How Brexit May Affect Public Procurement

Britain's historic vote to leave the European Union may have a profound impact on procurement markets on both sides of the Atlantic, in part because the United Kingdom has played such an important role in shaping European procurement law.

We have been following developments after the Brexit vote closely, and the emerging consensus is that the impact in procurement may not be catastrophic; like Norway, for example, the United Kingdom may choose to become part of the European Economic Area, which would keep the UK in the single market and bind it to existing European procurement directives. While the EEA option (commonly referred to as the "Norwegian" option) is controversial, in part because it might mean leaving UK borders open to migration, it could be a less economically disruptive choice for Britain.¹

If the UK entered the European Economic Area, it would remain part of the single European market and so European procurement rules likely would continue to apply to UK public procurement. In 2014, the European Union revamped its public procurement directives. Although EU member states had two years to transpose the 2014 directives into their own laws, in less than a year the UK government had enacted Public Contracts Regulations 2015. The new UK law was largely a copy-and-paste transcription of the governing EU directive.

Should Britain not join the EEA, in order to protect its own exports Britain might find itself forced to provide reciprocal access to its procurement markets, under the World Trade Organization's Government Procurement Agreement (GPA) or otherwise.² Under these scenarios, Britain still would follow international best practices for open markets, but UK procurement law likely would follow a separate path—a less European path—of development.

Brexit could also encourage European protectionism. Once it leaves the EU, Britain will have no direct say in writing the European Union's procurement rules. In part because of British resistance, the European Union has stopped short of adopting proposed barriers to other nations (such as China and the United States) that the EU accuses of protectionism.³ With Brexit, the British voice will be muted, and those EU procurement barriers may well rise. That, in turn, will put pressure on the United States to conclude the Transatlantic Trade & Investment Partnership (TTIP) with the EU, to reinforce US access to European procurement markets.