Historically, the UK has been a major factor in the Australia-EU relationship. Not only that, but the UK is Australia’s fourth largest trading partner, to the tune of $10.4 billion. Brexit is likely to change the context of Australia’s relationship with the EU, leaving many Australians to wonder about the effect of Brexit on Australia and the Australian economy. Find out everything you need to know about Brexit and Australia, right here.
What is Brexit?
Brexit (a portmanteau meaning ‘British exit’) refers to the process of Britain leaving the European Union and changing its relationship with the bloc on topics like security, trade, and migration. Britain officially left the EU on 31 January 2020, entering an 11-month transitional period that is set to end on 31 December 2020.
At this point, the main question regarding Brexit is whether the UK and the EU will be able to agree to a new trade deal, or whether the UK will leave the bloc without a trade deal. With reports suggesting that a full UK-EU trade deal is likely to be impossible to achieve before the deadline, many businesses in the UK and overseas are readying themselves for a ‘no-deal’ Brexit.
Brexit and Australia: what’s happening now?
The UK is attempting to come to an “early trade deal” with Australia, aimed at increasing trade between the two countries post-Brexit. Dominic Raab, Britain’s Foreign Secretary, made his first overseas trip after Brexit to Australia, and both sides are eager to come to a bilateral trade deal as soon as possible. However, an agreement has not yet been reached, despite Australia being a high-priority target.
There are a couple of potential stumbling blocks in the negotiations. For one, Australia has recently ruled out a post-Brexit trade agreement that involves visa-free travel and work arrangements. In addition, Britain’s decision to let Huawei continue to be used in its 5G networks may pose a challenge, as the Australian government has banned Huawei from participating in the nation’s own 5G network.
How will Brexit affect Australia?
During the transitional period, nothing will change for Australian business, as the UK remains in the EU single market and the current UK-EU trade arrangements are still in place. After the transition period ends, however, there may be changes to the arrangements that Australian business rely on in the UK and EU, as well as disruptions to trade. For example, some Australian businesses are claiming that meat exports are already suffering as a result of Brexit. However, until the terms of the UK’s withdrawal from the EU are fully understood, it’s difficult to pinpoint the exact effect of Brexit on Australia.
Has Brexit affected Australia’s trade negotiations with the EU?
No, negotiations for a free trade agreement (FTA) were launched on 18 June 2018. As a bloc, the EU is Australia’s second largest trading partner, and with a shared commitment to free markets and global norms, Australia and the EU are natural partners.
Preparing for Brexit
Regardless of whether a trade deal between the UK and Australia is reached in the coming months, businesses should start their preparations for Brexit immediately. The impact of Brexit on small business could be substantial, especially if a ‘no-deal’ Brexit becomes a reality. Think about the current volume of trade your business has with the EU and the UK, and whether you are likely to encounter any supply chain issues as a result of Brexit. You should also check the UK government’s transition website, which provides information for businesses and individuals.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.