​19 May 2017 | BAL Brexit Bulletin

EU adopts Brexit guidelines

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The following is a roundup of recent developments concerning Brexit negotiations and the United Kingdom’s withdrawal from the European Union.

News Summary

European Union leaders have adopted Brexit negotiating plans and indicate they will focus on the rights of EU citizens, the Irish border and U.K. payments to the EU when formal negotiations begin.

Voters in the U.K. are preparing for a June 8 election, with Prime Minister Theresa May looking like the odds-on favorite to win reelection and perhaps strengthen her Brexit negotiating hand. May released a Conservative manifesto Thursday, calling for a dramatic reduction in migration to the U.K., doubling the levy companies pay to employ non-EU nationals and promising to put off a second Scottish referendum. The Labour Party has said it would scrap the Conservatives’ “hard Brexit” approach, while the Liberal Democrats say they would give U.K. voters the opportunity to accept or reject a final Brexit deal.

Early data points on Brexit’s impact on the business community are not promising. One report says recruiters are having trouble finding qualified candidates across industries, while another suggests that London may lose as many as 9,000 banking jobs to continental Europe. Businesses along the Ireland-Northern Ireland border face uncertainty. And a letter from Japan to the U.K. and EU reveals how closely non-EU countries are watching developments.

Immigration

EU adopts Brexit guidelines

At a special summit on Brexit on April 29, EU leaders quickly adopted the negotiating framework proposed by European Council President Donald Tusk and chief negotiator Michel Barnier. Under the guidelines, before negotiating future relations with the U.K., the EU-27 and the U.K. must first conclude negotiations on three issues: the rights of EU citizens, the Irish border question, and settling the U.K.’s financial bill with the EU. Barnier made a trip to the Irish border earlier this month where he said he would work hard to prevent a hard border but that some controls may be inevitable in order to meet EU border management requirements.

EU nationals in the U.K.

The rights of EU nationals in the U.K. may prove to be a thornier issue to negotiate than anticipated, as both sides have hardened their demands. May has refused to extend a unilateral guarantee to the approximately 3 million EU nationals living in the U.K., insisting on reciprocal rights for 1 million Britons in the EU, while Barnier seeks an “iron clad guarantee” of EU citizens’ rights before the parties move on to negotiate a trade deal. Both sides have drawn up lists of the various rights of EU citizens, including rights related to labor issues, social security benefits and residency, each of which must be negotiated. Barnier has insisted that the EU Court of Justice continue to protect the rights of EU citizens and their family members after Brexit; May’s hard Brexit plan seeks to end the European Court of Justice’s jurisdiction over the U.K.

Logistical hurdles

The Institute for Government, meanwhile, issued a report highlighting the administrative and logistical challenges of developing and implementing a new immigration system. “The scale of the task makes successful implementation of a new immigration regime by April 2019 unfeasible,” the report said, “not just for government, who will need to design and deliver the regime, but also the employers, landlords and providers of public services who both rely on the system and support its functioning.” The report noted that May has discussed the possibility of an “implementation phase” during the period between when the U.K. formally leaves the EU and when it takes complete control over its immigration regime, but EU leaders have said the U.K. would be required to accept EU laws on migration during such a transitional period.

Politics

Election manifestos

While the U.K. and EU continue their pre-negotiation posturing, U.K. voters are preparing to head to the polls June 8. Prime Minister Theresa May, viewed widely as the frontrunner, released a Conservative Party manifesto Thursday that contained a number of immigration-related measures, including:

  • Bringing net migration to the U.K. down to the “tens of thousands per year.”
  • Doubling the annual fee on companies that employ non-EU nationals to £2,000 per year per worker.
  • Promising to prevent a second referendum on Scottish independence until after the U.K. leaves the EU, a rebuke of the Scottish parliament’s push for an independence vote in late 2018 or early 2019.

May called for the snap election in the hopes of securing a mandate to deliver on Brexit. Her renewed pledge to reduce net migration to the U.K. from the hundreds of thousands to the tens of thousands raised some eyebrows. The promise has been a mantra of the Conservative Party since David Cameron vowed to slash immigration before his unexpected election win in 2010. George Osborne’s London Evening Standard ran an editorial that called the pledge unrealistic and suggested it lacked support in May’s cabinet.

