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Brexit: what are the possible economic consequences and how can you anticipate them?

This article was written by Nikolas Vandelanotte, Hannelore Durieu.
Contact us for more info at contact@vandelanotte.be.
Brexit: what are the possible economic consequences and how can you anticipate them?
The timing of the United Kingdom's effective departure from the European Union is still uncertain. It is difficult to predict the outcome of a process that could take a long time. Looking at Northern Ireland and Scotland, however, it's safe to say that this matter will run into some hurdles.

In times of such uncertainty, we must not act hastily; however, let's take a quick look ahead at the potential practical consequences for your company.

Financial


On the one hand, even now we can see the impact on credit rating: the United Kingdom's credit rating has already been downgraded. We ask ourselves: What impact will this have on local companies and payment conditions for doing business? The stock markets have fallen significantly for two days in a row and the value of the British pound has also dropped enormously. This will have a significant impact on the performance of investments and life insurances (particularly Class 23). The overall extent and duration of this is not easy to estimate...

Legal


In the event of a Brexit, contractual relations with the United Kingdoms would, in principle, no longer be able to rely on European law. Therefore, it is advisable to include in your contracts that Belgian law is applicable and that Belgian courts are competent. In addition, agreements that have a territorial scope, e.g. non-competition clauses, distribution and agency agreements applicable to countries of the European Union, might have to be worded differently.

Fiscal


Brexit will also have a major fiscal impact. For example, the United Kingdom could be excluded from the harmonised VAT system and would have to determine its own VAT regulations. Trade with the E.U. would then in principle fall under the category of import/export, whereby customs duties could apply. Furthermore, the country will, in principle, no longer be able to rely on European Directives that reduce fiscal burdens, such as the Parent-Subsidiary Directive for dividend payments, the Merger Directive and the Interest-Royalties Directive. This could be an incentive for companies to move their headquarters to a Member State of the E.U.

In principle, double-taxation agreements concluded with the United Kingdom will continue to apply, because these were concluded bilaterally.

Employment


Additionally, cross-border employment is likely to become much more complex. If the free movement of people is restricted, this will potentially involve a huge amount of additional administration. However, the United Kingdom would have to take into account the employment law restrictions of more than 20 countries instead of one single harmonised legislation.

Furthermore, the abandonment of EU regulations, whereby a EU national only pays social security contributions in one Member State, will then lead to workers having to pay social security contributions both in the United Kingdom and the E.U. It also raises the question whether the rights to various state benefits (pension, unemployment benefit, sickness insurance, etc.) would continue to be guaranteed in such cross-border situations?

Conclusion


These are just some of the aspects associated with an exit of the United Kingdom. Whether that will all happen remains to be seen and will depend to a large extent on the choices made by the UK and the E.U. over the next two years. Will the UK choose the EEA or another form of cooperation? Or do they only want to enter the economic and financial arena?

Many of the consequences, against which you may or may not be able to protect yourself, either professionally or personally, are as yet unknown and will only become apparent over the coming weeks and months. We will keep our eyes and ears open in order to assist you as best as we can in this new environment.

If you have any questions or concerns, please contact us via contact@vdl.be.


This article was written by

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