Prep now for hard Brexit
Time to review your position, says Kerry Teahan of Carson Mcdowell
There is still no real clarity as to the form that Brexit will take when the fast-approaching 2019 deadline hits. Theresa May’s current stance that “no deal is better than a bad deal”, and the recent comments made by the EU’S chief negotiator, hint heavily that the so-called “hard Brexit” could potentially result in Northern Ireland businesses’ worst case scenario — a hard Brexit with a border on the island of Ireland.
Michael Barnier, in his first major speech since talks began in June, commented that “frictionless” trade with the EU will be impossible if the UK leaves the single market,
As such, bidders reliant on trade with EU member states should really be considering the following steps now. • When tendering, due planning should be given to how to “price in” or adjust proposals to take account of potential future risks such as restrictions on free movement of workforce, imposition of taxes, levies, duties or potential changes in law without losing a competitive edge.
Any attempt to re-negotiate contracts post-brexit to take ac- count of these types of changes is likely to prove difficult given the current legal restrictions on making “material” changes to publicly procured contracts.
If a material change that does not fall within very limited exceptions is required, this may mean the contract is terminated and a fresh procurement process required.
While these rules could potentially be relaxed in the long term for contracts being procured within the UK, in the short term, the rules will remain the same and any change to the EU position longer term is unlikely. • Prepare for the situation where there will not be some form of free trade arrangement with the EU, a prospect which looks possible given the Government’s current proposals and the EU’S negotiation stance.
Northern Ireland businesses should consider therefore wheth- er it is prudent to set up a business entity within the EU, the most obvious prospect perhaps being the Republic of Ireland, to ensure the same continued access to the EU market post-brexit.
There is a relatively low cost involved in doing so, for example, setting up an Irish subsidiary firm.
This may be a particularly important step for those bidders wishing to ensure they can still avail of the same rights and remedies they are currently afforded by the EU procurement law when bidding for public contracts.
If the UK was to exit the EU and rely on the World Trade Organisation and Government Procurement Agreement (GPA) to regulate its procurement relationship with the EU — an option that has been mooted in more than academic circles — this would require a Uk-specific schedule to be negotiated to the GPA. The UK is a member of the GPA simply by virtue of its EU membership, not as a standalone member.
If not negotiated in time, then bidders based in Northern Ireland may not be able to invoke the same rights and remedies in public tender competitions as their competitors in the Republic of Ireland.
Conversely, those bidders established outside of the UK, or who do not currently have a UK presence, should consider setting up an entity within the UK to address the prospect of the UK exiting without some form of free trade deal and/or that the procurement rules within the UK evolve longer term to offer some form of advantage for Uk-based businesses.
We are recommending that those reliant on EU and UK tenders start to take advice now to get their ducks in a row. Whilst there is certainly an appreciation of the need for robust trade agreements to be put in place, and the Government appears hopeful that this can be achieved on time, time is short and there is a lot of work yet to be done.
While we can all hope for the best, it is prudent and indeed necessary to review your position now and ensure that you are prepared for all potential scenarios. As the old saying goes, fail to prepare, then you may prepare to fail.
Northern Ireland businesses should begin preparing now for Brexit and the new trading challenges it will bring