If you’re a British business operating in the EU, or an EU company with presence the UK, Brexit has probably caused you some headaches – and it seems it will continue to do so. Here we analyse its main repercussions.
What is Brexit and what is its context?
On 29 March 2017, the United Kingdom notified the European Council of its intention to withdraw from the European Union and the European Atomic Energy Community, in accordance with Article 50 of the Treaty on European Union.
On 14 November EU and UK negotiators reached an agreement on the United Kingdom’s withdrawal from the European Union (known as Brexit).
According to Article 50(3), the Treaties shall cease to apply to the withdrawing State from the implementation date of the Agreement on Withdrawal or, failing that, two years after notification – unless the European Council agrees unanimously with said State to extend that period.
What is the current situation?
In October 2019 the European Council extended the Article 50 deadline further to 31 January 2020. On this date the United Kingdom finally exited the EU, effectively changing its status to ‘third country‘.
The Withdrawal Agreement provides for a transitional period for 11 months, until 31 December 2020. During this period EU legislation will continue to apply in the United Kingdom in relation to the internal market, customs union and EU policies.
However, if an agreement as not reached by the date of departure, the United Kingdom would keep its third country status indefinitely.
This situation would be expected to have a dramatic impact at fiscal, economic and logistical levels; hence why it is imperative to make an impact assessment and bring forward the necessary procedures insofar as possible. For this purpose, a contingency plan has been established through the Spanish Royal Decree-Law 5/2019, which we will cover in this post.
Consequences of Brexit for Spanish residents in the United Kingdom
The consequences of the Brexit are very broad, with one of the most affected groups being Spanish residing in the UK – which are estimated to tally at two hundred thousand at present.
So far there has been no legal change in relation to travelling or working in the United Kingdom. It is likely, however, that freedom of movement will come to an end – and although it doesn’t look like it will happen overnight, it seems residence and work permits might be introduced in the next two years.
The impact of these new migration policies could be significant, as there are over three million European citizens who reside there, approximately 6% of its population.
It is also possible that some European citizens will decide to return to their home countries of their own accord, given the uncertainty regarding their employment rights and statuses.
Those who have paid National Insurance contributions in the United Kingdom will have to wait for an economic agreement between the UK and the EU to fully assess its ramifications. It will largely depend on whether the UK stays in the European Economic Area. In that case, the EU regulations on social security would prevail, so there would be no further issues. If the opposite happens, alternative arrangements would have to be put in place to ensure that the right to such benefits isn’t lost.
It is still too early to draw any conclusions. That being said, it seems unlikely that the United Kingdom will want to close its borders completely and prevent the current freedom of movement.
Consequences of Brexit for British residents in Spain
In Spain there are almost 300,000 Brits living within our borders, exercising their right to free movement. However, the departure of the United Kingdom from the EU means that they will no longer enjoy the same rights as before.
Their legal status will change, but it remains to be seen what terms are agreed between the United Kingdom and the European Union. Some countries that aren’t part of the EU – although they do allow their citizens to live and work in Spain – are being used as examples. As we discussed in the previous section, these are Norway, Liechtenstein, Iceland and Switzerland.
With the exception of the last one, they are part of the so-called European Economic Area, which allows them to be part of the European Union’s internal market through the European Free Trade Association, without having to formally join the EU. However, these countries do allow freedom of movement – something that doesn’t exactly fit in with the pro-Brexit camp, which has proved to be clearly in favour of reducing immigration.
If the UK did accept the free movement of persons post-Brexit, it would have a positive impact on its citizens living abroad. Those Britons who have lived in Spain for at least five years would need to apply for a Long Term Card, instead of the EU Citizenship Registration Certificate that they now have. British nationals with less than five years in our borders would need to apply for a temporary residence permit.
This eventual situation would be regulated through the same agreements that Spain uses to regulate visas with countries in other continents. This would reduce geographical mobility and, consequently, would come into conflict with the interests of the Spanish government (and most governments) to continue receiving British citizens, either those who visit sporadically or are looking to settle permanently.
Whether your company operates in the UK, or wether you work with British partners or employees, there is no doubt great uncertainty surrounding the coming months. In Metacorp we have a specialized department in internationalization that will be happy to advise you. If you want to know more, do not hesitate to get in touch.