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Summary

The UK electorate has voted to withdraw from the European Union. Once the government formally notifies Brussels of its intention to withdraw by invoking Article 50 of the Lisbon Treaty, the two-year withdrawal process will begin. The outcome will take several years to unfold and is impossible to predict, but Brexit is very likely to impact public sector procurement and dramatically change immigration priorities.

Brexit will make departments' work costlier and more complex

The Prime Minister has announced that he will resign in three months' time. A general election is likely to follow. The new government will most likely either push for membership of the European Economic Area (EEA) – which will infuriate "Euroskeptics" – or try to negotiate access to the single market without the free movement of labor, which was the focus of the Leave campaign.

The EU has both motive and power to block either approach in order to make withdrawal as ugly a prospect as possible for other Europeans. In which case, trade will become costlier and trickier as regulations diverge, even if the EU does not impose tariffs on UK goods and services, which it might. Some UK-based firms will relocate to the EU. Procurement costs are likely to rise.

Procurement law may not necessarily change: it would take decades to unpick EU law from British statutes. The government will probably focus on immigration and associated rules on healthcare and welfare. The NHS may start charging patients from the EU. Benefit and pension rules for EU citizens will almost certainly be tightened up. Skill shortages may worsen if EU citizens lose their right to work in the UK, which is likely. On the other hand, skilled British workers will have fewer opportunities to leave.

Increased border controls will put pressure on the UK Border Agency and Visas and Immigration. A visa-waiver agreement for those not seeking work could offset some of the cost, but demand for work visas will intensify. If EU visitors require entry and exit stamps, "e-borders" could be scuttled yet again.

Border control could become more complicated as well as more expensive. The land border between Northern Ireland and the Republic was subject to customs controls from 1923 until 1993, when the Maastricht Treaty came into force, and its openness has been an important part of the peace process. With the UK outside the single market and the Republic of Ireland still in it, some form of controls may be enforced even if neither government wants them. This would create a delicate challenge for the officials tasked with managing it. To say the least, a light touch will be needed.

Appendix

Further reading

"Next-gen passports are so secure you probably don’t want one," IT0007-000830 (July 2015)

"US immigration reform and the dearth of high-tech talent," IT007-000466 (June 2011)

Author

Nick Wallace, Government Analyst

nick.wallace@ovum.com

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