Brexit one year off: We only know a little of how it will work

In exactly a year’s time – barring some amazing political reversal – the UK will be on its way out of the EU. Departure time is set for 11pm on March 29th, 2019, or midnight central European time. The most remarkable thing is how little we yet know about how this is all going to work.

True, EU leaders have agreed on a transition period, a kind of standstill, to operate until the end of 2021. But businesses need to remember that this transition is subject to an overall withdrawal deal being finalised. This is due by October, but could well be later, assuming agreement is reached.

And then the details of future trading arrangements will only be hammered out during the transition period.

As the uncertainties remain we are starting to get down into the detail of our own exposure. The latest research in a paper from the Department of Finance points to risk of rising prices and disruption to imports, of which 23 per cent – worth €17 billion per annum in cash terms – are sourced in the UK.

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A few key points are brought out. One is that while the export exposure is reasonably narrow in terms of sectors, imports from the UK come from a wider variety of business areas – food, pharma, finished manufacturing goods, intermediate goods, fuel and so on.

Also, many of the importing companies, particularly in areas like engineering and food, are SMEs, who would typically face a tough adjustment job.

And there is scope for much disruption to supply chains in areas like retail, where the big companies typically bring in products from UK warehouses.

The costs involved can emerge from tariffs – if there is no free trade deal after Brexit – or the myriad of non-tariff barriers which emerge from divergences in rules and regulations, for example in the pharma industry where chemicals are brought in here for further processing.

Some of this exposure comes from cross-Border trade, but the vast bulk comes from goods imported from Britain. For example, just 14 per cent of goods and live animal imports coming here from the UK are from the North.

As the study concludes, the remedy is as close as possible to a future trading relationship between the UK and the EU. As of now, many miles still have to be travelled.