Dan O’Brien, chief economist at the Institute for International and European Affairs (IIEA), spoke on the “Brexit Revisited: London Calling” webinar last week, the latest event in Matheson’s Knowledge Insights series.

He gave an analysis of the impact of Brexit on the latest economic services data from Ireland, the UK and a number of EU economies, which was followed by a panel discussion in which Matheson experts discussed legal developments in the UK post-Brexit.

Focussing on services trade data, Mr O’Brien addressed the negative impact of Brexit first, saying “the biggest hit from Brexit so far has been weaker capital expenditure. UK consumers have also been hit by a weaker pound since late 2015, and goods exports to the EU were hit after Brexit took place. However, Britain retains strengths and a lot of the commentary around its weaknesses is exaggerated.”

While the UK is the only major economy in Europe whose GDP hasn’t fully returned to pre-referendum levels and it has underperformed since the referendum (“although not catastrophically”), negative Brexit effects are hard to see in its services trade.

The UK remains the biggest seller of international services within the larger EU countries, which is a big strength, and 2022 saw a big increase in services exports from the UK. Of particular interest is the fact that UK’s services sales with the EU continue to grow across almost all areas, but particularly in financial services and insurance/pension services.

Bilateral trade in services between Ireland and the UK has grown strongly since 2016, and continued to increase strongly during 2022. This has been dominated by strong technology services exports from Ireland to the UK, followed by the areas of business services and financial services. Trade from the UK into Ireland has followed a broadly similar upward trend.

Ireland’s economic performance during this period since the Brexit referendum in 2016 has been marked out by the performance of two key areas: the pharmaceutical and technology industries. Recent years have seen a doubling of industrial performance, driven by a growing pharma industry, and a tripling in size of tech exports.

Following Mr O’Brien’s analysis, a panel of Matheson partners discussed a number of key pieces of legislation which are currently going through the EU and UK legal systems, and considered the likelihood of divergence between them as they proceed. Any divergence or convergence in those pieces of legislation may have a potential impact on businesses in those jurisdictions.

31 December 2023 is a planned ‘sunset date’ by which time the UK government will have to decide on the future of almost 4,000 pieces of EU derived legislation.

Matheson technology and innovation partner Rory O’Keeffe said one example is the EU GDPR, which will likely fall away, especially given the recent introduction of the UK Data Protection and Digital Information (No.2) Bill. This represents a change from earlier approaches by the UK government, and is currently going through the legislative process.

The aim of the EU Retained Law Bill is to tidy up legislation, reduce the red tape, and make it easier for business to work. “Just over 17 per cent of the outstanding legislation has already been reviewed per the UK government’s dashboard, so while there’s a lot of work to do, there’s nothing to suggest that it won’t happen,” he said.

By comparison, the UK is adopting a wait and see approach with AI regulation: “Although they’re not moving ahead for now, they are moving forward with their own agenda to make it a best-in-class economy in the AI space with their active involvement in the creation of international AI standards. We’ll have to wait and see how it will work out in the end.”

Matheson partner Joe Beashel said that where there are established frameworks like the Basel III Reforms (Basel 3.1) and Solvency II up for review and consideration in a post-Brexit regulatory environment, it isn’t expected that we will see much change, largely due to the need to align with broader international standards and circumstances which might constrain any divergence.

“However, there are newer areas of law such as ESG or technology, where there may be opportunities for changes to be made to certain regulations and legislation”, he said. “We’ll see some laws being actively changed, but passive changes could also occur.”

Karen Reynolds, partner in Matheson’s regulatory investigations team, said that there is already a commonality of enforcement trends across the EU, and a central setting of regulatory priorities.

She said: “We advise a lot of businesses who operate internationally across borders, and they’re already dealing with divergent regulatory systems and legal practices. In the ESG area for example, the US is out ahead in terms of enforcement actions, and in the digital assets world, there are new areas where regulators are now catching up.

“Regulatory practices often come from the same sources within Europe. In some emerging areas we don’t have a rule book yet so it’s open to regulators to create them as they go along. Policy makers are concerned with stability and will carefully avail of opportunities.”