Preparing for Brexit

Preparing for Brexit 

It is less than 5 months until Brexit and the Article 50 deadline on 29 March 2019, and whilst rumours abound of deals, unfortunately – from a business perspective – the spectre of a non-orderly withdrawal outcome remains fully in view. With a few exceptions, it is a wide and deep business consensus that such a no-deal outcome would be an extremely disruptive negative outcome for economic operators on both sides of the Channel. It’s worth repeating – from a business perspective – no deal is the worst deal for everyone.

If there is no withdrawal deal, one might hope there will be side deals covering key issues such as aviation or data, but this cannot be guaranteed, particularly if negotiations break down badly. Consequences will be unpredictable, both politically and economically.

Irrespective of that, we can expect significant disruption at all UK/EU borders – notably with France, Belgium, the Netherlands and in main airports. This is a simple function of the UK leaving the Customs Union and the Single Market without a ready replacement legal framework and with the systems developed to take over.

The situation of the Irish Border in the case of no deal is also unclear – both sides have committed to no ‘hard border’, though both sides may have legal obligations under both EU law in the case of Ireland, and under the WTO in the case of the UK to undertake customs and regulatory checks. Once the UK has left the EU Customs Union and Single Market, there will have to be checks and formalities for goods, the only question is where these checks will take place and exactly what formalities will be applicable.

Preparedness notices from both the EU and the UK Government have flagged the respective legal provisions at the moment of the UK leaving the EU, but do not give a clear roadmap for affected businesses in the case of a collapse of the withdrawal negotiations or a non-ratification by the respective parliaments.

At a minimum, companies should be looking at the potential impact on their supply chains of a potential raising of regulatory and customs barriers, possible queues on both sides of the border as new systems and formalities are introduced, as well as the possible restriction of freedom of movement for staff. On a sector by sector basis, the cessation of regulatory arrangement and licensing may also create new barriers to market.

The British Chamber of Commerce | EU & Belgium will stay close to the UK Government, the EU institutions and the Belgian Authorities during this challenging period. We are the go to organisation that authorities are asking for feedback from on business concerns. Get in touch, use our platform and share your concerns, specific or otherwise so that we can get them to the right people.

Matt Hinde, Fleishman Hillard, and Morten Petersen, EPPA, Co-Chairs of the Future Relations Committee

If you have more questions about the prospect of a no deal Brexit, you can find more information on our website page – What to do if there is no deal?

Our next Brexit event – Brexit and Future Relations – An Update on the Irish Perspective – will take place on the 20th November. You can find more information on our website.

 

 

Autumn in Review – EU Events

Like every autumn in Brussels, this one didn’t disappoint with regard to its packed schedule, and we would like to believe that we didn’t either!

We kicked off with the discussion on Cartel Enforcement: Current Practice and Updates where we learned that since February 2018, companies breaching antitrust regulations by taking part in cartels has resulted in hundreds of million in fines, while ¾ of cartel cases originate from leniency applications.

On a different note, Kate Kalutkiewicz updated our members on the state of play with regard to EU-US Trade Deals. A special emphasis was put on China and the current state of trade relations with the US, as an increasing threat of a trade war looms between both countries, plus we discussed the reform of the Dispute Settlement System in the WTO and the view of the US on the Mutual Recognition Agreements (MRA). More specific trade sectors were also examined, such as chemicals, aluminium and car company regulations.

We also hosted a panel debate on eHealth – Engendering Health Systems’ Sustainability. The positive impact that eHealth can have on EU member States’ Health Systems was stressed throughout the discussion between the panellists and the participants. A wider implementation of digital health across the EU would allow, amongst others, tremendous savings resulting from the use of mobile health applications. A better pooling of data at the EU level would also have huge benefits, reducing for instance the time to diagnose rare disease. The main issue in this field arises from data privacy, record linkage and a lack of incentives from both doctors and governments to use digital technologies.

