brexit' mandate (from his own party); the EU is tiring of UK uncertainty and has a new Commission to appoint and a 7 year budget to approve early in 2020.
Perhaps crucially, unlike March, there are a vanishingly small number of Parliamentary days scheduled between when Parliament returns on 3 September and 31 October when the UK is due to leave the EU. Parliamentary recess dates are not set in stone and so more time could have been found, in theory. However, the Government's focus has now become on proroguing Parliament and so reducing, rather than increasing, available Parliamentary time.
In addition, there is also no obvious opportunity to legislate to force the Government to seek an extension of the Brexit deadline beyond 31 October or to otherwise revoke the Article 50 process and so prevent a 'no deal' Brexit. The Government, for the most part, controls the business of Parliament and to date has not been inclined either to schedule specific opportunity for debate or even to bring forward Parliamentary business that may provide an opportunity for MPs to debate Brexit. Opposition MPs are looking for opportunities – as we have seen previously – to try and force such a debate and to express the will of Parliament in a variety of different ways. But that requires Parliament to be sitting and for MPs to agree on what to demand and how.
All of these factors mean that discussion inevitably turns to votes of no confidence in the UK Government and the calling of a General Election. Both scenarios (and all of the different permeations that could arise) are governed by the framework of the UK's Fixed-Term Parliaments Act (FTPA).
With a very small working majority (including support of the DUP) the Government may well lose a vote of confidence. If a confidence vote is lost this kick starts a 14-day period to try and find a new Government can command the confidence of Parliament. If that is not possible then the FTPA requires an early general election takes place. However, the FTPA sets no timeframe for such an election and so it is conceivable that such an election would be scheduled after the 31 October Brexit deadline. Whilst the 14 day period can be dispensed with (if Parliament votes to do so by a two-thirds majority), the Government still retains the power to set the date of such an election.
What does this mean?
Ultimately, it means that the prospects of a 'no deal' Brexit are higher than they have ever been.
Importantly, it also raises a number of questions over the regulatory landscape that businesses will face in the event of a 'no deal' Brexit and may impact on their existing Brexit preparations. That uncertainty is driven by three main factors:
Little/no time or inclination for necessary primary legislation
For the reasons set out above the Government may be reluctant to schedule further debate on key pieces of primary legislation necessary to prepare the country for Brexit. If Parliament is prorogued then those opportunities are reduced yet further. Parliamentary bills in areas such as trade, agriculture, social security, financial services and fisheries all look unlikely to become legislation ahead of 31 October. This creates both potential regulatory divergence from the EU and uncertainty for businesses who may have operated on the assumption that the UK regulatory framework – if not all the practical operational elements – would have been in place in time for Brexit.
Little/no time for necessary Statutory Instruments
The EU Withdrawal Act relies upon EU law being transposed into UK law to ensure there is as little disruption to the regulatory regime as possible on Brexit day. This has been done, in the most part, by way of Statutory Instrument (SIs). However, time is also running out to use the SI procedure for those EU laws that have come into place since the original scheduled exit day of 29 March. Some SIs require the positive approval of both Houses of Parliament before they come into effect; others can be adopted under the negative procedure but still require 10 sitting days of Parliament before they can be passed. Coupled with a possible increased pressure to use the SI procedure to give effect to elements of the stalled primary legislation, there remains a lot to do in a relatively short period of time.
Changing Government policy
The UK's new Prime Minister and Cabinet colleagues have announced a shift in Government policy over the course of the summer, noting that the whole purpose of Brexit was to provide 'advantages' to the UK in areas such as employment and environmental regulation. As we highlighted in our earlier blog, in fields such as immigration – where the Government has announced a change in its treatment of EU citizens coming to the UK in the event of a 'no deal' Brexit – these policy changes can have a very real impact on businesses operating in the UK and the arrangements they have previously made for a 'no deal' Brexit.
Implications for businesses
Many companies had contingency plans in place for a hard Brexit on 31 March and their Brexit planning may require only minimal updating to reflect some of the policies emerging from the UK and the EU over the summer and up to the 31 October deadline. Other companies took the view that Parliament's position in late 2018/early 2019 meant that a 'no deal' was unlikely but will want to revisit that conclusion – and possibly contingency planning – in light of the new UK government’s radical shift in approach.