Brexit: The impact for Iceland - KPMG Precedent models Norway, Switzerland, Turkey, Canada How do you like your Brexit? Hard, soft, Goldilocks, Red white and blue Deal or no deal?

Brexit: The impact for IcelandMay 2017

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Document Classification: KPMG Confidential

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative

(“KPMG International”), a Swiss entity. All rights reserved.

With you todayTim Sarson

Partner, KPMG in the UK

E-mail: [email protected]

Tel: +44 20 7694 4831

Soffía Eydís Björgvinsdóttir

Head of Tax and Legal, KPMG Iceland

E-mail: [email protected]

Tel: +354 545 6089

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AgendaIntroduction

The impact on business

Optimising your position

Wrap up and questions

Introduction:Setting the scene

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Brexit: The background

— Immediate change in Prime Minister and many

senior Cabinet members (July 2016)

— General Election to be held on 8 June 2017

— Announcement of the “Great Repeal Bill” to end the

primacy of EU law in the UK

— Article 50 invoked on 29 March 2017

— Full details of the Brexit model will not be known

until exit negotiations with the EU take place, but

we do know:

— UK will not seek membership of the Single

Market;

— UK will seek a mutually beneficial new customs

arrangement.

— To date, the financial impact of Brexit has been less

severe than feared

Developments

since 23 June 2016:

Why?

— Immigration

— Cost of EU Membership – £8.5 billion net

contribution p.a.

— (Perceived) loss of control

The result: The UK voted

to leave the EU by 52%

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The UK’s current position in Europe

Source: Financial Times

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Iceland’s place in Europe

- EFTA

- EEA

- Schengen

- Single Market (but agriculture and

fisheries excluded)

A member of:

- EU

- Eurozone

- Customs Union

Outside of:

Overall a strong relationship with the EU

Relationship with the UK (including Scotland)

The bigger picture:

- Geopolitical events

- Relationships with the wider world, including trade links

The Brexit model

9




The starting position

Ma

rketa

ccess

and

inte

gra

tion

with

EU

National sovereignty

EU

membership EEA

membershipEFTA

membership

Customs union

Bilateral agreement

WTO

Immediately after the Referendum Result, the focus was on existing precedent models:

10




Now the Brexit lexicon has changed

June 2016

Sept 2016

January 2017

March 2017

?

The result. A

surprise for

many

Conservative

party

conference

Lancaster

House

speech and

White Paper

Invocation

Precedent

models

Norway,

Switzerland,

Turkey, Canada

How do you

like your

Brexit?

Hard, soft,

Goldilocks,

Red white

and blue

Deal or no

deal?

UK’s 12

objectives

Cliff-edge?

11




The Brexit White PaperThe Government’s plan for leaving the EU has been outlined in Theresa May’s “Lancaster House”

speech (17 January 2017) and the Government’s White Paper (2 February 2017).

— 12 principles to guide the Government in implementing Brexit

— Pursuance of a “bold and ambitious” Free Trade Agreement with the European Union

— A desire to seek a mutually beneficial new customs arrangement with the EU, and trade

agreement with other countries.

"no deal for Britain

is better than a bad

deal". – Theresa

May, 17 Jan 2017

“We will forge

ambitious free trade

relationships across

the world” – White

paper, 2 February

2017

“Delivering a smooth,

orderly exit from the EU –

we will seek a phased

process of

implementation”– White

paper, 2 February 2017

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/589191/The_United_Kingdoms_exit_from_and_partnership_with_the_EU_Web.pdf

12




What does Brexit look like for UK?Overall messages from Government

Customs Union: for both beneficial tariffs and logistics

RoW FTAs: opportunities?

Appeal to EU populations

People: “Brightest and best”

No reserve parachute…yet

Ball now in EU’s court

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UK General election: Business as usual Government expect to increase majority

Increased room to manoeuvre

Reduced chance of “walk away early”

Increased chance of “deal”

Increased chance of “cliff-edge”

For business, little change since before announcement

Don’t wait and see: Prepare and monitor

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A busy 2017 for Europe22 and 29 Jan 2017

Socialist primaries

in France

14 May 2017

State election in

Nordrhein-Westfalen

29 March 2017

UK triggers

Article 50

26 Mar 2017

German State

election in Saarland

15 Mar 2017

General election in

the Netherlands

Early Jan 2017

Article 50

UK Supreme Court

Appeal by PM

23 Apr and 7 May 2017

Presidential and general election in

France

7 May 2017

State election in

Schleswig Holstein

24 September

General election in

Germany

Sep 2017

Catalonia plans

independence

referendum

Summer Migrant Crisis Greek debt renewal

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Brexit Timeline

March 2017 Sept 2017 March 2018 Sept 2018 March 2019

.

