Impact of No-deal Brexit on Singapore and Effect of Brexit on EU-Singapore Free Trade Agreement

The United Kingdom (UK) is the second largest economy in the European Union (EU) and the fifth largest globally. It is also an important economic partner of Singapore. Like other countries, we are keeping a close watch on Brexit, which remains set for 29 March 2019.

There are three possible scenarios. First, the UK and the EU agreeing on a Withdrawal Agreement. Second, the UK exits the EU without any deal, that is, Hard Brexit. Third, a scenario in which the UK's formal departure from the EU is postponed beyond 29 March 2019.

Under the first scenario, the Withdrawal Agreement will include an "Implementation Period" that will last till 31 December 2020. This scenario offers the greatest predictability and stability while minimising disruption to businesses. This is because during the Implementation Period, the UK will continue to be functionally treated as an EU member state and remain a party to EU international agreements, including the EU-Singapore Free Trade Agreement (EUSFTA) when it is ratified by the European Parliament, as targeted in 2019.

Under the second no-deal scenario, the UK will cease to be a party to the EU's agreements with third countries when it formally leaves the EU on 29 March 2019. This would mean that the EUSFTA will not apply between the UK and Singapore even after its entry into force. This, in itself, would not impact our trading relationship with the UK as the current tariff and non-tariff regime for Singapore companies trading with the UK are based on World Trade Organization terms, which would continue to apply.

Under the third scenario, the UK's formal departure from the EU will be postponed to a date after 29 March 2019. This would entail the UK extending the Article 50 timeline, subject to the unanimous approval of all EU member states. The prospect of an imminent no-deal Brexit would be diminished, although we may see a period of continued uncertainty.

Singapore and the UK share substantial trade and investment linkages, with many of our businesses operating in each other's markets across sectors, such as pharmaceuticals, professional services and consumer goods. The Ministry of Trade and Industry's (MTI's) assessment is that trade between the UK and Singapore will not be fundamentally impaired. Nonetheless, owing to the integrated nature of today's global supply chains as well as the extensive trade linkages that span the UK, EU and the rest of the world, a no-deal Brexit could weigh on consumer and business sentiments in the UK and EU, with potential negative effects on global growth.

MTI and Enterprise Singapore will continue working closely with Singapore companies to help with any near-term company-specific disruption. This will include facilitating linkups between companies and the appropriate authorities to work through continuity issues in areas, such as labour and talent supply, or delays in shipments that might be routed between the UK and the EU.

MTI is also in close contact with UK economic agencies on measures to strengthen our strong trade and investment relations. We have several bilateral platforms with the UK, such as the UK-Singapore Economic and Business Partnership and the recently launched UK-Singapore Partnership for the Future. Singapore is also prepared to work with the UK to apply the EUSFTA in a UK-Singapore context that could form the basis of a future Singapore-UK trade agreement.

The ratification of the EUSFTA and EU-Singapore Investment Protection Agreement is on track. The ratification process is not affected by Brexit, and both agreements are expected to be voted on by the European Parliament during its next sitting from 11 to 14 February 2019. Pending clarity on post-Brexit arrangements, any consequential amendments to the EUSFTA can be addressed during the implementation phase.