Brexit – What consequences for European Works Councils ?
A referendum was held on 23 June 2016, to decide whether the UK should leave or remain in the European Union, the so called Brexit (“British” and “exit”). England and Wales voted for leave. Scotland, Northern Ireland, Greater London and Gibraltar backed staying in the EU. Liverpool, Manchester, Bristol, Cardiff and the regions around the university cities such as Cambridge, Oxford and Warwick backed staying in the EU.
The referendum was non-binding
Article 50 of the Treaty on European Union establishes the procedures for a member state to withdraw from the EU. It requires the member state to notify the EU of its withdrawal and obliges the EU to then try to negotiate a withdrawal agreement with that state. Britain's “Leave” vote does not represent that formal notification.
The High Court in London ruled on 3 November 2016, that only parliament – not the prime minister – can authorise the signing of Article 50. The government appealed against the judgment. The Supreme Court heard the case from 5 to 8 December 2016 and confirmed the High Court ruling on 24 January 2017.
On 13 March 2017 both Houses of Parliament endorsed the activation of Article 50. The prime minister started the formal legal process of withdrawing from the EU on 29 March 2017. Now the UK has two years to negotiate its withdrawal, the negotiations did start on 19 June 2017. Meanwhile politicians in Scotland, Northern Ireland and Wales called for a referendum on leaving the UK (see press report).
EU law still stands in the UK until it ceases being a member, until the end of March 2019. After that date, the British government is free to repeal - or not - the law transposing the EWC Directive. Until that date, there are no legal changes regarding the status quo of European works councils, SE works councils and special negotiating bodies.
“As long as we remain in the EU we will retain the rights and obligations of EU membership.” (Theresa May, prime minister, 27 July 2016)
The general election on 8 June 2017
Theresa May called a snap election to strengthen her parliamentary majority and have more power and freedom to negotiate Britain's exit from the European Union, but she lost her parliamentary majority. The increase in Labour’s vote share was the largest for any party between two general elections since 1945. Theresa May is now vulnerable to unforeseen events.
How to avoid the “cliff edge”?
In the absence of agreement on exit terms or an extension to the negotiating deadline, Brexit would be automatic in March 2019. The UK would then have no choice but to trade with the rest of Europe under World Trade Organisation rules. The UK could find itself close to a “cliff edge” without final agreement. “Severe disruption to air transport and long queues at the Channel port of Dover are just some of the many examples of the negative consequences of failing to reach a deal,” said Michel Barnier, the EU chief Brexit negotiator. “Others include the disruption of supply chains, including the suspension of the delivery of nuclear material to the UK.”
- Brexit cliff edge: What happens immediately on 30 March 2019?
There will be transitional arrangements necessary for the period between the UK leaving the EU in late March 2019, and any EU-UK trade deal being finalised and ratified. During this period the country is no longer a EU Member State, but must however abide by EU laws and contribute to EU's budget. Experts estimate a period of ten years is necessary for transition, while the European Parliament is prepared to accept three years at the most, namely until March 2022. On 6 July 2017, business leaders called for indefinite delay in leaving the single market (see press report). On 26 August 2017, the Labour Party promised a “jobs-first Brexit” and to stay in the EU single market for up to four years (see press report). Theresa May called for a two-year transition after Brexit (see press report), however senior EU officials believe the exit date would be most likely 31 December 2020 (see press report).
The tide of opinion is turning
Since late July 2017 the vocabulary of Brexit in the British media is beginning to go beyond the “soft”, “hard”, “cliff-edge” and “no deal” varieties, to include a “scrap-it” Brexit. Here is a list of the main political errors and unforeseen costs of Brexit: see position paper.
“UK should stay in EU during transition”
On 28 July 2017 the head of aerospace body ADS said, the UK must remain an EU member during a transition period. Otherwise there will be no flights between the UK and Europe for a period beyond March 2019 (see BBC report).
“There will be disruption to flights in April 2019”
On 2 August 2017 the CEO of Ryanair warned that flights to and from the UK could be grounded and Britons limited to ferry journeys to Ireland and road trips to Scotland (see press report).
UK airports warn of catastrophic slump in air travel
On 22 August 2017 the country's biggest airports warned of a 41% fall in passenger demand and the risk of a 20.6% decline in aircraft movements (297,000 flights), in the absence of an aviation agreement between the UK and EU (see press report).
New customs arrangement not ready before 2024
On 15 September 2017 the head of the UK tax agency said Britain could need up to 5,000 extra staff to handle customs and border checks after Brexit. This could cost as much as £800m and take seven years to implement (see BBC report).