The Labour party released its manifesto Tuesday, pledging to scrap the Conservatives’ approach to Brexit. Labour said it would immediately guarantee existing rights for EU nationals in the U.K., a welcome pledge for those who are affected or who believe it is important to guarantee such rights. It rejected what it calls “bogus immigration targets” in favor of developing new migration systems with input from business, trade unions, the devolved governments and other stakeholders. Labour says it accepts the Brexit referendum result, but that it would reject May’s hard Brexit approach and would work on “retaining the benefits of the Single Market and the Customs Union.”

The Liberal Democrats go a step further in their manifesto, saying they want to put another referendum before U.K. voters, giving them the option to accept or reject the final agreement the U.K. reaches with the EU. This could create additional uncertainty, but it remains to be seen what the public thinks is the most sensible approach on Brexit. Ultimately, the party in power after the election will determine how immigration policy is shaped for years to come.

Macron on Brexit

The French presidential election results brought a sigh of relief in Brussels. With Emmanuel Macron’s win, not only has the EU averted another possible defection from the bloc, but also gained a pro-European partner in Paris. Macron advocates a strong EU and has said the EU-27 should be “tough” on the U.K. and “extremely rigorous” about the consequences of leaving the EU. However, he also indicated in February that he would be inclined to guarantee the rights of U.K. citizens already living in France.

Business

Formal Brexit negotiations have not even begun yet, but some data suggest that U.K. businesses are already experiencing negative repercussions. A Markit/REC Report on Jobs released May 9 found that while unemployment is at its lowest rate since 2005, recruiters are having a tough time finding suitable job candidates in such fields as engineering, IT and nursing. REC Chief Executive Kevin Green cited “Brexit uncertainty” as a problem, saying that people are both less likely to come to the U.K. from Europe and are less likely to leave their current job.

Reuters, meanwhile, reported that London’s largest banks are planning to move about 9,000 jobs to continental Europe in the next two years. The BBC reported that questions about the border with Ireland remain a concern for border towns, with the Ulster University Economic Policy Centre issuing a study finding that businesses along the Ireland-Northern Ireland border currently benefit from €3 billion (£2.5 billion) in cross-border trade. Such reports emphasize the need for the U.K. government to consider carefully its approach to Brexit negotiations, as this could influence where businesses decide to place staff in Europe, even before the U.K. formally leaves the EU.

With that in mind, non-EU countries are following Brexit negotiations closely. In a 15-page “Message to the United Kingdom and the European Union,” for example, the Japanese government made a number of requests of the EU and the U.K., ranging from providing adequate notice about any policy changes to maintaining an immigration system that allows companies to have access to high-skilled foreign workers. “Uncertainty is a major concern for an economy,” the memo said. “We hope that predictability is secured whereby all stakeholders, not just the negotiating parties, have a clear idea of the post-Brexit landscape.”

Preparing your Company

While the future is uncertain, many companies have begun taking proactive steps to support their EU employees and to plan for eventual changes to free movement. BAL continues to provide Brexit-related services at varying levels depending on individual corporate needs. Brexit immigration planning may include:

  • Consulting and auditing to determine your company’s level of exposure to Brexit.
  • Assessing your company’s EU workforce and its future needs.
  • Tracking EEA employees and new hires for permanent residency eligibility based on five years of “continuous” and “lawful” presence.
  • Exploring all options for EEA employees to secure or confirm their rights to remain.

Employees

Employees can also take steps to prepare for Brexit, including making sure they are aware of their legal status in the U.K. and checking whether they can claim to be a “qualified person” under EU law. Employees should ensure they possess:

  • Evidence of their date of arrival in the U.K. (e.g., travel records).
  • U.K. housing records (e.g., chain of tenancy or mortgage documents).
  • U.K. tax records (e.g., P60s for each year in the U.K.).
  • Contracts, pay slips and bank statements to demonstrate periods during which they were working in the U.K.
  • Comprehensive sickness insurance, including either private insurance or evidence of registration in their home country, to cover any periods of time as a student or self-sufficient person.

BAL encourages and welcomes communicating with the BAL London team regarding Brexit developments, as we continue to work with the Government to prepare for reforms.

Should you have any questions or require more information on how BAL can help with Brexit planning, please contact us at uk@balglobal.com.

Copyright © 2017 Berry Appleman & Leiden LLP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@balglobal.com.

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