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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 EU, 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 and negotiations started on 19 June 2017. Meanwhile politicians in Scotland, Northern Ireland and Wales called for a referendum on leaving the UK (see press report).

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.

The government lost a crucial vote in the House of Commons on 13 December 2017 due to critics within the conservative party who sided with the opposition to back an amendment for a right of veto over the final Brexit deal (see press report). There was however no majority in Parliament for a particular form of Brexit. The Parliament voted on three occasions (15 January, 12 and 29 March 2019) with a substantial majority each time against the withdrawal agreement that the government has negotiated with the EU. This political deadlock led to delaying Brexit initially by two weeks and subsequently until 31 October 2019. The Commons backed a bill to block a no-deal departure on 4 September 2019 (see press report). As a result, Brexit was postponed again until 31 January 2020 (see press report).

The general election on 12 December 2019

Although 50.8% of all votes went to parties critical of Brexit and only 45.7% to Brexit supporters, Prime Minister Boris Johnson was able to win most of the seats in Parliament thanks to the electoral system and the fragmented opposition. The Labour Party is far behind and has achieved the worst result since 1935. Johnson has a larger majority than Margaret Thatcher in 1987. The Tories have won the fourth election in a row and after nine years will be able to govern for another five years. Scotland's quest for independence has received a new boost. The Scottish National Party has won three quarters of all seats in Scotland, which is an important argument for another independence referendum.

The legal situation since 1 February 2020

With the withdrawal from the EU, almost nothing did change, since the withdrawal agreement includes a transition period until 31 December 2020 - which may be extended once up to the end of 2022 at the latest. During this period the country is no longer a member state, but must continue to adhere to EU law without having a say (comparable to Norway). During the transition period, the future relationship with the EU will be negotiated, including the question of social standards and the further application of the EWC Directive.

Should these negotiations fail, a no-deal Brexit (“cliff edge”) will occur. Therefore, the critical moment that the business community has warned of in recent months has merely been postponed into the future. For European works councils, SE works councils and special negotiating bodies nothing will change legally during the transition period. Delegates from the UK will retain their seats and vote just like delegates from Norway. EWC agreements based on British law will also remain valid. The Central Arbitration Committee (CAC) in London is still responsible for complaints. Only after the transition period the British government can decide to repeal - or not - the law transposing the EWC Directive.

 

Do British EWC members lose their mandate?

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 EWC. 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. On 8 August 2019, the UK government published a guidance on the legal consequences of the Brexit for European works councils. If there is no agreement, they do not wish to abolish the British EWC legislation (TICER 2010), but rather to freeze it. All European works councils already in existence on British soil, would continue to operate and no British delegate in continental-European EWCs would lose his mandate. Furthermore, requests for establishing a European works council, which have been registered before the end of the transition period, are to remain valid and may be negotiated up to the conclusion. However it would no longer be possible in the future to establish new European works councils under British jurisdiction.

 

How to avoid the “cliff edge”?

In the absence of agreement after the transition period, the UK would have no choice but to trade with the rest of Europe under World Trade Organisation rules. “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, EU chief Brexit negotiator. “Others include the disruption of supply chains, including the suspension of the delivery of nuclear material to the UK.”

  • 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).

  • European Commission published briefing on no-deal Brexit planning

Transport between the EU and the UK will be “severely impacted” with roads and ports blocked by customs queues and millions of British and EU citizens would be left in legal limbo if the UK leaves without a deal, the European Commission said on 19 July 2018 (see press release).

  • UK government published advice on no-deal Brexit

Pharmaceutical companies have been told to stockpile medicine and businesses should start planning for new customs checks, new software or logistical help (see BBC report, 23 August 2018).

  • France is prepared to pass emergency laws

Eurostar trains could be stopped on reaching French territory, and planes from Britain prevented from entering French airspace in the event of a chaotic no-deal Brexit (see press report, 13 September 2018).

  • British firms call for state bailouts

A no-deal Brexit could require UK government bailouts like those following the financial crisis to prevent businesses from going bankrupt (see press report, 11 November 2018).

  • No-deal Brexit could be “worse than the financial crisis”

The Bank of England warns the UK economy could shrink by 8% and house prices could fall by almost a third. The pound could fall by a quarter (see BBC report, 28 November 2018). A new report to the Kent county council warned of major disruption (see press report, 6 December 2018).

  • UK government triggered contingency plans

In case of a no-deal, the military will help to keep public order and to deliver medicines to hospitals (see press report, 18 December 2018). Shops should hire extra security guards, because shortages may lead to panic-buying (see press report, 10 January 2019). A secret UK government document reveals chaotic planning for no-deal Brexit (see press report, 22 March 2019).

  • No-Deal-Brexit would be a disaster

A no-deal Brexit would be nothing short of commercial suicide and would undo 25 years of economic progress, industry representatives have said (see press report, 12 June 2019). It could trigger a material economic shock, according to the Bank of England (see press report, 11 July 2019). Retailers warned of fresh food shortages coupled with potential price rises (see press report, 4 September 2019).

