Is the fact that British companies have lost out in receiving work for the Copernicus satellites due to the uncertainty of a post-Brexit UK an indication of a general reluctance to move new work to the UK?

There can be no denying that the Brexit decision has brought a significant level of uncertainty to the UK's participation in major EU research and funding programs. This uncertainty has particularly impacted the bid for contracts within the Copernicus Program, which is a critical space initiative encompassing Earth observation systems. In this article, we will explore how this uncertainty has affected British companies and their eligibility for future Copernicus contracts.

The EU's Imperative to Ensure Welfare and Fiscus

One of the primary concerns raised regarding Brexit's impact on the UK's participation in Copernicus satellites lies in the understandable desire of the European Union (EU) to ensure the welfare and usage of EU tax money. The EU seeks to allocate its funds in a manner that maximizes benefits for its member states and citizens. Given that the UK has opted to leave the EU, it becomes a pertinent question whether EU taxpayer money should be used to support non-EU companies.

The Reality of Financial and Legal Implications

The UK government, in its efforts to regain control over tax laws and borders, has been vocal about the potential disruptions that could arise from Brexit. Since the start, it has been emphasized that EU-based businesses, academics, and researchers will no longer be eligible to bid for future Copernicus contracts tendered through the EU or any other process that adheres to EU procurement rules. This decision is driven by the principle that the majority of tax money should be spent on projects that benefit the UK and its own companies.

Business Perspective: Uncertainty and Optimal Jurisdiction

From a business standpoint, the concepts of uncertainty and risk play significant roles in decision-making. As the UK has become uncertain about tax tariffs, state-aid policies, and legal statuses, these factors have contributed to a general reluctance to move new work to the UK. Many consortia are opting to replace or exclude UK-based entities in their bids, especially those from EU-based ECJ-ruled subsidiaries. These subsidiaries often present a competitive advantage due to their alignment with EU-funded programs and their adherence to EU legal frameworks.

Strategic Decisions and Business Logic

It is rational for companies to align with the jurisdictions of their largest customers, especially in the EU context. Paying taxes, obeying legal systems, and adhering to procurement rules in the EU makes sense from a business perspective. The ever-present risk and uncertainty of government policies are often transferred to EU-based subsidiaries of foreign companies, which are largely responsible for coping with these challenges.

Metaphorical Perspective: Cake and Reality

Using a metaphor, cake-ism versus reality, elucidates the situation further. The decision to leave the EU introduces a challenge where businesses must weigh the benefits of maintaining operations within the EU against the potential risks and uncertainties associated with Brexit. For many UK-based firms, this means not only relocating their businesses but also aligning their operations with the EU framework to mitigate these risks.

TL;DR: The Conclusion

In summary, the UK's exit from the EU has led to a situation where maintaining EU benefits often requires adjusting to EU regulations, which necessitates a strategic reevaluation of where to invest and operate. For those looking to benefit from EU-funded programs, such as the Copernicus satellites, it often makes more business sense to align with EU frameworks, thereby favoring EU-based entities over those from the UK. This shift reflects a broader reality where strategic decisions must be made in the face of change and uncertainty.

The decision to stay and eat EU cake or to leave and grow other forms of businesses showcases the complexity of post-Brexit realities. To ensure continued participation in major EU-funded programs, UK-based firms have to reassess their strategies, often leading to a relocation of business activities to the EU.