US aviation trade body fears that cliff-edge Brexit could ground flights
On 19 September 2017 the chief executive warned that disruption of flights could be catastrophic, with 140 passenger flights and 43 cargo flights a day between the US and Britain (see press report).
What are the scenarios after EU withdrawal?
After the transition period there are several paths onwards: the Norwegian-option, the Swiss-option and a so-called “Hard Brexit”.
The Norwegian-option (see explanation of a former foreign minister of Norway)
In Norway there was no majority for accession to the EU in the 1972 and 1994 referendums. Norway as well as Iceland and Liechtenstein are however, fully integrated into the single market as a consequence of the European Economic Area agreement. In practice, this means that Norway transposes almost all EU laws into its national legislation, but has hardly any influence on the legislation. The EWC Directive therefore also applies to Norway without restriction.
- If the UK joins the European Economic Area, British EWC law has to remain in place.
In Switzerland, the accession to the European Economic Area was rejected by referendum in 1992. However, in order to benefit from the advantages of the common market, comprehensive bilateral agreements between Switzerland and the EU were concluded in 1999 and 2004. By these means, important parts of the EU legislation have been adopted in the Swiss national legislation. In order to prevent Switzerland from “cherry picking”, all these agreements are inter-connected to one another through a “guillotine clause”; if a tiny part of an agreement is canceled, all agreements are automatically terminated. In December 2008 Switzerland adhered to the Schengen Agreement and abolished border controls with the EU (see report in EWC News 3/2008). The EWC Directive however does not apply, since there was no majority on it in Parliament, in June 2012 (see report in EWC News 2/2012).
- If the UK concludes bilateral agreements like Switzerland, British EWC law can be removed.
Do British EWC members lose their mandates after EU withdrawal?
Prior to 15 December 1999 there was no EWC legislation in the United Kingdom. Nevertheless, at that time many large British companies had established a EWC. The EWC agreement was then, for example under Belgian, German or French jurisdiction. Usually the UK workforce was also integrated into the European works council. In companies with headquarters in Switzerland, the Swiss workforce is represented on the EWC in over 70% of the cases. This suggests that in practice, a massive loss of British mandates will probably not happen. The situation is different in EWC agreements under British jurisdiction. It remains entirely uncertain, as to whether or not they will continue to apply or have to be completely renegotiated.
At the conservative party convention held in Birmingham, government members declared on 2 October 2016, that the currently applicable labour legislation would not be touched. If this promise is kept, then current British EWC legislation (TICER 2010) would also remain unchanged.
Many voices for the Norwegian-option
because the EU buys 44% of the UK's exports and provides 54% of its imports.
- Former foreign secretary and new Chancellor Philip Hammond says it is crucial UK retains full access to the single market.
- Government of Wales: it is important to retain access to the European single market
- Boris Johnson, “Leave” campaigner and new foreign secretary, wants to “intensify” cooperation with the EU and maintain access to the single market.
- But German Chancellor Angela Merkel says, access to the single market will have its price. It is not possible to demand use of “club facilities” without paying membership dues.
- EU leaders are refusing a “Europe à la carte” by letting Britain select parts that it may like, such as access to the single market, while dispensing with EU principles such as free movement of people.
- And Norway may block UK return to European Free Trade Association (see press report).
- On 17 January 2017 Theresa May ruled out the Norwegian-option and confirmed to exit from the single market and to prefer “no deal” to a “bad deal”.
- Theresa May’s Brexit speech on the single market is considered as Angela Merkel’s victory (see press analysis) and her willingness to prefer “no deal” to a “bad deal” may turn into one of the biggest own goals in diplomatic history (see political analysis).
- The American Chamber of Commerce to the EU warns of dangers. Many US companies are based in the UK because of its role as “a gateway to the single market” (see press report).
- German business leaders urge Tories to rethink plan to leave single market. The message is: “Do not harm the single market by cherry-picking deals”. (see press report)
- Brexit Secretary David Davis admitted on 9 June 2017 after the election disaster, the Tories could have lost their mandate to quit the single market (see press report).
- On 12 June 2017, the engineering industry organisation (EEF) called for access to the single market to be at the heart of Brexit negotiations (see BBC report).
- On 22 June 2017, London Mayor Sadiq Khan from the Labour Party called for the UK to remain in the single market (see press report).
- Up to 70,000 jobs could be lost in London's financial sector if the UK crashes out of single market (see press report).
