Guest Column | August 1, 2019

What Is the Current State Of BREXIT, And What Happens Next?

By Zaid Al-Nassir, Decision Resources Group (DRG)

medtech-trendwatch-ZAS

[Editor’s Note: This draft is updated through Aug. 1, 2019, and will be updated as Brexit progresses]

On March 29, 2017, the United Kingdom (UK) invoked Article 50 of the Lisbon Treaty, beginning the two-year process of leaving the European Union (EU), more commonly known as Brexit. Although the UK government and the EU reached a deal on the withdrawal agreement in November 2018, British Members of Parliament (MPs) have not been able to rally a majority to support a specific withdrawal arrangement on several occasions.

Because the government has not been able to secure parliamentary approval for the deal — and considering the UK was originally set to exit the EU on March 29, 2019, regardless of whether an agreement had been reached — MPs have voted (and the EU has agreed) to delay Brexit on two separate occasions between early March and mid-April, 2019.

Since April 11, 2019, when the EU and UK agreed on a “flexible” extension through Oct. 31, 2019, the UK can leave the EU at any point during the period leading up to Oct. 31, 2019, if MPs manage to ratify a withdrawal agreement. If no agreement is reached, a “no-deal” Brexit on Oct. 31, 2019 remains the default outcome.

In late May 2019, having repeatedly failed to unite parliament (and her own cabinet) behind a Brexit deal, Theresa May announced that she was stepping aside as Conservative Party leader and Prime Minister, thereby triggering a race for leadership within the Conservative Party that would determine the next Prime Minister. Nearly two month later, Boris Johnson — a leading figure in the Brexit campaign and former Foreign Secretary in Theresa May’s cabinet who had resigned in protest at May’s Brexit approach — won the Conservative Party leadership ballot and was subsequently appointed Prime Minister by the Queen.

Johnson has since indicated that he intends to renegotiate both the binding and non-binding elements of the deal that his predecessor negotiated with the EU. However, EU leaders have repeatedly indicated that there is no willingness on their part to reopen the negotiation process, particularly as it relates to the binding withdrawal agreement. Nevertheless, Johnson has insisted that the UK will leave the EU on Oct. 31, 2019, regardless of whether a deal is reached.

Therefore, as it stands, all possibilities — including a full renegotiation, a no-confidence vote against the new government, an early general election if the deadlock in parliament is not resolved, a second referendum, the revocation of Article 50, and a “no-deal” Brexit on Oct. 31, 2019 — remain on the table.

In the scenario that some form of withdrawal agreement is approved, the UK and EU already have agreed on conditions of a 21-month transition (or implementation) period, which is aimed at avoiding potential disruptions by providing citizens, businesses, and the government more time to prepare for post-Brexit arrangements.

During this implementation period, Marketing Authorization Holders (MAHs) based in the UK will continue being able to access EU markets; manufacturing and distribution licenses and inspections will continue to be mutually recognized in both regions. Moreover, UK-based firms will still be able to apply for marketing authorizations. Furthermore, both UK and EU markets will continue to rely on CE marking, and UK-based firms will not be required to have EU-based authorized representatives. Notified Bodies in the UK may continue third-party conformity assessments, which will be recognized throughout EU markets.

Significantly, because both the MDR and the CTR are set to be implemented prior to Dec. 31, 2020 — which will likely occur before an implementation period ends — the UK government will implement both regulations in full. However, given that May’s negotiated withdrawal agreement has been rejected by parliament and that Johnson intends to reopen negotiations, it is unclear whether this implementation period would still be effective under another arrangement.

While the full impact of Brexit will be reliant on the specifics of the final withdrawal agreement, a number of consequences for the medtech market can be anticipated. For example, historically, the UK has been at the receiving end of a large portion of grants from the European Research Council; although some non-EU countries receive funding from this council, it is possible that the amount given to the UK will be reduced; other partnerships and research investments may be in jeopardy, as well. Furthermore, the UK may be able to maintain some trade cohesion with the EU if it negotiates to remain in the European Economic Area or join the European Free Trade Agreement; it is currently uncertain whether this will occur.

In the event of a “no-deal” Brexit, the UK will no longer be party to EU regulatory networks and will need to have its own approach to managing internal regulatory actions. This would include developing new processes and systems for UK-based companies and informing these companies of any changes they would need to implement to abide by UK regulations; in addition, companies applying for device approval in both the EU and the UK would have to engage in these processes separately.

That said, a “no-deal” Brexit appears somewhat unlikely, given the substantial opposition to this potential outcome in both the UK and the EU — in fact, on March 13, 2019, British MPs voted to rule out a “no-deal” Brexit; though this was not a legally binding vote, it does demonstrate the prevalent opposition to such a scenario. However, considering Boris Johnson’s nomination as Prime Minister — coupled with his formation of a heavily pro-Brexit cabinet — the likelihood of a “no-deal” Brexit has surely increased.

Nonetheless, because the situation remains largely unresolved, no assumptions regarding the outcomes or impact of Brexit have been factored into this evaluation.

About The Author

Zaid Al-Nassir is a senior product support analyst at Decision Resources Group. He holds a B.A. focused in Political Science, History, Writing & Rhetoric from the University of Toronto. Zaid can be contacted at zalnassir@teamdrg.com