By Yasmine Lingemann
Belgians are big savers. According to recent figures released by the National Bank of Belgium (BNB), Belgians have reached a record high in average household savings, with figures reaching 290 billion euros in aggregate regulated savings accounts. On average, the household savings ratio in Belgium is 12.6%, which by comparison is just over double that of the UK, where households save 6.2% of their disposable income. Belgians have traditionally saved a lot, yet even in an era of zero or negative interest rates on savings, the lack of spending is beginning to become problematic and even a hinderance to the national economy.
Globally, the Coronavirus pandemic has hurt economies everywhere. With firms in the UK and Europe also having to simultaneously adapt and create contingency plans to prepare for the end of the Brexit transition, businesses face the situation where they need to use alternative methods to attract clients and re-establish confidence in their company. In Belgium, that means trying to encourage people to spend more and save less at the same time as rising unemployment, weakening job security, and people generally tightening their belts and restricting spending to the bare necessities.
Despite this, firms must not lose hope: Now is the time to seek new opportunities. Businesses are responding, many are offering their goods and services in a different way. In Belgium, where consumers have traditionally been less open to online commerce, increased time at home in front of a screen enables households to be more susceptible to e-commerce and advertising. Businesses must use this time to improve communication and dialogue with their clients to reestablish trust and retain brand loyalty. Getting active online and keeping your customer base up to date on changes will help businesses in the long run and hasten the adoption of a more digitalised economy.
Belgium government support has not been as forthcoming as in the UK. However there are a variety of loans and tax deferral schemes that have been put in place to weaken the damage felt by Belgian firms.
Click here for Belgium’s government website to see how your business can benefit from the support available: https://www.belgium.be/en
Here at the British Chamber of Commerce, we will continue to update you with the necessary information to help all our members to succeed. We are all in this together, and with the right plans in place, consumer confidence can be restored. BritCham offers support, guidance and specialised coverage for both Brexit and COVID-19, including webinars, workshops and events that will give your firm the tools it needs to navigate through this challenging period.
See our website here for more details on how we can help you: https://www.britishchamber.be/
The practical implications of Brexit on everyday UK-EU trade is becoming clearer week by week. This week, Amazon announced changes affecting Amazon sellers, customs briefings and enquiries ramped up, and the impact on product availability and businesses started to become evident. The detail is very welcome, and helps businesses prepare further. For some, the impact will be more difficult to manage and will effect consumer choice, price and availability.
The UK government’s publication of its border operating model provided traders and logistics operators with more detailed information on the requirements for UK exports and imports. While much of the overall approach was predictable, the details of the arrangements make clear the challenges that traders will have to adapt to, and the costs likely to be incurred.
This week, retail giant Amazon announced the end of Fulfilment by Amazon (FBA) for UK sellers delivering to customers in the single market (and vice-versa). Sellers will now have to divide their inventory between UK and EU-Based Fulfilment Centres to avoid losing sales in either market.
This will raise the cost of reaching customers through increased storage and transaction costs of shipping their goods to warehouses in both markets. With Amazon putting in transitional measures before 1st January 2021, sellers Christmas trade may be affected too.
As so often, it’s the detail that counts. The UK’s plan to introduce postponed VAT accounting will be a boon to the cashflow of UK importers. But some businesses are beginning to see additional unwelcome challenges. For example, fresh fruit and vegetables delivered by air from Africa to the UK and its Benelux neighbours are distributed across the region. Since these goods movements will now need phytosanitary checks at the entry point, the opening hours of phyto offices at ports and airports now become a critical factor in avoiding lengthy delays.
With the time for preparation now short, the UK government is stepping up its communications to businesses with webinars for Belgian and Irish firms this week and more to come.
With its network of expert members and the backup of its UK chambers, Britcham is there to help you. If you have questions, contact us at BusinessContinuity@britishchamber.eu
Glenn Vaughan – Senior Adviser
The UK Government has published its long awaited border operating model. It makes clear how the border with the EU will work – at least in most cases. But some important questions remain, and the cost to business, in customs administration work alone, will be substantial. The government has responded to some key demands from British Chambers of Commerce for measures to improve cash flow. But if there’s not a deal, the cost will be higher again – and key questions remain unanswered.
While businesses will welcome more detail on processes for trading goods overseas, some questions still remain unanswered, including on trade across the Northern Ireland border and the operation of the Goods Vehicle Management System. We will continue to look at the detail and how it affects businesses over the coming weeks.
