Two and a half years since the referendum, the specifics of Britain’s forthcoming exit from the European Union are almost as opaque as when discussions first began in 2016.
EU leaders in Brussels today agreed to delay Brexit until the end of October, the air in the UK is thick with uncertainty and the rest of the global community is looking on with bated breath.
Brexit – assuming it goes ahead – affects the global economy in myriad ways, but do you know how it will affect your sector and your business?
Despite being Australia’s largest economic partner, our trade interests do not lie solely with China.
The ripple effect of European upheaval has significant implications for our economy. These may be both positive and negative, depending on how this divorce is negotiated.
What did Brexit ever do for us?
When Britain joined the European Economic Community in 1973, many Australians interpreted this as Britain’s neglect of Commonwealth partners. This sentiment is testimony to the fact that Australia’s relationship with the UK has always been intimate. Brexit may represent an opportunity for this to deepen.
The UK is Australia’s seventh largest trading partner. Australia currently exports $6.4 billion worth of goods to the UK (largely raw materials and machine parts) and imports around $7.3 billion worth of a range of goods, including vehicles, machine parts, petroleum and alcoholic beverages (2017).
Brexit – if it happens – will upend legislation concerning the UK’s trade with regions outside the EU.
This may be dislocating. It may also present new opportunities that the UK and Australia will actively seek to cultivate.
A newly unmoored UK looking to recover from the potential economic consequences of leaving the EU, may look to Australia to become an increasingly significant partner.
Given that the UK government is deskilled in terms of trade negotiation capabilities, business leaders will be carefully following who is advocating for their industries.
EU and me
The EU is Australia’s second largest trading partner and was the largest source of foreign investment in 2017.
Excluding services, goods trade with the EU in 2016 was valued at $69.3 billion, and in June 2018 Australia launched negotiations with the EU for a free-trade agreement (FTA) that looks set to revolutionise trade with the bloc.
The composition and value of Australia’s trade with the EU will change dramatically with Brexit, however, given that in 2016 half of Australia’s exports to the EU were bound for the UK.
Furthermore, while Australia’s connection to the EU is complex and does not rely on the UK as intermediary, many Australian companies operate in the UK as a gateway to the rest of the EU market.
Companies may feel they want to relocate elsewhere, dependent on the terms of access negotiated in the Withdrawal Agreement.
Brexit may mean Australia loses a go-to partner on issues relating to the bloc. Conversely, new FTAs with the EU and Britain may enable Australia to enhance its position with each, respectively.
Dependent on the outcome of the Withdrawal Agreement, companies trading with the EU will likely have to make fundamental alterations to their structures and operations in order to deal separately with the UK and the EU, respectively.
The scale and timing of Brexit means governments will be incapable of anticipating and acting upon the multiple and complex legislative and regulatory implications for every industry and business.
This makes it incumbent upon each potentially affected industry and business to audit its own regulatory risk in light of difference Brexit scenarios and put in place appropriate responses, be that unilaterally or via a government relations program.
Small to medium companies may need to employ external consultants to advise them on these changes.
Companies seeking to capitalise on new opportunities with a newly separated UK and EU may need to seek expertise on the positioning required to secure and maintain deals while navigating new procedures and mechanisms as they emerge.
The Civic Group’s team have a wealth of experience in managing complex and competing stakeholders in negotiations. We have secured large-scale contracts for foreign companies seeking to invest in Australia and for Australian companies seeking to expand elsewhere.
Our team is composed of people with unique insight, expertise and lived experience in Australia, the UK, France and China.