- Post-Brexit customs checks will lead to border chaos and cost at least 1.1 billion € per year (see press report).
- On 12 September 2017, Labour leader Jeremy Corbyn told the TUC conference his vision of a “jobs-first Brexit” that guarantees full access to the European single market (see press report).
- The TUC has developed five tests assessing the options for Brexit. On 30 November 2017, the organization called on the government to seek membership of the single market (see report).
- The Scottish government has published its study into the impact of Brexit on 12 January 2018. Its preferred scenario is to stay in the EU (see report).
The economy after the referendum
The pound hits its lowest level since 1985. In early July 2016, several commercial property funds have been forced to suspend redemptions. They have to raise cash and need to sell properties. Over half of this sector is now on ice. The pressure on the pound is stoking inflation, denting household finances and putting a brake on spending. The first quarter of 2017 saw the biggest decline in retail sales since the financial crisis (Press report, 21 April 2017). Shoppers would face “higher prices, less choice and poorer quality” (BBC report, 10 July 2017). UK policymakers face a dilemma between countering rising inflation (up from 0.4 to 2.9 percent since the referendum) and falling growth, making the UK the worst performer in the European Union and bottom of the league among the world’s advanced economies (Press report, 15 June 2017). The vote to leave the European Union is already costing UK households 600 £ a year (Press report, 1 November 2017).
Many companies are likely to freeze recruitment or to relocate jobs, some examples:
- The Swiss pharmaceutical group Roche warns of drug shortages in the United Kingdom and will reconsider its investments there. (Press report, 21 July 2016)
- Japanese businesses with their European headquarters in the UK may decide to transfer their head-office to continental Europe, says Japan's government. (Press report, 4 September 2016)
- Three-quarters of British chief executives say they are considering moving their headquarters or some of their operations outside the UK as a result of Brexit. (Press report, 26 September 2016)
- “Have a break, have a Brexit!” Swiss food giant Nestlé has warned that it may have to put up prices of Nescafé, KitKat and other products because of the falling pound. (Press report, 21 October 2016)
- Ratings agency Moody's announced on 2 November 2016 to downgrade the UK's sovereign rating if the UK lost access to the Single Market (see announcement).
- Brexit vote’s blow to the economy would force the government to borrow £122bn more than hoped, admits Chancellor Philip Hammond. (Press report, 23 November 2016)
- More than 100 companies based in the City of London inquiring about relocating to Ireland after Brexit. (Press report, 25 December 2016)
- Goldman Sachs has suspended plans to move key operations from the US to London and HSBC and UBS warn they will have to relocate staff out of Britain. (Press report, 19 January 2017)
- Nissan, which builds around a third of Britain's total car output, will reconsider a decision to invest in a plant in northern England. (Press report, 20 January 2017)
- Citigroup plans new operations away from London after Brexit. (Press report, 24 January 2017)
- According to a new study, one in seven businesses active in Britain is considering moving to the Continent as a result of Brexit. The top destination is Germany. (Press report, 31 January 2017)
- Ryanair will move future investment away from the UK and into its European operations as a result of Brexit. (Press report, 6 February 2017)
- Ford prepares to cut 1,160 Welsh jobs. UK’s biggest trade union blames Brexit and urges Theresa May to secure tariff-free access to the single market. (Press report, 1 March 2017)
- According to the Institute for Fiscal Studies, Britain is set for a return to falling real pay later this year, with this decade now set to be the worst for pay growth since the Napoleonic wars.
