‘Flextension’ makes Brexit planning challenging for business, says expert

EU Council president Donald Tusk announced the agreement on Twitter, saying: “The EU27 has agreed that it will accept the UK's request for a #Brexit flextension until 31 January 2020. The decision is expected to be formalised through a written procedure.”

The decision means that if the withdrawal agreement negotiated earlier this month is approved by the UK parliament before the end of January, Brexit could still take place earlier than the new deadline. A general election is also possible before the UK finally withdraws from the EU, although a date is yet to be set.

Brexit advisory expert Clare Francis of Pinsent Masons, the law firm behind Out-Law.com, said: “Whilst the extension will be a welcome relief to businesses as it avoids an imminent no-deal scenario, the ‘flextension’ nature of the extension makes it challenging for businesses to plan.

“The ever-changing political environment means a swift Brexit could materialise at any time during the coming months. Therefore businesses will need to remain agile and be prepared for any situation. This takes time and resource and means critical decisions are likely to be placed on hold yet again while that much needed certainty of the future direction remains elusive,” Francis said.

Francis said the delay could help businesses who import goods or materials from the EU, although there continued to be considerable uncertainty about the future.

“Businesses heavily reliant on imports, such as retail and manufacturing, may be buoyed by the January extension as warehouse capacity frees up after Christmas easing the pressure on those that need to stockpile. But given the imminent general election and its impact on the future of Brexit, many companies will be left in limbo until we know the composition of the new parliament.

“Will businesses see the latest extension as simply ‘the boy that cried wolf’ and scale back no-deal contingency planning as Brexit paralysis takes hold? Given this is the third extension this response is understandable. But this could lead to utter chaos for businesses should a swift exit from the EU materialise in the coming months,” Francis said.

Last week MPs voted to allow the European Union (Withdrawal Agreement) Bill to pass to 'committee stage', at which detailed examination of proposed legislation takes place.

However parliament voted against prime minister Boris Johnson’s proposal to allow only two days for committee stage scrutiny. Johnson then wrote to the EU requesting a further extension to the withdrawal deadline, as required by the EU Withdrawal (No. 2) Act, also known as the ‘Benn Act’.

The UK was originally set to leave the EU on 29 March 2019, but then-prime minister Theresa May asked for a six-month extension after the original withdrawal agreement was rejected by parliament.