Under the Future Relations Committee, the chamber organised three events, starting with the roundtable debate with legal industry and the UK Justice Minister on EU-UK Civil Judicial Cooperation, Lucy Frazer. At this event we had the opportunity to discuss how the UK’s withdrawal from the EU has created many legal complications due to the intertwining of UK and EU law. It can be seen as one of the largest areas to negotiate in the agreement as companies wish for the legal protection to remain consistent, or at least to have a large enough transition period so that the adjustment is smooth. The second event saw Philip Rycroft, DExEU Permanent Secretary, give an Update of the UK EU Exit planning process, and finally we hosted the UK Ambassador to Belgium, Alison Rose, who updated us on the current situation in the negotiation process.

Our last event in September was organised with our members Digital Together, who took part in the workshop Digital Movers and Consumers. The objective was to initiate the creation of a dialogue between digital businesses, non-digital businesses, consumer associations, policy makers and other stakeholders to ensure that all viewpoints are shared to help formulate appropriate future regulation and legislation in the digital space in Europe.

Just two days before a crucial Parliamentary vote, we hosted a debate on Single Use Plastics , where many concerns and issues for industry were raised, in particular the issue on the Extended Producer Responsibility (EPR) and its lack of clarity.

Our FDI Screening Mechanisms event kept our members informed, helping us to understand that the EU has no single Foreign Direct Investment (FDI) screening mechanism, but several states in the EU have their own screening mechanism, which are strongly related to national security.

Finally, to finish the month of October, we organised a discussion on eCommerce after Coty and beyond, during which we heard about the Coty decision, which saw the European Court of Justice (ECJ) ruling that luxury good suppliers may prohibit the online sale of their goods by authorised retailers on third-party platform (such as Amazon) – a fascinating example of the intricacy of the enforcement of e-commerce rules.

If you want to learn more about our events, please visit our website, read our detailed event reports or join us at one in the future.

Bernada Cunj

Head of EU Events and Policy

The British Chamber of Commerce | EU & Belgium

Meeting with Brexit Secretary Dominic Raab

On Thursday 25th October, the British Chamber’s CEO Glenn Vaughan met with Brexit Secretary Dominic Raab for a landmark meeting alongside representatives from chambers across Europe. Glenn shares his thoughts following the meeting:

There’s no certainty – but more clarity and confidence can be built

Last Thursday I was part of a delegation of national chambers of commerce that met Secretary of State, Dominic Raab, Brexit Minister Robin Walker and the top officials from his department. Countries represented were Germany, France, Ireland, the Netherlands, Belgium and Denmark – as well as Britain.

The message from our own members was supported by detail from our expert Future Relations Committee, and echoed loudly by national chambers representing 70% of all EU-UK trade:

• No-deal is not an option – for either side. It would create very severe disruption for everyone.
• When a withdrawal agreement is finalised, the next phase of negotiations must proceed quickly. There’s no room for a leisurely go-slow while the EU manages its institutional changeover or London lines up its ducks.
• Regulatory alignment is extremely important if we are to get close to ‘frictionless trade’ in a future agreement.

The need for certainty underlies everything we have to say, but right now it is a long way off. Each new piece of progress only reveals the next cause of uncertainty. An agreement at a hoped for November European summit will need to be approved, especially in the UK parliament.  Once a withdrawal agreement is sealed, that’s the point from which we can start to work towards clarity – step by step.

We expect both the UK and the EU to take that opportunity to specify a clear destination and make clear and practical steps towards it, building confidence as they go. Another period of putting off decisions, until the next cliff edge is reached, is no good for anyone.

Brexit – the Voices of European Business

New research by the Council of British Chambers of Commerce in Europe (COBCOE) aims to give European businesses a voice. Key areas of common interest are identified, highlighting the priorities for a Brexit that secures prosperity for Europe.

Business leaders across Europe need to be listened to. They also need clear signals from the EU and UK that will allow them to plan. These are just two of the key messages to come out of COBCOE’s report, “Brexit – the Voices of European Business.”

The research, which involved around 1,000 businesses across the continent shows that uncertainty about the Brexit process and the outcome of negotiations coupled with a potentially short timeframe for change, has already impacted investment and commercial decisions. Managing the risk that this uncertainty presents is not only a drag on productivity, it means that progress on wider policy issues, such as the  development of the digital economy, could be delayed by the focus on Brexit.

Three main themes emerged during the course of the research which are highlighted in the report:

1. Barriers to trade – maintaining a frictionless European economy;
2. Uncertainty and disruption in the Brexit process; and
3. The UK’s role as Europe’s global springboard. It includes many real-life examples of how firms are being impacted.