(Press report, 9 March 2017)
- 40% of games companies based in the UK are considering relocating out of the country in the wake of Brexit. The UK boasts more than 2,000 games companies, with 12,100 full-time employees. (Press report, 30 March 2017)
- Britain’s essential role in the global aerospace industry could come under pressure from Brexit, since it is “hardwired” into the global supply chain. (Press report, 11 April 2017)
- One in five small business employers have EU staff and one-third do business with the EU. Brexit could force small businesses to shut down or move abroad. (Press report, 25 April 2017)
- The largest global banks in London plan to move about 9,000 jobs to the continent in the next two years. (Press report, 8 May 2017)
- Farms have been hit with a shortage of the migrant workers that Britain relies on to bring in the fruit and vegetable harvests. (Press report, 22 June 2017)
- The European Central Bank is making a bid for authority over euro clearing after Brexit, which could cost 232,000 British jobs. Frankfurt is so far beating out other cities in luring business from London. (Press report, 23 June 2017)
- Leaving the EU could have “catastrophic” effects on access to new potentially life-saving medicines for decades, according to health economics consultant. (Press report, 27 June 2017)
- The UK service sector stumbles, following further disappointing readings from manufacturing and construction. There is now “clear” evidence that the economy is losing momentum ahead of Brexit. (Press report, 5 July 2017)
- Prospect of seasonal labour crisis prompts calls for introducing new scheme to ensure UK farms have enough workers. (Press report, 6 July 2017)
- US bank JP Morgan with 16,000 UK staff has warned that up to three-quarters of its workforce could be transferred to EU countries after Brexit. (Press report, 11 July 2017)
- EasyJet is creating a new airline in Vienna to continue flying in the European Union after Brexit. (Press report, 14 July 2017)
- Deutsche Bank envisions shifting 4,000 jobs, almost half its UK staff, to the European continent. (Press report, 1 August 2017)
- Leaving the EU will reverse the progress made in past decades and may wipe out small suppliers, says Britain's motor society. (Press report, 4 August 2017)
- The UK produces only 60% of its own food and must increase production to avoid food insecurity after leaving the EU. (Press report, 5 August 2017)
- Relocation plans and a banking exodus from London will result in the creation of up to 87,667 new roles throughout the Rhein-Main-Region in Germany. (Press report, 25 August 2017)
- Without customs agreement, the UK would risk delays at ports, disrupted supply chains and gaps on supermarket shelves. (Press report, 30 August 2017)
- The Japanese carmaker Toyota plans to invest in a production plant in England with government support, but warned that uncertainties over Brexit negotiations may force them to shift some UK production elsewhere. (Press report, 25 October 2017)
- The Bank of England warned that around 10,000 jobs in the UK are at risk on “day one” of Brexit and 75,000 financial roles could be lost if no trade deal was struck with the European Union.
(Press report, 1 November 2017)
- According to a survey, 63% of EU companies expect to move some of their supply chains out of Britain. (Press report, 6 November 2017)
Brexit could lead to the “disintegration” of the whole UK
“People thought there was something patriotic or particularly pro-British about leaving the EU only to discover that it led to the disintegration of our country.” (William Hague, former Foreign Secretary)
“I have met in my life two big destroyers: Gorbachev, who destroyed the Soviet Union, and Cameron, who destroyed the United Kingdom.” (Jean-Claude Juncker, President of the European Commission)
1. Scottish independence
Scotland voted to remain in the European Union. The Scottish Government started discussions with the EU institutions and other member states about Scotland remaining in the EU. Since early August 2016 there is a call for a referendum whether the country should continue as a monarchy or republic. On 30 March 2017 Scotland's first minister formally asked for powers to hold a second Scottish independence referendum (see BBC report). It could take place at the end of the Brexit process.
The Labour Party published a plan for a federal UK, a “third option” for Scotland's future. The Scottish government should be given the power to set VAT rates and sign international treaties (see BBC report).
This challenge has dramatically increased the complexities and uncertainties of Brexit negotiations. The announcement effectively starts a two-year independence campaign. In an already disadvantageous negotiating position, Theresa May is now open to having the Scottish issue used as leverage against her throughout the process (see political analysis).
Former Prime Minister Tony Blair said in January 2016, that he thinks Scotland will leave the United Kingdom if the United Kingdom leaves the European Union (see BBC report). The U.S. bank JP Morgan said on 29 June 2016 it now expects Scotland to vote for independence and introduce its own currency before Britain leaves the European Union in 2019 (see press report). Scotland is looking to open its own trade representations abroad and signed its first economic collaboration declaration with Bavaria on 24 March 2017 (see press report).
Scotland rejoining EU “could be speedy” -- 6 April 2017
A senior German conservative MEP says: “Scotland is a member of the European union and fulfils all of the conditions. There will be not many technical problems”. And Spain's foreign minister confirmed his government would not veto any attempt from Scotland to join the EU after Brexit (see BBC report).
2. Irish reunification
An independence referendum is under discussion on Irish reunification in order to maintain Northern Ireland's EU membership. At least, Northern Ireland would ask for special arrangements with the EU. The exit from the EU could undermine the peace agreement signed in 1998 (see press report).
- European leaders to recognise a united Ireland -- 29 April 2017
The 2 March 2017 poll brought an end to the unionist majority in the Northern Ireland Assembly. The two main nationalist parties now have more seats than the two main unionist parties (see press report). Population change will bring a majority for Irish unity in a few years' time anyway (see political analysis). If the island reunifies, the north will automatically regain EU membership (see press report). So the EU has done something it has never done before: it has offered an incentive to part of an existing state to join another state.
