- On 17 October Boris Johnson and the EU concluded a new withdrawal agreement, with a different solution for Northern Ireland.
- The agreement is not final until the relevant parliaments approve it, and the exit remained subject to votes and a tight calendar.
- Companies should keep preparing scenarios: an agreement on paper does not change reality until it is applied.
On 17 October 2019 Boris Johnson and the European Union concluded a new withdrawal agreement for the United Kingdom, with a different solution for Northern Ireland. The announcement came a few weeks before the 31 October deadline, and it reopened the possibility of an orderly exit, after months in which the no-deal scenario had gained weight in public debate and in companies’ concerns.
For those with business between the United Kingdom and the EU, the news was positive, but not enough. An agreement reached between negotiators is an important step, not an end: it still had to pass the vote of the parliaments, and the calendar was very tight. The experience of earlier months advised caution and avoiding treating as certain what had not yet been approved. The outcome also depended on parliamentary arithmetic, and the experience of the previous months advised against taking any support for granted.
What changed
After months of deadlock, a new text replaced the one negotiated by the previous British government. A withdrawal agreement is an extensive document, with sections on rights, obligations and timetable, so a change in one of its key elements can alter the balance of the whole. The novelty was, therefore, more than a correction of detail.
The central novelty lay in the treatment of Northern Ireland, the most delicate point of the negotiation, because it affects the land border between the United Kingdom and the European Union. How checks on goods and people are handled at that border is a question with economic, political and security consequences, and resolving it had been one of the main obstacles of the process. A different treatment of that point implies different rules for trade between territories, something companies with a presence there should study carefully.
Still to be approved
An agreement concluded between negotiators is not final until the relevant parliaments approve it. In this case, that meant that, even with a new text, the exit remained subject to votes and a tight calendar. A negotiated text can be rejected or amended in the parliamentary process, and recent history showed that this possibility was real.
For companies, uncertainty fell, but it did not disappear. It is one thing for the most feared scenario to lose probability, and another for it to vanish. Until there were conclusive votes, it remained necessary to keep alternative plans, so that an unexpected decision in Parliament would not find the company without room to respond. Moreover, the deadline remained close, and the possibility of a new postponement or a tight vote could not be ruled out.
Staying cautious
Companies with trading relationships on both sides should keep preparing scenarios and reviewing contracts, rather than treating the matter as settled. Preparation already done is not lost: it serves equally if the pact goes ahead, because it allows quicker adaptation to the new rules, and it is indispensable if it does not.
It is also worth talking to key customers and suppliers to find out how they are preparing, because a chain is only as strong as its weakest link. A company can have its procedures up to date and still be affected by the delay of a supplier that has planned nothing. Asking, sharing information and coordinating calendars is a form of mutual protection. A small audit of the risks along the chain, done in good time and in an orderly way, is worth more than many improvised meetings when a critical date approaches.
An agreement on paper does not change reality until it is applied.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