The research also uncovered concerns about the UK being partitioned off – even among European companies not directly engaged in trade with the UK. This is because many European businesses value the UK for its financial markets, regulatory infrastructure and world-class research and development.

The UK acts as a gateway for international investment and is considered to be a business-friendly force within the EU.

The 1,000 businesses which participated through round table discussions, a survey and poll, perceived a lack of engagement from governments and negotiators.

David Thomas, Executive Chairman of COBCOE pointed out “Europe’s prosperity depends on successful economic relationships between neighbouring businesses and consumers. Disregarding these engines of commerce and wealth creation will make Brexit the cliff face on which such relationships will deteriorate.

“The negotiators’ apparent ‘zero sum’ approach, whereby a loss to one side means a gain for the other, does not reflect reality. The risks and uncertainties that firms across Europe now face undermine European productivity and competitiveness. Agreement on the future framework for economic relations between the EU and agreement on a plan for a transitional period must be made without delay.

COBCOE has presented this report to the UK Government Department for Exiting the European Union and will soon be presenting it to the European Commission Taskforce on Article 50 Negotiations. Charles Brasted, Partner at Hogan Lovells, the international law firm which supports the project, said, “The voices in this report are a unique contribution to the discussion of what kind of post-Brexit Europe is needed and how we should get there. Businesses around Europe and across sectors are clear that Europe needs a strong and connected UK to continue to thrive, because it is central to access to capital, innovation and talent.

“European businesses recognise that they have to work with the process that Brexit has begun and that some change will be needed to give effect to it; but they need, as a matter of urgency, a predictable framework within which to continue to operate, plan, grow and compete during that period of change, and beyond. Agreement on a plan for the transitional period should not be delayed any longer, so that businesses have as much time and information as possible to plan and implement contingencies effectively and can avoid making costly adjustments that prove unnecessary in hindsight.”

British Chamber 10 Negotiation Principles

Last week we announced our 10 negotiation principles and now that Article 50 has been triggered we felt it was due for a timely reminder as to what the priorities of our members are going to be during the negotiations.

WHAT BUSINESS NEEDS FOR A STRONG EU-UK PARTNERSHIP – 10 NEGOTIATION PRIORITIES

In order to underpin a stable, attractive and competitive European economy, the British Chamber of Commerce in Brussels (BCCB) have identified ten priorities that should underpin any future UK-EU relationship:

TRADE & INVESTMENT

Equivalent access and treatment: European businesses should be able to access the EU and UK markets, participate in trading mechanisms, trade and provide services across Europe under compatible and equivalent conditions, so as to maintain free and fair economic relations. A deep and comprehensive agreement should guarantee the new UK-EU relationship enabling mutual market access, compatible with EU rules on free movement of goods and services.  A close stable regulatory cooperation should ensure continuation of equivalence in standards and treatment. This includes continuation of tariff-free trading, simplified customs procedures, absence of duty rates and other restrictions, coordinated trade defences vis-à-vis third countries and tariffs and mutual preferential access to third countries’ markets, as well as open data flows.

Freedom of investment and establishment: UK and EU businesses should continue to participate in Europe’s economic life by enjoying mutual protection and unrestricted conditions of establishment and investment. An agreement should ensure that all entities engaged in economic activities, as well as movement of capital between the EU, the UK and third countries, are not subject to unjustified or unnecessary restrictions, for instance being able to rely on unhindered financing under stable equivalent conditions.

LABOUR MARKET

Skills, Qualifications & Employment rights: European businesses need to rely on the right skills at the right time and place, to ensure innovative and dynamic economies and support full employment, as well as on clarity on the rights of the workforce and related obligations of employers during the transition to a new UK-EU relationship. A system between the UK and the EU that provides adequate availability of these skills throughout Europe is a must, including through continued (and where possible enhanced) mutual recognition of professional qualifications in the new EU-UK relationship.

REGULATION & LAW

Competition: UK and EU businesses should benefit from healthy competition and a level playing field, in the interest of all European consumers, while embracing the opportunity provided by under the new relationship. An agreement should foster regulatory cooperation for continued alignment and equivalence in competition and M&A rules, to facilitate approvals, prevent abuses, limit compliance burdens, and ensure proportionality of antitrust investigations, as well as ensure close coordination on clearance of notifications.