3. Status of London
London voted to remain in the EU. A petition calling to declare London independent from the UK has received more than 180,000 signatures so far. Supporters of London's independence argued that London's demographic, culture and values are different from the rest of England, and that it should become a city state similar to Singapore, while remaining an EU member state (see press report).
4. Status of Wales
On 2 July 2016 demonstrations for the independence of Wales and to remain in the EU took place for the first time in two cities.
Warning of inner-UK “trade war”
On 18 March 2017, the first minister of Wales warned of a “trade war” between the nations of the United Kingdom after Brexit (see BBC report).
5. Status of Gibraltar
Gibraltar voted with 96% majority to remain in the EU. Spain is calling for joint sovereignty in order to maintain Gibraltar’s EU membership (see press report). Gibraltar's Chief Minister seeks a special Brexit deal to preserve freedom of movement (see press report). A former Labour cabinet minister called on the government to think about “co-sovereignty” (see press report).
Brexit could have “catastrophic” implications for the future and the sovereignty of the Falkland Islands. Argentina is watching developments closely (see press report).
A new Constitution?
Since July 2015 the all-party Constitution Reform Group is already working on a new constitutional settlement for the United Kingdom: http://www.constitutionreformgroup.co.uk
Call for a “more federal UK”
On 28 March 2017, Former British prime minister Gordon Brown called for the creation of councils for England’s regions (see press report). Andy Burnham, the first elected mayor of Greater Manchester, is seeking the establishment of a new body: the Council of the North (see press report).
What is the most likely scenario? The Brexit will not happen
“Surviving your own suicide” (Chris Patten, former EU Commissioner, Conservative Party)
- “It is possible that Brexit may never happen” -- 1 September 2016
Former Labour Prime Minister Tony Blair said: “We have done something rather bizarre with Brexit. It's like moving house without having seen the new house. The vote to leave had been a reaction against austerity, globalisation and immigration.” (see BBC report).
- “Brexit negotiations more or less like what happened with Greece” -- 3 October 2016
According to Malta’s Prime Minister, who will chair the EU’s rotating presidency in early 2017, Britain must be ready to accept an “inferior deal” (see press report).
- Two former Prime Ministers in favour of a second referendum -- 25 November 2016
After Tony Blair (Labour Party), the former Prime Minister John Major (Tories) said, a second Brexit referendum would be “perfectly credible” (see press report).
- UK public expects disintegration of the United Kingdom -- 18 March 2017
A poll from 14 to 17 March 2017 shows 54% of Britons (63% of Scots) believe the Brexit vote increases the chances of the United Kingdom breaking apart (see press report).
- 83% of Britons are concerned about price hikes -- 19 May 2017
British consumers are bracing themselves for an expensive and uncertain post-Brexit future, a new survey has revealed (see press report).
- 60% of Britons want to keep their EU citizenship after Brexit -- 1 July 2017
This would include the rights to live, work, study and travel in the EU – and many would be prepared to pay large sums to do so (see press report).
- 60 prominent figures from Scottish civil society call to stop Brexit -- 18 July 2017
Living standards are falling, inflation rising and growth and productivity slowing, top Scots warned in open letter (see press report).
- Brexit vision isn't achievable -- 24 August 2017
England has yet to answer fundamental questions raised by Brexit, former Irish Prime Minister John Bruton said. Brexit is intimately linked to deeper questions of identity, who they are and their place in the world. And that's a psychological process rather than an economic one (see press report).
- Corbyn: Tory cabinet of chaos risks a Brexit jobs meltdown -- 14 October 2017
According to the Labour leader, “the Tories are transparently failing Britain in the Brexit negotiations. They are making a shocking mess of Brexit. They are split down the middle, negotiating with each other instead of the EU.” (see full speach)
- Majority of people think negotiations are failing -- 20 October 2017
According to a new poll, 76% said they felt Brexit negotiations are going either “quite badly” or “very badly” (see press report).
- London Mayor in favour of a new EU referendum -- 23 October 2017
Sadiq Khan would back a second referendum if parliament rejects any deal between Theresa May and Brussels (see press report).
Half of Britons support a second vote on Brexit -- 3 December 2017
An election analyst said it was “the first time any pollster has recorded backing” for a second Brexit referendum (see press report).
Only 41% of Britons now support Brexit -- 17 December 2017
The British public has swung behind staying in the EU by its largest margin since the referendum (see press report).