Overview

Brexit refers to the United Kingdom’s (UK) decision to leave the European Union (EU) following a referendum in June 2016.

Although the EU and UK have now agreed to delay Brexit until 31 October 2019, or earlier if a deal is concluded before then, it is still unclear at this time what might happen next. Whatever the outcome of the ongoing political negotiations, IBM has plans in place to ensure continuity of service to our clients and partners and minimise any disruption to our business due to Brexit.

What has happened since the referendum?

Since the 2016 vote, negotiations have been ongoing between the UK and the EU over the terms of the UK’s withdrawal from the EU. A Withdrawal Agreement & Political Declaration on the future relationship between the UK and the EU was endorsed by EU leaders at a special meeting of the European Council on 25 November 2018. However, when the deal was put to a vote in the UK Parliament, it was rejected.

What happens next?

Although the UK and EU have now agreed to delay Brexit, it is still unclear at this time what might happen next. A no-deal Brexit is still the default outcome unless an alternative is agreed. This would mean there would be no transition period, and EU laws would cease to apply to the UK immediately at that time.

The UK government has been planning for this potential situation, and has published a series of technical notices and guidance.

IBM has also been planning for a range of potential scenarios, and you can find more information below.

IBM’s Brexit Plan

Since before the 2016 referendum, IBM has been analysing its business operations and taking proactive measures to prepare for various Brexit scenarios.

While IBM believes that any political change as significant as Brexit should be as structured as possible to avoid economic upheaval, we will continue to operate our business and serve our clients regardless of the Brexit outcome.

We believe that the best outcome for business is that UK/EU negotiations and deliberations within the UK government can result in a transition period and, ultimately, in future arrangements which will not materially interrupt business. However, we have taken the prudent step of making contingency plans to deal with a scenario in which there is not a comprehensive agreement, either when the UK leaves the EU or at the end of the transition period.

In a scenario where the UK leaves the EU without a withdrawal agreement in place, the UK would no longer have access to the Four Freedoms of the European Union – the freedom of movement of goods, services & data, labour and capital across borders.

While the below considerations reflect this particular Brexit scenario, they may also be relevant in other scenarios.

Freedom of Movement of Goods

Hypothesis

Post Brexit, the trading relationship between the UK and the EU would be governed by World Trade Organization (WTO) rules. Customs & other administrative controls would be introduced. Tariffs would be levied in accordance with WTO rules.

Possible Impact

IBM imports goods into the UK from the EU and vice versa and, as such, could be impacted by an end to the free movement of Goods. The key impacts expected are in the areas of Customs Clearance & Export Compliance, and we have comprehensive plans in place to deal with these considerations. We do not anticipate any impact from tariffs, in the expectation that the Information Technology Agreement (ITA) rates would continue to apply.

Freedom of Movement of Services & Data

Hypothesis

Post Brexit, personal data would no longer move freely between the EU and the UK. Companies would need to use additional measures, such as Standard Contractual Clauses or Binding Corporate Rules, in order to continue to transfer personal data across borders in a lawful way.

Possible Impact

IBM processes the personal data of UK and EU citizens in the UK both as a data controller and as a processor on behalf of our clients. Movement of data between the EU and the UK would be classed as an international transfer and would require us to utilise one of the mechanisms available under the GDPR to cover international transfers. IBM is incorporating EU Standard Clauses into our client contracts to permit these transfers to continue uninterrupted.

Freedom of Movement of Labour

Hypothesis

Post Brexit, the automatic right to work across Europe would no longer exist for EU citizens in the UK, and for UK citizens in the EU. Independently, the UK government has committed to implementing the EU Settlement Scheme, which will allow all EU citizens who are legally resident in the UK by 29 March 2019 to apply for the Scheme and secure their status in UK law.

Possible Impact

IBM employs EU nationals in the UK and also moves personnel into and out of the UK from the EU on a temporary basis. Similarly, IBM employs UK nationals in the EU and also moves personnel into and out of the EU from the UK on a temporary basis. IBM’s extensive global talent pool and well-established practices for deploying resources from around the globe, combined with the UK’s EU Settlement Scheme, would mean that the impact to IBM would be very limited.

Freedom of Movement of Capital

Hypothesis

Post Brexit, Capital can no longer move without restriction between the UK and the EU. Furthermore, UK financial service providers would lose their ‘passporting rights,’ making it more difficult to provide services to EU countries from the UK.

Possible Impact

An end to the free movement of capital could impact IBM through increased regulatory reporting, additional fees for cross border payments, and currency volatility. IBM is monitoring these impacts closely and has comprehensive plans in place to deal with any impacts in a way that minimises any residual impact on our clients. IBM maintains banking relationships across Europe and due to the loss of ‘passporting rights,’ some of the banks in the UK may change location.


Possible impacts on businesses

IBM’s approach to preparing for a scenario where no withdrawal agreement is in place is laser-focused on ensuring the smooth operation of business and continuity of service to our clients and partners with minimum disruption. We have plans in place to do this, and are confident in their efficacy.

The main area of impact would be the freedom of movement of Data. Protecting the privacy and security of client data is of utmost importance to IBM.

IBM processes the personal data of UK and EU citizens in the UK both as a data controller and as a processor on behalf of our clients. Movement of data between the EU and the UK would be classed as an international transfer and would require us to utilise one of the mechanisms available under the GDPR to cover international transfers. IBM is incorporating EU Standard Clauses into our client contracts to permit these transfers to continue uninterrupted. IBM outlined these contractual changes in a letter addressed to clients in February 2019.

Frequently Asked Questions

General

Are you aware that the UK is leaving the EU?

Yes. IBM will continue to operate our business and serve our clients in the UK and EU regardless of the result of the ongoing Brexit negotiations.

