Industry Trend Analysis - Brexit Related Uncertainty To Remain A Challenge For Drugmakers - APR 2018
BMI View: The draft Brexit treaty released by the European Commission on February 28 has placed even more pressure on the beleaguered UK government to come up with a workable plan for the UK's exit from the EU. A shift in the opposition Labour party's stance on Brexit towards a closer alignment with the bloc after the UK leaves, combined with internal dissent in the governing Conservative party and vocal public concerns about the funding of state-run services, all threaten the continued tenure of Prime Minister Theresa May. Clarity on the impact of Brexit for the pharmaceuticals industry, as with other industries, still remains absent and drugmakers will be forced to continue business in an uncertain operating environment.
The ongoing confusion and procrastination within the UK government is being exacerbated by its extremely tenuous political position domestically. The main opposition left-wing Labour Party laid out its plan for what the EU-UK post-Brexit relationship should look like in late February 2018, shifting away from a similar stance to the government, insofar it had previously agreed that the UK should leave the single market and the customs union. Labour now supports the UK staying in a permanent customs union with the EU after Brexit, but not necessarily the existing customs union.
Our core view since the invocation of Article 50 in March 2017 has been that the UK will leave the single market and customs union, and that it will secure some form of Brexit deal that allows for a transition period in which the UK retains single market regulations to facilitate a smoother withdrawal from the EU. While we are not yet changing our core view, the chances of a disorderly 'cliff edge' Brexit with no deal in place, or a 'soft Brexit' in which the UK joins the European Economic Area (EEA) in a Norway-style agreement, are stronger than ever. The former on the basis that time is running out to secure an acceptable transition deal. A cliff edge Brexit would also require the House of Commons to reject any Brexit deal offered, or indeed for a deal to be rejected by EU institutions or other member states' parliaments. Undoubtedly in the short-to-medium term this outcome would prove extremely damaging to the British economy, with no provisions for the future of trade with the EU incorporated and chaos regarding the status of EU citizens in the UK and vice versa, and the future of the Irish border.