 

The economy after the referendum

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)
  • 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)
  • 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)
  • 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)
  • The chemical industry is “highly reliant on EU supply chains” and Brexit will be putting 500,000 direct and indirect jobs in jeopardy. (BBC report, 8 March 2018)
  • More than a fifth of manufacturing firms are planning to lay off workers to cope with the costs of Brexit, according to a survey. (Press report, 31 March 2018)
  • Airbus has warned it could leave the UK if it exits the single market and customs union without a transition deal. (Press report, 22 June 2018)
  • Jaguar Land Rover, UK's largest car manufacturer with around 40,000 employees, has warned that a “bad” Brexit deal may force it to close factories. (Press report, 4 July 2018)
  • Panasonic Europe will transfer its regional headquarters from Bracknell in the UK to Amsterdam. (BBC report, 30 August 2018)
  • British manufacturers are pulling back sharply on investment plans due to mounting uncertainty over Brexit. (Press report, 1 October 2018)
  • German manufacturer Schaeffler has said Brexit is a factor in its decision to close two UK plants, with 500 jobs expected to be lost. (Press report, 6 November 2018)
  • London will lose up to 700bn £ in assets to rival financial hub Frankfurt, Germany by March 2019 as 37 banks start to transfer business. (Press report, 29 November 2018)
  • Nissan is abandoning plans to build a new model of one of its flagship vehicles in Sunderland, Britain's biggest car plant plant. (Press report, 3 February 2019)
  • Farmers are finding Brexit as disruptive as a major disease outbreak, and food companies are in danger of moving out of the UK or scaling back their investment. (Press report, 8 February 2019)
  • The University of Oxford finds that the UK's car industry has lost 9% of its volume due to Brexit, and overall investment has dropped by 80% over the last three years (see report, 10 April 2019).
  • British Steel enters insolvency, blaming partly “Brexit-related issues” for its difficulties (see press report, 23 May 2019).
  • U.S. carmaker Ford confirmed it plans to close its Bridgend plant in South Wales in September 2020. (Press report, 6 June 2019)
  • Public services are facing massive Brexit-related recruitment gaps, with 100,000 unfilled posts in the NHS and 110,000 in the adult social care sector. (Press report, 11 June 2019)
  • PSA Group has warned that it will only build its new Vauxhall Astra at its Ellesmere Port plant if the UK avoids a no-deal Brexit. (Press report, 27 June 2019)
  • In June 2019 construction industry output “dropped like a stone” to give its worst performance in more than 10 years, and the manufacturing industry recorded the sharpest drop in factory output for more than six years. (Press report, 2 July 2019)
  • The GDP would be 3.5% lower in 10 years' time than if Britain had remained in the EU, a new study has found. (BBC report, 30 October 2019)
  • The economic growth for 2019 is just 1%, the weakest expansion outside a recession for more than half a century. (Press report, 27 December 2019)

British car manufacturing slumped to its lowest level since 2010, a decline of more than 14% on 2018. (Press report, 30 January 2020)

 

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, former European Commission president)

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 should take place before 2021 (see press report).

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).

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 (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”

Spain's foreign minister confirmed his government would not veto any attempt from Scotland to join the EU after Brexit (see BBC report). The former European Council president Donald Tusk said, Brussels “would be enthusiastic” if an independent Scotland sought to rejoin the EU (see press report).

  Brexit boosts support for Scottish independence -- 13 December 2019

The first minister of Scotland is calling for the powers to hold a second independence referendum after the Scottish National party won a landslide in the general election (see press 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.

  Northern Ireland Assembly against Brexit bill -- 20 January 2020

The motion was to “affirm that the assembly does not agree to give its consent”, because the UK government's Brexit plans will do “untold damage” to Northern Ireland businesses (see BBC report).

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).

  • Brexit could lead to Welsh independence

According to the new Plaid Cymru leader Adam Price, these are the “dying days of the British state”. (Press report, 5 October 2018)

5. Status of Gibraltar

Gibraltar voted with 96% majority to remain in the EU. 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). The EU is backing Spain over its territorial claims to Gibraltar by giving Madrid the power to exclude the British overseas territory from any trade deal struck with Brussels (see press report).

6. Falkland-Islands

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).

  “Only a radical constitutional reform can save the union”

On 18 January 2020, former Prime Minister Gordon Brown proposed to replace the House of Lords with a second chamber representing the UK's nations and regions (see press report).

 

What is the most likely scenario?

“Surviving your own suicide” (Chris Patten, former EU Commissioner, Conservative Party)

  • 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).

  • 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).

  • 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).

  • UK would vote to stay in EU by 12 percent point margin -- 17 January 2019

The proportion of people wishing to stay in the EU reached the highest level since the 2016 Brexit referendum (see press report).

  • Majority of Tory members would accept destruction of their own party -- 18 June 2019

According to a survey, 54% of Conservative party members say they would rather see their own party destroyed than have Brexit not take place. 61% would prefer to see significant damage to the economy and 63% would consider Scotland leaving the UK to be a price worth paying (see report).

 

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The new Brexit video

 

How to explain Brexit to children:

Boris Johnson: I don’t want free movement of people but I want the single market.

Carlo Calenda, Italian economics minister: No way.

Johnson: You’ll sell less prosecco.

Calenda: OK, you’ll sell less fish and chips, but I’ll sell less prosecco to one country and you’ll sell less to 27 countries.

Conversation during a meeting, November 2016 (see press report)

Question to the children: which politician has always skived off math lessons?

 

Ryanair boss O’Leary favors “really hard” Brexit

“I think we should enjoy the entertainment and the spectacle that Brexit is bringing to us. The British will realize a really hard Brexit will be so damaging to the economy. I suspect they will fudge it to the next general election, while UK politicians make a complete balls of Brexit since they haven’t a clue what they’re trying to do or achieve.” (see press report)

 

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