Do you have a working group considering the impacts to your business of Brexit?

Yes. IBM began considering the implications prior to the 2016 referendum and has been following the progress of negotiations while accelerating implementation of contingency plans over the interim period.

Have you carried out an assessment of the risks to your business of a hard (no-deal) Brexit?

Yes

Have you considered the disruption to your company's supply chain including any vulnerabilities of your suppliers and sub-contractors following Brexit?

We have assessed the potential impact on our supply chain and are in discussions with our suppliers to ensure that any vulnerabilities are managed.

Can IBM help my organisation with our own preparations for Brexit?

IBM’s consulting organisation has been working with many of our clients to help them prepare for Brexit. For example, we are helping them prepare for changes in the movement of goods by implementing solutions that provide better visibility of their entire supply chain and updating their systems to interface with new import and export systems. We are also helping clients manage the movement of data across borders with solutions that track the lineage and permissions associated with customer data. For further information on how IBM can assist your organisation, please contact Jon O’Donnell at Jon.odonnell@uk.ibm.com.

Movement of Goods

Do you have experience of handling customs declarations for goods imported into the UK and how do you plan to handle post Brexit?

IBM holds Authorised Economic Operator status and has substantial experience importing goods into the UK from our manufacturing facilities around the world. We expect this to continue. We have a plan in place to handle any increase in the number of transactions which require customs declaration.

What is Authorised Economic Operator status?

Authorised Economic Operator status is an internationally recognised quality mark that shows our role in the international supply chain is secure and that our customs controls and procedures are efficient and meet EU standards. It gives quicker access to some simplified customs procedures and, in some cases, the right to ‘fast-track’ shipments through some customs and safety and security procedures.

Will there be an impact to IBM on the provision of goods into the UK?

Our current assessment is that there may be a potential impact to allow for additional import checks or as a result of border delays, but we expect to be able to manage these within our existing supply chain and planning processes.

What actions are you taking to avoid delays in the provision of spare parts?

We have assessed the changes necessary for the delivery of spare parts and are working with our logistics partners to adjust our processes, including increasing local parts stocks in the UK, to be able to continue to meet service level commitments.

If applicable, will you have a valid dual use export license in place in a WTO Brexit scenario?

The European Commission has adopted a proposal for a Regulation to add the UK to the list of countries for which a general authorisation to export dual use items is valid throughout the EU.

Are the physical goods that you import/export EU to UK / UK to EU exempt from duties due to the Information Technology Agreement, or other preferential agreements?

Yes. We expect the World Trade Organisation’s Information Technology Agreement to apply.

As some of your goods and services are sourced beyond Europe what mitigations are planned, post Brexit, for continued supplies?

IBM does not expect any material issues affecting the supply of goods and services that are sourced beyond Europe.

Movement of Services & Data

How do you believe Brexit will impact the movement of data?

IBM processes the personal data of UK and EU citizens in the UK both as a data controller and as a processor on behalf of our clients. Movement of personal data between EEA countries and the UK would be classified as an international transfer post Brexit and would require us to utilise one of the mechanisms available to cover international transfers under the GDPR regime unless an alternative mechanism is agreed as part of the Brexit arrangements.

Will there be any changes in the requirements to transfer personal data to other third countries?

IBM has EU Model Clauses (Standard Contractual Clauses) in place for transfer of personal data to other third countries. We expect to be able to continue to make use of them as allowed for in the UK Statutory Instrument: “The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019”.

What about transfers to the United States?

IBM has available the option of either EU Model Clauses or the continued use of Privacy Shield as outlined in the relevant ICO guidance and the US Government’s “Privacy Shield and the UK FAQs”.

Furthermore, IBM has updated the IBM Privacy Shield Privacy Policy for Certified Cloud Services on our website, effective 29 March 2019. The language reflects the Brexit changes required by the US Dept of Commerce for the EU - US Privacy Shield program. In summary, the language now specifically describes United Kingdom data as included in the Privacy Shield Program, along with the prior categories of data from the EEA and Switzerland, which still remain.

Are new arrangements required to transfer data to countries which are currently judged ‘Adequate’ by the EU?

The UK government intends to recognise the EU adequacy decisions which have been made by the European Commission prior to the date of exit.

What will happen where an IBM sub-contractor is acting as a sub-processor of personal data?

IBM has standard contractual clauses in place with these sub-contractors and is updating these to reflect the UK’s withdrawal from the EU.

How will IBM transfer data for which it is the data controller?

IBM has binding corporate rules approved which allow multinational companies to transfer personal data internationally within the same corporate group and has also agreed to EU Model Clauses (Standard Contractual Clauses), both within the IBM group of companies and with vendors. IBM would continue to make use of these post-Brexit.

Movement of People

For any resources located outside of the UK and within the EU, do you have a plan of action?

IBM has extensive global resources and established practices for deploying resources from around the globe into the UK. We would ensure that these can be applied to any eventual Brexit scenario.

Will there be any impact on your UK employees who are non-UK EU nationals?

Through its EU Settlement Scheme, the UK Government has committed that EU nationals currently living and working in the UK can continue to do so regardless of the outcome of the Brexit negotiations.

What immigration system do you expect the UK to have in place post Brexit?

The UK Government published its Immigration White Paper in December 2018. In January 2019, the UK Government announced that EU citizens will be able to enter the UK to visit, work or study after 29 March 2019. For stays longer than 3 months, European Temporary Leave to Remain will be required.

Disclaimer

The implications and impacts of Brexit remain far from certain. Information regarding IBM's plans and preparedness for Brexit are subject to change or withdrawal without notice. IBM will endeavour at its sole discretion to ensure that information contained on this web page is current, but offers no representation or warranty that this is the case. IBM does not provide legal advice.