Navigating the New: London's regulatory maze post-Brexit
United Kingdom's Decision to Exit European Union: A Random Walk Through Political Turmoil
Let's chat and delve into the minds of some top-notch regulatory experts as we explore London's changing regulatory landscape, still in flux following Brexit.
Justin Cash | Wednesday, 1st May, 2024 at 06:29
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Beyond Textbooks: London's regulatory scene is currently undergoing transformation, mirroring post-Brexit divergence and ongoing EU-UK negotiations. The alterations have substantial ramifications for trade, compliance expenses, and alignment endeavors.
Navigating Divergence and Alignment
Post-Brexit, the UK is witnessing an escalated passive and active divergence from EU regulations[5], breaking free from EU regulatory constraints while creating trade hurdles. Key developments include:- Active Divergence: The UK is pushing for independent regulatory changes, such as proposed consultations on chemical labeling, aimed at minimizing trade interruptions between GB and NI[5].- Passive Divergence: The UK must adapt to EU regulatory updates (e.g., financial services or product standards) due to no longer being within the EU’s regulatory orbit[2][5].- Financial Services: The UK is perusing regulatory cooperation, seeking shared supervisory standards, to streamline cross-border operations given London's reliance on EU markets for its £194B services surplus[2].
Trade and Compliance Expenses
- Real-term exports of goods to the EU are currently 18% below 2019 levels, attributed to stricter customs rules resulting in a 17% drop in UK-EU food exports since 2019[4].
- Administrative burdens have escalated exponentially:
- Over 30% increase in customs documentation costs for businesses[4].
- £180M annual compliance costs for “not for EU” labeling under the Windsor Framework[4].
- SMEs face disproportionate strain, with 77% reporting compliance costs exceeding 10% of operating budgets[4].
EU's Remaining Influence
Even though EU law only reigns persuasive but not mandatory for cases initiated after 2023[1], its influence remains:- Pre-2021 cases are still bound by ECJ rulings[1].- Ongoing litigation (e.g., tax disagreements) continue to reference EU precedents, particularly for lingering issues[1].
The Road Ahead
The UK is striving to maintain regulatory independence while minimizing trade impediments, particularly in financial services[2]. However, as the UK lacks formal alignment mechanisms, administrative fragmentation is likely to expand, leading to increased domestic compliance expenditures and potentially supply-chain reshoring[4][5].
- The landscape of London's regulatory scene is undergoing a significant transformation post-Brexit, moving beyond textbook theories and mirroring the post-Brexit divergence and ongoing EU-UK negotiations.
- The UK, post-Brexit, is experiencing an escalated passive and active divergence from EU regulations, which breaks free from EU regulatory constraints while creating trade hurdles.
- The real-term exports of goods to the EU are currently 18% below 2019 levels, partially due to stricter customs rules resulting in a 17% drop in UK-EU food exports since 2019.
- Despite EU law only having persuasive impact after 2023, its influence remains, particularly with pre-2021 cases still bound by ECJ rulings and ongoing litigation referencing EU precedents for lingering issues.
