We still don't know if there's a brexit with or without a contract. Much depends on the closest vote in the House of Commons. However, the economic consequences of each scenario should be analysed.
On 17 October 2019 an agreement was reached between the European Union and the United Kingdom on mutual relations after the United Kingdom left the European Union, i.e. after a brexit.
The negotiated document shall include, inter alia, a transitional period which is to last until the end of next year and, if necessary, may be extended by one year or two, provided that both sides agree. The current rules will apply during the transitional period, including those relating to trade aspects, both intra-Community and non-EU.
However, the British will not participate in the work of the EU institutions.
If there is no agreement between the European Union and Britain, we will have a tough brexit. In this case, the economic (trade) relations between the United Kingdom and the European Union will take place in accordance with the rules developed by the World Trade Organisation and the United Kingdom will be treated as a state third
The transitional period is intended mainly to negotiate and conclude a free trade agreement between the United Kingdom and the European Union, which will ensure that there are no duties, fees or quantitative restrictions in relation to each other.
Evening 17 October 2019 The European Council endorsed this agreement and called on the European Commission, the European Parliament and the EU Council to take the necessary steps to ensure that the agreement can enter into force 1 November 2019 Consequently, it will decide whether the agreement will enter into force on Saturday 19 October 2019 House of Commons. However, in the current political situation in Britain, it is likely that the House of Commons will reject the agreement, which in turn will open two possibility: either to extend the deadline for the conclusion of a new (another) brexit agreement to 31 January 2020, or the UK leaving the European Union on 31 October 2019 No deal.
Consequently, for this moment we still need to consider two brexit possibilities.
Hard landing
If there is no agreement between the European Union and Britain, we will have a tough brexit. In this case, the economic (trade) relations between the United Kingdom and the European Union will take place in accordance with the rules developed by the World Trade Organisation and the United Kingdom will be treated as a state third. Consequently, border controls and customs duties will apply in mutual relations.
This is the worst solution from the point of view of external trade, as it will involve, for example, the introduction of customs duties in mutual trade, changes in VAT settlement (currently in intra-Community trade, the VAT rate was essentially 0%), Customs, sanitary and veterinary controls – which can cause huge obstacles to trade in animals and zoonotic products, changes in excise duties, or the need to have certificates for certain products stating compliance with the legal requirements.
Equally important, tough brexit will hit the existing purchasing and supply chain solutions between entrepreneurs and within international corporations. This, in turn, will have a negative impact on the production and distribution of goods and may even cause temporary shortcomings in the market for certain goods, such as medicines or food.
The possible exit of the UK from the European Union without a signed agreement entails numerous difficulties for entrepreneurs wishing to continue to maintain economic relations with the country.
Soft output
Should an agreement be adopted between the UK and the European Union on 17 October 2019 the so-called soft brexit, according to which all the rules in economic relations would remain unchanged, at least during a transitional period.
In turn, the transitional period is intended primarily to establish and conclude a free trade agreement between the European Union and the United Kingdom, the main elements of which are part of the agreement, called a political declaration.
It follows that, in the framework of a future free trade agreement, the relationship between the European Union and the United Kingdom is to be based on several freedoms that have been in force so far – i.e. the free movement of services, goods and capital.
Consequently, there will be no duties, fees or quantitative restrictions in the relationship. At the same time, freedom of movement will not be ensured, although the rights of EU citizens residing in the British Isles are to be guaranteed.
The agreement also addressed the issue of Northern Ireland, which has so far been the bone of disagreement between the UK and the European Union.
The agreement includes the absence of a hard border between Northern Ireland and the Republic of Ireland; Northern Ireland will remain part of the United Kingdom's customs zone, but with some reservations. If goods destined for an EU market outside the Community or the UK appear in Northern Ireland, they will be subject to EU customs law.
However, goods manufactured in Northern Ireland or the United Kingdom intended for the Union market will be subject to British customs regulations.
The UK's leaving the structures of the European Union on the basis of the findings developed is beneficial for entrepreneurs, in particular because of the longer period of compliance with the new regulations. Nevertheless, the soft brexit will have some consequences, including: the said need to adapt to standards and requirements which, after a brexit, may be different in the European Union and the United Kingdom, the need to obtain new certificates and licences, or finally the need to make customs declarations and the emergence of border controls between the European Union and the United Kingdom.
In conclusion, the UK's exit from the European Union has consequences for both hard and soft brexit.
However, including first In the case of restrictions, they can create enormous chaos in economic relations and break the economic ties currently in place within the common market between entrepreneurs as well as within large international corporations.
In the second In the case of soft brexit, the existing standards and economic ties will be retained in terms of trade. The transitional period will allow European Union and UK entrepreneurs to adapt to the forthcoming changes in the future.
source: https://www.forbes.pl/opinie/brexit-jakie-beda-konsekwencje-dla-handlu-miedzy-unia-a-zjednoczonym-krolestwem/5bkhz86
Dr. Andrzej Dmowski – tax and restructuring adviser, managing partner Russell Bedford Dmowski & Partners, Law Firm sp. k. and Russell Bedford Poland sp. z o.o.