Financial & Legal News

Heading for a Brexit… a Summer of conjecture?

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This article comments on what is needed to effect the UK’s exit from the European Union – and how the political events of the last month affect that process.

It's been over a month since the EU Referendum’s “Leave the EU” vote and we are little further in being able to predict what the future might hold for the UK.  It’s looking like we have a Summer of conjecture ahead.

A few surprise positives steps have been taken. Andrea Leadsom’s withdrawal from the leadership race and Theresa May’s appointment as Prime Minister avoided a messy conservative leadership campaign and May’s subsequent speech and choice of Cabinet (incorporating as it does a mix of “Brexiters” in key positions as well as “remainers”) had an immediately stabilising effect on the markets and Sterling.

There is, however, no doubting the scale of the job facing the new Prime Minister‘s government. The stark mix of views held by the new Cabinet and how they will work together combined with the continued wrangling at the top of the Labour party mean that the uncertainty for UK businesses will continue for a good while longer.

We face a time of great national challenge…” (Theresa May13.7.16)


What is causing the economic uncertainty?

A key “unknown” is when - or even, if - the government will serve Article 50 notice on the EU notifying of the UK’s intention to leave. Doubt about the government’s approach to a Brexit and its timing continues to fuel the current economic uncertainty and makes it hard for businesses to plan.  In a nutshell, we simply don’t know what kind of trade relationship we are going to have with the EU, its members and the international trade community after a Brexit.

In addition, several legal, procedural and constitutional arguments are being run for example, that the UK needs a second referendum before it can leave.

There are plenty of other issues, but for now… what we can say is this:

  • Theresa May has sought to quash uncertainty about whether the UK will actually leave the EU or not by saying a "Brexit means Brexit" – that is, the UK will be leaving the EU.  What we don’t know is how that will be done.
  • Before he resigned, David Cameron said he would leave it to the next Prime Minister to serve the notice. Theresa May has now appointed a key Brexiter, David Davis as Secretary of State for exiting the EU.  
  • David Davis published his blueprint for a Brexit on the "Conservative Home" website on 11 July (You can find a useful summary of that blueprint as published by the Financial Times in their article of 14 July 2016.) The blueprint indicates that the exit process will be started at the end of this year (“after consulting with administrations in Scotland, Wales and Northern Ireland and other business groups and unions”) and an exit will be achieved in 2018.  This would suggest that Article 50 might be served towards the end of this year.
  • Theresa May confirmed before her appointment that there will be no decision to invoke Article 50 until the British negotiating position is clear – and not before the end of 2016 (see here.)  She repeated this view in her latest meeting with German Chancellor, Angela Merkel on 20 July and received some backing from the Chancellor as reported in The Times and the Guardian.


So what is the exit process?

  • The exit process for the UK to leave the EU starts with Article 50.
  • Article 50 of the Treaty of European Union provides that a member state wanting to leave the EU must serve notice on the EU of its intention to leave. That notice then triggers, arguably irreversibly, a two-year period within which the UK must negotiate its departure from the EU.
  • The new Prime Minister and her Brexit team will decide when and how the negotiations with the EU are conducted. The role of Labour’s leader, Jeremy Corbyn (if he survives the leadership challenge), as leader of the opposition will be to challenge or support the government’s policy to ensure the best for the UK.
  • Trade negotiations will take place at the same time.

What’s involved in making the Brexit happen?

Many assumed (or would have done if they’d thought about it) that the procedure for the UK to leave the EU involved a straightforward service of the Article 50 notice on the EU.  In other words, the government has power to act on the basis of the referendum.

However, legal arguments are now being raised that the government cannot just proceed with serving the notice.  Various arguments about how a Brexit should – legally - be effected are starting to emerge. These issues arise from diverse interpretations of EU and UK constitutional law as well as, in some cases, discontent about the economic, social, constitutional and legal ramifications of leaving the EU.

It is being argued for example, that:

  • There is a requirement to hold a second referendum (possibly fuelled in part by public admissions of regret by some who voted leave (the so called “Regrexiters”). A petition calling for a second referendum has now topped four million signatures. The government must now debate the issue as reported by the BBC here and will do so on 5 September 2016.
  • A general election must be called.
  • The outcome of the leave vote is not legally binding and requires a vote of Parliament to approve it before Article 50 notice can be served.

Mishcon de Reya Solicitors have announced that they are taking legal steps, on behalf of a group of clients, “to ensure the UK government will not trigger the procedure for withdrawal from the EU without an Act of Parliament”. (See their press release.)  

There are also other claims being planned including one which seeks to obtain an injunction to stop the government giving Article 50 notice before the issue is considered by the courts.


Where does that leave businesses?

Despite government assurances that Brexit means a Brexit, no one can predict when – or even if - Article 50 notice will be served. It is therefore also impossible to predict when (or if) the UK will leave the EU.

This widespread doubt about how properly to proceed to effect a Brexit is a very unsatisfactory – albeit unprecedented - state of affairs for the UK and not one that helps businesses generally to plan their short or long-term affairs.

Until it is resolved, read our checklist of what to consider here

You might also want to read the following:


Contact us

To discuss how the decision to leave the EU might affect your business, speak to one of our commercial team:

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

Written by Keith Kennedy


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