Contractual relations and dispute settlement: European businesses must be able to maintain smooth contractual relations, without uncertainty as to the applicability of law in EU-UK cross-border situations, as well as benefitting from streamlined cross-border judicial procedures, certainty as to the competent courts and mutual recognition and enforceability of judgments, to safeguard attractiveness of EU-UK trade and investments.

Better Regulation: The principles of better regulation and proportionality should underpin the new EU-UK relationship and the agreements enshrining it, so as to avoid undue regulatory burden.

ENERGY & CLIMATE

To ensure a level playing field and respecting the principles of the Energy Union, under the new relationship the UK should have continued access to the Internal Energy Market (IEM) and commit to Europe’s climate goals.

TAX

In the negotiations towards a new relationship it should be ensured that the taxation of cross border trade and business activities does not become unnecessarily complicated or lead to double taxation. This applies in particular to the following tax matters: clarity in the application of the UK-EU VAT; keeping or reproducing frameworks that abolish tax impediments, such as the EU Arbitration Convention or legal frameworks on cross-border dividends within groups of companies; and maintaining a common system of taxation applicable to interest and royalty payments between associated companies from the UK and different EU states.

INNOVATION

IP and anti-counterfeiting cooperation: European businesses should be able to rely on continued consistency in the application of IP rules, including the application and protection of trademarks, designs, copyrights and patents. This should be complemented with anti-counterfeiting and anti-fraud cooperation between UK and EU authorities.

Innovation: UK and EU businesses have a shared interest in ensuring ongoing cooperation on knowledge exchange, research priorities and funding, and maintaining open participation in EU and UK R+I+D and education programmes.

 

Brexit: The impacts on the German economy

German enterprises continue to believe in the European integration. The EU and its Single Market are fundamental for business. Based on the free movement of goods, capital, workers and services, which are all intrinsically tied to each other, it provides free trade by overcoming internal borders and regulatory obstacles. The United Kingdom’s decision to depart from the EU has lead to great uncertainty among German companies and must be prevented from becoming a precedent for other Member States. Especially SMEs now fear the setting up of burdensome trade barriers. The Brexit-negotiations thus need to strengthen the European integration while keeping EU-UK-relations as firm and as close to the status quo as possible.

Importance of the EU Single Market

Completing the EU Single Market is one of German businesses and thus DIHK’s top priorities. The further opening of markets combined with the removal of bureaucratic obstacles and barriers to trade in the EU creates prosperity and makes the benefits of the European Union visible to companies and citizens. While abolishing tariff controls nearly 50 years ago has spurred cross-border trade, increased mobility of workers is crucial for businesses to compete and excel with their products and services. An EU-wide level playing field as regards public procurement helps saving taxpayers’ money and the common application of EU-law gives enterprises much needed legal certainty. Furthermore, the Single Market ensures the EU‘s global competitiveness and increases its attractiveness as a place to invest. Given the worldwide emergence of new markets and competitors, this is more important than ever. The basic prerequisite to fully benefit from the Single Market is EU-Membership.

German-UK relationship

Germany and the UK are closely connected both politically and economically. This close partnership should be preserved. The UK is Germany’s fifth largest trading partner. The total sum of imports and exports between both countries exceeds €127 billion. The UK is Germany’s third largest export-market after the US and France. More than 750,000 Jobs in Germany depend on trade with the UK. The UK-market is of particular importance for car-manufacturers, the chemical and pharmaceutical industry. Almost 15 percent of cars manufactured in Germany are sold in the United Kingdom. About 2,500 German companies have branches in the UK, employing about 400,000 British.

Furthermore, the UK and Germany are closely linked in the field of investment and banking. Therefore, investment protection should be a keen interest for both the EU and the UK. At the same time, it is hardly imaginable to have the central financial marketplace of the EU being based outside the Union.

Which future for the EU-UK economic relationship?

