Brexit: Timing, EEA and Implications for Life Sciences

When will we leave the EU?

Article 50 notification is likely to be delayed until Spring 2017, which would lead to an exit from the EU in Spring 2019, unless the remaining EU countries agree unanimously to extend this deadline. A long-term relationship will then be established under a new Treaty, but it may take years to complete this transition.

What is the most difficult issue?

A crucial issue is whether the UK joins the European Economic Area (EEA) as a non-EU member, like Iceland, Liechtenstein and Norway. This option would give the UK access to the single market, combined with the free movement of capital and labour. This is seen by many as a highly desirable aim, and would avert many of the disadvantages of leaving the EU.

The main problem with the EEA is that the free movement of labour is incompatible with the aim of cutting UK immigration from within the EU. This issue was a driving force behind the EU referendum result and the Government has made clear that this is an absolute necessity. The EU leaders have made clear that the free movement of labour is an essential precondition for joining the EEA. As David Davis, the Secretary of State for Exiting the European Union, told Parliament on 5th September, his personal view is that it is improbable that all EU countries (the final negotiated agreement has to be unanimous) would agree to such an arrangement.

How is healthcare affected?

If EEA membership is not possible, the life sciences industry may be adversely affected by restrictions on capital markets access, reduced inward investment and moving the location of the European Medicines Agency (EMA) away from the UK.

However, the EU external tariff on medicines, vaccines and blood is nil, so it would be a simple question of maintaining this approach for the UK.

In bilateral trade negotiations, the UK could aim to secure EMA and / or FDA approvals via the Medicines and Healthcare Products Regulatory Agency (MHRA). Other countries such as Australia, New Zealand and Switzerland have negotiated fully operational Mutual Recognition Agreements with the EMA, so this seems a reasonable aim and could be extended to include the FDA.

Mutual recognition and common standards in others areas, e.g. devices, are likely to be agreed, and UK participation in multi-national research activity will be essential. For UK healthcare, and the life sciences industry, access to skills and staffing is vital, and the key will be how visas can be secured in the numbers needed.

What are the opportunities?

The forthcoming Accelerating Access Review (AAR) paper from the Government is expected to address many of the key issues facing the UK science base and how a more competitive business environment can be created. Of particular interest is whether the Government will look at speeding up the NICE and NHS processes for new medicines, and whether a lower low level of Corporation Tax will be introduced – perhaps building upon the UK Patent Box which provides a 10% Corporation Tax rate on qualifying profits subject to certain restrictions.

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Published on 14. September 2016 in News UK