The UK voted on June 23, 2016, to leave the European Union. The timetable for the UK’s exit, the terms of exit, and the UK’s post-exit relationship with the European Union (EU), are still to be determined, which will take time. Until these issues are clarified, firms with a UK presence, or UK customers, will have to address the inevitable legal uncertainty regarding the legal environment in which their businesses operate. Those firms, in the meantime, should continue to monitor developments, identify those areas where their businesses are likely to be affected by new or amended legislation and regulation – and, importantly, those areas that are unlikely to be affected – and determine how to mitigate risks in affected areas.

How long will it take to exit?

Exit will not be immediate – there will be a transitional period in which the UK will negotiate the terms of its withdrawal from the EU.

The duration of this transitional period is uncertain, despite the two-year initial deadline specified in the EU Treaty.  This is due to a number of factors that make the exit process unpredictable:

  • The process can start only when the UK notifies the European Council (Council) of its intention to leave the EU. The Council itself cannot initiate the process. There is no deadline for notification, and the UK could decide to delay it, for example, to give it time to make new arrangements for its relationship with the EU.  Some commentators say that notification could be deferred for as long as two years, but that the associated risk of prolonged uncertainty could prompt the Council to find grounds to lay the process aside and force the UK into a quick exit.
  • The UK’s notification will trigger negotiation of the exit agreement. Negotiations are likely to involve a wide range of complex issues that could take several years to resolve, requiring an extension of the two-year initial deadline. If the Council were not to agree an extension, the UK would have to exit the EU without an exit agreement.
  • Once the final version of the agreement has been settled, it must be:
    • agreed by a majority of the other 27 EU Member States making up the Council;
    • approved by the European Parliament;
    • ratified by the UK Parliament; and
    • implemented in UK legislation.

All of these formal approvals will take time and could further extend the exit process.

Taking these factors into account, the general view is that the UK’s withdrawal from the EU could take an estimated 4-5 years.

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