Even with an EU-UK agreement that prevents new tariffs, additional bureaucracy will become necessary, e.g. formal notifications to customs authorities. Year by year, the German Chambers of Commerce and Industry issue millions of certificates of origin and other types of foreign trade documentation. When the UK will leave the EU, this will lead to a steep increase of these numbers. This administrative burden will hit German and British exporters. Especially small and medium-sized Enterprises often lack sufficient human and financial resources to tackle the new bureaucratic trade barriers. Thus, it should be in the interest of both sides, to keep burdensome measures as little as possible.

Furthermore, both sides should continue to pursue a forward-looking and open trade policy. Given the worldwide protectionist tendencies and policies on the rise, there is a mutual interest in a common approach to further expanding the rule-based multilateral system of free trade. Common initiatives for opening up world-wide markets would be excellent opportunities to underline the strong commitment of both sides towards each other.

The Association of German Chambers of Commerce and Industry (Deutscher Industrie- und Handelskammertag – DIHK) is the umbrella organization of 79 Chambers in Germany (IHKs) and the worldwide network of 130 business representations abroad. All companies registered in Germany, with the exception of handicraft businesses, the liberal professions and farms, are required by law to join a Chamber. Thus, DIHK speaks for more than 3,6 million enterprises.

The UK Referendum on EU Membership: How Much Will Turnout Matter?

This week, Professor Justin Fisher writes on the importance of electoral turnout in June’s referendum on the UK’s membership of the European Union. Why does this impact differ from a general election or any other referendum for that matter?

As the UK referendum on EU membership gets closer, the opinion polls will start to matter a whole lot more. Months out from the referendum, the polls have been difficult to interpret, as there are many voters who have yet to make up their mind. There’s a good reason for this. Despite appearances to the contrary, the EU is not an issue that British voters grapple with on a daily basis. At general elections, it rarely, if ever, features in the top ten most important issues identified by voters. True – immigration has become an increasingly prominent issue, but of course, that includes immigration from outside the EU as well as from within. But as June 23^rd gets closer, voters’ attention will increasingly turn to the referendum and a clearer picture will emerge as to the likely outcome.

So, if Europe is not an issue that excites British voters in a way that the NHS or the economy does, will this mean that turnout will have an impact on the result? Comparatively, turnout in referendums tends to be rather lower than for national elections. And that is generally true in the UK as well, whether at national or sub-national level. The 1975 referendum on EEC membership was 64.5%, when in the October general election of 1974, turnout was 72.8%. Not a huge difference necessarily, but the last time there was a UK wide referendum (on the electoral system) in 2011, turnout was only 42%. There are two exceptions, however. Referendums in Northern Ireland in 1998 (the Good Friday agreement) and Scotland in 2014 (Scottish Independence) both had very high turnouts – well in excess of participation at national elections. But both referendums were on questions that carried significant political and emotional involvement on both sides. In the case of Europe, where there is emotional involvement, it is heavily skewed toward the Brexit camp.

With this in mind, low turnout has been seen as a potential threat for the Remain camp. It’s argued that the greater commitment will lead Leave voters to be more likely to turnout. Certainly, the 2014 European elections, with a typically low turnout (35.6%), lead to UKIP being the largest party. Moreover, one of the largest opinion splits is generational. Polls tell us that older people are much more in favour of Brexit, and young people much more in favour of Remain. Importantly, older people are much more likely to vote than younger ones. So, if Remain voters are complacent, the Leave side could win. There’s a strong logic to this view and it may well be correct.

But there’s also an alternative view – that a high turnout may benefit the Leave campaign. Why is that a possibility? First, the UKIP vote tends to be proportionally higher in areas where the demographic characteristics are associated with lower turnout. Coupled with that, those who voted UKIP at the 2015 election were more likely to have not voted in the 2010 election compared with supporters of the main GB parties. Of course, UKIP is not the same as the Leave vote. But we do know that the Leave campaign is disproportionately supported by those with from lower social groups and those with lower levels of education –groups that are generally less likely to vote. All in all, there is some evidence to indicate that those who might be most likely to support Brexit are less likely to be habitual voters. A higher turnout, where these voters are mobilized, could therefore be beneficial for the Leave campaign.

Ultimately, I would probably lean towards the view that it would be a lower turnout that would be more beneficial to the Leave campaign. But, clearly, neither side can take the impact of turnout on the result for granted.

 Justin Fisher is Professor of Political Science at Brunel University London

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