The Consequences of Leaving the EU

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With the decision in the 23 June referendum to leave the European Union (EU), the consequences for the life sciences industry need special consideration. MAP political and industry experts have developed this article to help you assess the situation.

No Immediate Change

The Government is expected to initiate Article 50 of the Treaty of Lisbon in the autumn to begin the negotiations as a departing country.

For the following two years there will be little change in European business dealings. The UK will remain part of the EU for this period and subject to EU rules. The main change is that the UK would no longer be able to participate in the discussion of the European Council of Ministers or in the decisions concerning it.

Most businesses will therefore not take immediate decisions but will wait to see how negotiations between the UK and the other EU members develop.

See MAP’s answers to some frequently asked questions below: 

Could the UK apply to join the European Economic Area (EEA), of which Norway is a member, and retain free access to the EU market and free capital movement?

The UK could apply, but as EEA membership requires free movement of people, and because control of immigration from the EU has been a critical factor in the vote to leave campaign, it is highly unlikely that any UK Government would agree to this.

How long will the negotiations take?

Negotiations for Greenland to leave the EU took three years, and the main issue was fish. For the UK the issues are much more complex and a timescale of 5-7 years seems a reasonable estimate.

What happens if the negotiations exceed the two-year deadline?

If negotiations are not concluded within this period, the remaining EU members can vote unanimously to extend the deadline. If this does not happen, then the UK will exit the EU at the end of the two-year period and World Trade Organisation rules on tariffs2 will come into force.

Will the present Government continue?

The Prime Minister has announced that he will resign before the Conservative Party Conference starts on 2 October. George Osbourne is not expected to continue as chancellor in the new government. Others in the Cabinet, are likely to announce that they will not serve in a Cabinet to implement a policy with which they are in fundamental disagreement.

When will a new Prime Minister emerge?

The first step will be to elect a new leader of the Conservative Party. Candidates will put their names forward and Conservative Members of Parliament will choose two candidates, with Party members selecting one of the two to become leader and thus Prime Minister. The new Prime Minister can expect to take will take office before 2 October and a new Cabinet will be formed.

Will there be an early General Election?

A new Election will be called if the new Government loses a vote of no- confidence in the House of Commons and if the Opposition itself cannot obtain majority support in the House of Commons. However, if the Government wins a no-confidence vote, and any subsequent ones, then Parliament can be expected to run until May 2020.

Will this Government upheaval, some 5-7 years of negotiations and a General Election in 2020, create great business uncertainty?

Yes. This has been one of the greatest fears of leaving the EU. It is coupled with the danger of life science companies delaying new investment in the UK or diverting it to other countries like Germany which are part of the EU and a have strong life science industry sector. Much will depend on how the negotiations are handled.

What can companies do?

The industry must use its considerable political strength among the civil service, Ministers and Parliament to demand changes to policies to encourage life science companies to stay and expand in the UK. Raising the levels of UK medicine prices, lowering company taxation and speeding up the decision-making processes within the UK would be among these areas.

Could the new Government afford this programme?

It is generally expected that the decision to leave the EU will reduce state revenue, add to the level of unemployment in the medium term and put pressure on the public sector borrowing targets. However, the industry would argue that the Government would have no option if it wanted to retain a strong life sciences sector in the UK. If the Government can support declining industries in manufacturing, it can be asked why it should do less for a life sciences sector which employs some 167,000 people, with turnover of over £50bn a year, and represents the mainstay of high-tech future for the country.

What will be the UK’s relationship with the European Medicines Agency (EMA)?

The EMA internal organisational and licensing arrangements are restricted to EU and EEA members. However, it would be sensible for the UK to negotiate a Mutual Recognition Agreement with the EMA so that what is agreed by the one will be accepted by the other. Such agreements already exist between the EMA and Switzerland, Canada and Australia.

Will the EMA headquarters move out of London?

Yes – almost certainly.

Will the UK be able to supply rapporteurs to the EMA after the UK formally leaves the EU?

No – rapporteurs from the UK will not be accepted.

Between 2007 and 2013 the UK received EU science grants worth €7 billion, including 18% of university research. What will happen to this after the UK leaves the EU?

This will be an important issue. The science and business community can be expected to ask the Government to fill the gap

What will happen with the European Patent Convention?

The Convention will remain in force, as its membership goes wider and is not dependent on EU membership. However, the Supplementary Protection Certificate, extending patent life by up to five years, is purely an EU matter. This issue could be part of the negotiations, however if agreement were not reached, the UK would need to decide whether to introduce its own legislation.

Will companies be able to employ professional staff from EU countries after the UK leaves the EU?

Restrictions on immigration from the EU are inevitable, but it is assumed that the Government will introduce a visa scheme to enable a limited number of professionals with the right qualifications to come from the EU to work in the UK.

Will there be a second Scottish independence referendum?

The Scottish First Minister has stated that a second Scottish independence referendum is now “highly likely”, but this leaves open the question when and if this might happen.

References

  1. The Lisbon Treaty
  2. World Trade Organisation – Tariffs