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What Are The Effects of Brexit?

For entrepreneurs who seek to engage in international business, it is important to keep abreast of developments in other countries. Political problems, exchange rates, and legislation may affect the business climate when engaged in international business.  The most recent shake up in international legal requirements seems to have risen from “Brexit” and what it means for those doing business with the United Kingdom, European Union, and United States. Brexit (which comes from the merger of “Britain” and “Exit”) is the UK’s vote to leave the European Union.  While this decision has had repercussions on the value of the British Pound, Euro, and U.S. Dollar, it also serves to show that the UK will no longer be bound by the European Union’s rules or regulations.  So, what law applies now? How soon will the United Kingdom be unbound from the European Union’s rules or regulations? What should American businesses take out of this referendum?

What does “Brexit” do?

The UK has voted to leave the European Union as part of a referendum voted on by its citizens. The EU is an economic and political partnership between various member states, sharing a common currency, with the exception of the United Kingdom, which uses the British Pound. The EU imposes certain restrictions when working with member states (e.g., Privacy Shield, Digital Single Market initiative). It serves to allow the free movement of people between member states. However, Brexit does not mean that right now, the UK has officially separated from the European Union.  Brexit has set in motion the process to fully remove the United Kingdom from the European Union.  It needs to invoke “Article 50 of the Lisbon Treaty,” to initiate the process, which grants both sides two years to negotiate the terms and conditions.  Essentially, the referendum will start the process, but does not remove the United Kingdom from the European Union immediately.

What should entrepreneurs keep in mind about Brexit?

For the Americans involved in international commerce, the important thing to keep in mind is that “Brexit” while official, has not yet taken effect. Given that, and the negotiations needed under Article 50, the end result may be that some aspects of the EU still apply to the UK, while others may not remain applicable. Furthermore, as the UK can negotiate different trade deals, it’s possible that current restrictions, like the Privacy Shield, may not apply when dealing with the UK, unless similar legislation is passed in the country.  However, this new change could favor investors and new businesses, as the United Kingdom may seek to make itself more competitive on the international stage, loosening restrictions towards Americans.  Furthermore, it may be a boon to those investing in the UK and EU, due to the fall in their currency values.  Essentially, the U.S. Dollar would become stronger compared to the British Pound and Euro, allowing international investments to move quicker when compared to national investments.

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