Engaging 38 national and

subnational parliaments

Summer of elections and

uncertainty Autumn to autumn: the window for discussions

Perceived likelihood that Article

50 period expires with no deal

Invoke

Article 50

German

Federal

elections

Effective

deadline to

agree political

solution

Drop dead

Brexit

deadline

Time at which those who have

not planned ahead will react

Opportunity to secure capacity and leading position

UK

General

Election

June 2017

The impact on Business

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Many moving parts

Corporate Tax

and Structural

impacts

Your fact

pattern,

your priorities

Immigration &

People

Your industry

sector

Brand,

Customer, and

Identity impact

Your

stakeholders

Exit from

Customs Union

Your employee

profile

Regulatory /

Passporting

Your supply

chain

Brexit

18




How Brexit affects UK businesses

Rooted Interconnected Mobile

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The EU Network of Current Free Trade AgreementsEUROPE

• Albania

• Andorra

• Bosnia and

Herzegovina

• Faroe Islands

• Iceland

• Kosovo

• Liechtenstein

• Macedonia

• Monaco

• Montenegro

• Norway

• San Marino

• Serbia

• Switzerland

• Ukraine

AMERICAS

• Antigua and Barbuda

• The Bahamas

• Barbados

• Belize

• Chile

• Colombia

• Costa Rica

• Dominica

• Dominican Republic

• El Salvador

• Grenada

• Guatemala

• Guyana

• Honduras

• Jamaica

• Mexico

• Nicaragua

• Panama

• Peru

• Saint Kitts and Nevis

• Saint Lucia

• Saint Vincent and the

Grenadines

• Suriname

• Trinidad and Tobago

MIDDLE EAST

• Algeria

• Egypt

• Georgia

• Lebanon

• Jordan

• Iraq

• Israel

• Morocco

• Tunisia

• Turkey

• Palestinian Authority

AFRICA

• Cameroon

• Madagascar

• Mauritius

• Seychelles

• South Africa

• Zimbabwe

ASIA PACIFIC

• Fiji

• Papua New Guinea

• South Korea

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Impact on logistics

Movement of goods

to Ireland could

suffer delays

May need to establish a

new UK D.C to minimise

cross-border delays.

Significant infrastructure

cost and inventory

duplication would result.

Internal movements

Outbound to customer

Warehouse

Key

EU network, most product imported from far

east. High costs and limited capacity in EU

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UK food retail

EU Non-EU

Impact on People: Look at the whole chain

Van based e-fulfilmentHigh Street StoresWarehouseFarming

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Brexit: the impact for IcelandKey Sectors:

- Financial Services

- Life Sciences

- Agriculture and Fisheries

- Data centres

- Clean Energy

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The impact on the FS sector

9

8

3

1

Jurisdiction

Operating model

(branch/sub)

Back book

Required

market access

Supervisory approach

Distribution impacts

Logistics

2

6

7

4Substance required

5

Outsourcing ability

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The impact for Life Sciences

• Regulated sector

• Complex, cross border supply chains

• Large geographic footprint – likely to

have operations in multiple locations

• Highly skilled workforce, likely to be

drawn from an international pool

• High number of EU Resident

employees

• Significant exporter, international

customer base

• Depending on manufacturing process

and location, may also be an importer

of goods

Typical features

Companies in this sector are concerned

about:

• Loss of ability to passport

pharmaceutical licences

• Loss of access to EU R&D funding and

collaboration opportunities

• Optimising access to any new UK

incentives for the sector

• Understanding the impact on the

supply chain, in particular non-tariff

barriers

• Quantifying the benefits and costs of a

Brexit driven restructuring

• Risk of a skills shortage, and how to

retain key staff

The Brexit impact

Optimising your positon

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Optimise your position1. Understand the pressure points

• Do you trade with the UK?

• Do you have UK subsidiaries? UK staff?

• Is your supply chain reliant on the UK?

2. Quantify the “worst case” impact

3. Use the Brexit Navigator to plot out your action plan and identify key dates

4. Don’t wait and see

• Prepare and monitor

5. Timing is key to maintaining your competitive edge

• Be ready to act when the time is right

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KPMG Indirect Tax Assessor Tool

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KPMG Brexit Navigator

Keep informed

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Keeping you up to date

• Our “Managing Brexit” homepage

• Expert opinion, thought leadership,

Brexit tools and more

https://home.kpmg.com/xx/en/home/ca

mpaigns/2016/07/brexit.html

KPMG.com

• Follow us on Twitter and Linked In

• Receive invites to KPMG Brexit

themed events and webinars

https://home.kpmg.com/uk/en/home/social

.html

Social media

• Our two year roadmap

• Helps you to plot out your key

milestones

https://home.kpmg.com/uk/en/home/ins

ights/2017/04/brexit-navigator-our-two-

year-roadmap.html

The Brexit Navigator

• A fresh perspective on Brexit

• Click to subscribe to our weekly

thought leadership

https://home.kpmg.com/uk/en/home/ins

ights/2016/10/the-brexit-column.html

The Brexit Column

https://home.kpmg.com/xx/en/home/campaigns/2016/07/brexit.html

https://home.kpmg.com/uk/en/home/social.html

https://home.kpmg.com/uk/en/home/insights/2017/04/brexit-navigator-our-two-year-roadmap.html

https://home.kpmg.com/uk/en/home/insights/2016/10/the-brexit-column.html

Q&A

Thank you!


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Documents

Brexit: The impact for Iceland - KPMG Precedent models Norway, Switzerland, Turkey, Canada How do you like your Brexit? Hard, soft, Goldilocks, Red white and blue Deal or no deal?