In a June 23 referendum, the United Kingdom (UK) narrowly voted to leave the European Union (EU), with 52% voting “leave” and 48% “remain.” This British Exit, or “Brexit,” from the EU may not take place for two years, but the vote caused immediate upheaval in world markets and the UK political sphere. In the month since the vote, markets have calmed and a new prime minister has been seated, but the remaining uncertainty about the trade and economic relationships of the UK, the EU, and their trading partners like the United States continues to impact business decisions going forward.

Following the “leave” vote, Prime Minister Theresa May and her cabinet have begun to prepare for the Brexit, with her Brexit czar David Davis in charge of setting in motion the withdrawal process under Article 50 of the Treaty on European Union. That process may take until December 2018 and requires the UK to negotiate the terms of its exit from the EU and its relationship with the EU in the future. Until then, the UK remains an EU Member and, regardless of its relationship with the EU, the UK will remain a World Trade Organization (WTO) Member. The UK is thus faced with negotiating its economic and social relationship with the EU as well as its trade relationship with the remaining WTO Members. The UK will have to choose among a number of options with respect to the EU, such as relying on its WTO membership as a basis for trade, joining the European Economic Area, negotiating a free trade agreement, or creating a customs union, as Turkey has with the EU. The legal and regulatory framework for diverse areas such as sanctions, export controls, and customs procedures, among others, may be revised as UK law replaces a number of EU regulations currently in force.

In the United States, the current administration, which favored the UK remaining in the EU, has not indicated that it will immediately begin bilateral negotiations, with the U.S. Trade Representative Michael Froman recently stating that the U.S.-UK negotiations should follow the Brexit negotiations between the UK and the EU. At the same time, some members of Congress have highlighted the special relationship between the United States and the UK and have called for quick bilateral negotiations.

In light of the legal and business uncertainty for UK-based companies with customers or supply chains in the EU or other countries as well as for companies doing business in the UK, it is becoming increasingly important to understand the business implications of the impending Brexit. A detailed review of the potential trade impact of Brexit, such as King & Spalding’s “Brexit Trade Audit,” would allow impacted companies to plan for business continuity and minimize uncertainty. Such an audit can enable companies to identify which legal and regulatory changes will most impact their business and how to prepare for changes to the regulatory environment at the UK and the EU levels in the near future.