Predicting the consequences of Brexit for the UK energy industry is as problematic as predicting Boris Johnson’s future political career. Much will depend on two factors:
A: Whether the UK strikes a new deal which continues to provide access to the Internal Energy Market (“IEM”)
If the UK joins the European Free Trade Association (“EFTA”) or the European Economic Area (“EEA”), or gets its own deal on similar terms, this would probably mean that the UK would remain part of the IEM and would continue to incorporate the principles of the Third Energy Package into UK law. If this happens, then little is likely to change. However, such an arrangement would probably require the UK to agree to the continued free movement of workers, as well as accepting EU laws and rules on competition policy and state aid, and to the UK having to contribute to the EU budget. Therefore it is possible – likely, even – that the UK will leave the IEM.
B: The effect of Brexit vote and Article 50 negotiations on the UK and European economies
The immediate reaction of the markets to the Brexit vote was negative: the FTSE and Sterling plummeted. The UK’s credit rating has been downgraded by two key ratings agencies, and the Governor of the Bank of England said that the UK economy faced a “deteriorating outlook”. EU member states’ economies have also been hit hard, and it remains to be seen how the Eurozone’s growth – which has been sluggish to say the least – will be affected by the departure from the EU of the EU’s second-biggest economy by GDP and a significant contributor to EU funds.
All these points are examined in detail on the Scottish Energy News POLICY PLATFORM:-
Ironically the UK oil & gas industry, which is relatively isolated from EU regulation – and therefore on the surface less likely to be impacted by Brexit – might feel the effects of Brexit most keenly.
To add to all this uncertainty, there is the Scottish Independence question.
The majority of the electorate in Scotland voted in favour of remaining part of the EU, and there have been renewed calls for a second independence vote.
A new independence referendum would resurrect 2014’s arguments about which country would be entitled to the revenues from UKCS oil & gas, and who would foot the decommissioning bill?
RICHARD POWER is a Partner at Clyde & Co Ltd LP, a firm of solicitors