Posted on November 24, 2017
This week has seen the UK’s budget statement by the Chancellor including an additional £3 billion to prepare for Brexit. This is in addition to £700 million already set aside for Brexit costs. All of this feeds into the internal preparations for the UK to leave the European Union (EU) and will be on top of whatever the divorce settlement with the EU is. The government is so far committed to paying whatever the UK legally owes, with latest estimates hovering around £40 billion with an expectation that the sum will be settled by the end of this year. Along with EU citizens’ rights and the Northern Irish border issues, the Brexit bill should be settled before moving onto trade talks.
How has the UK business community reacted?
Both the European Medicines Agency and the European Banking Regulator are leaving the UK to resettle in Amsterdam and Paris respectively, garnering a loss of one thousand UK jobs. 10,000 banking jobs are expected to leave London by 2019, with longer term predictions from the Bank of England that this number could rise to 75,000 in the long term.
Frankfurt and Paris seem to be the clear beneficiaries. The UK Prime Minister Teresa May has so far been reluctant to meet with bankers, but will be acutely aware that the tax contribution of £70 billion per annum is hugely important to the UK economy. Michel Barnier, the EU’s Chief Negotiator, has now said that UK-based financial services companies will lose the right to cross-border transactions (also known as passporting) according to his view that ‘Brexit means Brexit, everywhere’.
And what do the UK’s European neighbours think?
Well, in essence, not a lot. A leaked report from the Irish Foreign Ministry described the UK approach as both ‘chaotic and incoherent’, with the UK Foreign Secretary Boris Johnson being described as “unimpressive” by various EU member states. The Irish themselves, fully supported by the EU, have been clear that they will veto any potential trade deal with the UK unless the border issue with Northern Ireland is fully settled.
While no one supports a hard border, there are various options to be considered, which include keeping Northern Ireland within the Single Market to obviate the need to check the 30,000 crossings each day. However, that solution would be politically difficult and a likely red line for the UK as it leaves the Single Market and Customs Union. There is a sense now coming to the fore, that the EU wants the UK to leave as soon as possible so the EU can continue without the huge distraction of Brexit.
As the UK reaches out to be a ’truly global’ country, there are already signs that the UK will come up against obstacles with other countries. India, one of the UK’s target countries for a trade deal, has already been clear that the UK will have to allow more Indian immigration to the UK. India’s London High Commissioner has said that any trade deal wouldn’t be done until around 2030. It is worth remembering that the EU has been trying to secure a trade deal with India since 2007, around the same time Canada and the EU started talking about the Comprehensive and Economic Trade Agreement (CETA).
The December EU Ministerial should give a clear indication of what has or hasn’t been agreed. In the following month, the clock will remind the UK that the country will be leaving the EU next year.
Navigator's Brexit Response Team
If you have any questions on the implications of Brexit and its implications for your organization, please reach out to Navigator's Brexit Response Team.
If you require immediate assistance, call our crisis response hotline at:
Press 3 for the on-call crisis manager