The Border Operating Model provides clarity and certainty for the border industry and businesses, including technical detail on how the border with the EU will work after the transition period and the actions that traders, hauliers, ports and carriers need to take. It covers all of the processes and systems, across all government departments, that will be used at the border. It provides clarity on the end to end journey for moving goods across the border – with information about controlled goods and new government systems that will support trade.
To help businesses prepare for these changes and continue to trade, guides on how to import and export goods are available in the form of a ‘journey’ (see below). That’s important since so many UK based companies currently trade only with the EU. They need to clearly see every step they need to take to ensure that their goods are transported successfully.
This will cost businesses money. With full border controls in place at all ports from January 1st next year, regardless of any deal that is agreed with the EU, an estimated 200 million more customs declarations will need to be made by traders annually. At a cost of £20 to £45 per declaration the cost to business could be in the region of £4bn to £9bn.
The UK government has listened to the British Chamber network and reintroduced Postponed VAT Accounting, as well as allowing the deferment of duty and VAT on EU imports for at least 6 months from January 2020. And many businesses will appreciate the introduction of bond-free duty deferment accounts, which will provide much needed help to cashflow for businesses and reduce import costs.
Along with the European Commission’s Communication last week on preparing for the end of the transition period, it’s clear firms that import and export across the UK-EU border should take action now including the appointment of customs intermediaries and addressing approvals and certifications.
With its network of expert members and the backup of its UK chambers, Britcham is there to help you. If you have questions, contact us at BusinessContinuity@britishchamber.eu
Glenn Vaughan – Senior Adviser
Hyperlinks also below.
How to import and export goods between Great Britain and the EU from 1 January 2021: https://www.gov.uk/government/publications/how-to-import-and-export-goods-between-great-britain-and-the-eu-from-1-january-2021
European Commission – Getting ready for the end of the transition period: https://ec.europa.eu/info/european-union-and-united-kingdom-forging-new-partnership/future-partnership/getting-ready-end-transition-period_en
Last week’s virtual summit of EU leaders discussed the proposal for a revised long term budget and EU Recovery Plan – put together by the Commission in double quick time. Much of the discussion between member states is inevitably informed by a calculation of who gets what and who pays, so it will not be easy or very quick. But the effectiveness of the EU response will really depend on how the money is spent and avoiding the temptation to create new barriers to business.
At the end of May 2020, the European Commission presented its proposal for a comprehensive reconstruction plan. 750 billion will be mobilised for the “Next Generation EU” action. In addition, the long-term EU budget 2021-2027 will be increased to a total of EUR 1.85 trillion.
The Commission says the plans will deliver resources at the scale and speed needed and focused on green and digital as engines of growth as well as increased resilience for Europe’s ‘open strategic autonomy’ model. It also emphasises the importance of avoiding fragmentation of the single market. Good to hear.
The package focuses mainly on cohesion and recovery along with a boost to Horizon Europe and more money for the planned Just Transition Fund for decarbonisation, and a new health program.
The biggest lump of cash – a new Recovery and Resilience Facility of €560 billion – will offer financial support for investments and reforms with a grant facility of up to €310 billion, and will be able to make up to €250 billion available in loans.
The scale and effectiveness of spending will be central, but it also needs broader global coordination. As pointed out by JBCE (Japan Business Council in Europe) recently, this is not just about the EU alone. So the EU’s response needs to be timely, but also coordinated wherever possible through multilateral and bilateral action. More important for the medium term, the EU’s openness to trade, ideas, innovation and people needs to be part of the answer.
The recovery plan will be based on a model of “open strategic autonomy” and there has been much made of the need to strengthen and diversify supply chains. While that’s undoubtedly true, there’s always a risk that the need to protect its people and companies can be used to push a protectionist agenda.
That’s why it will remain important for business to make the case, loudly and persistently that recovery will be built on international cooperation and free and fair trade, as well as a vibrant single market and that Europe remains #Open4business
Glenn Vaughan – Senior Adviser
There are many outstanding issues still to be negotiated as part of the future relationship between the EU and the UK, however one area where there shouldn’t be much disagreement is over the British government request to join the Lugano Convention.
There should be an overwhelming interest for both sides to keep the existing relations in this field. The consequences would be severe and very negative for businesses and consumers on both sides of the Channel should there be no agreement to continue enforcement of civil and commercial judgments.
The Lugano Convention covers cross border enforcement of civil and commercial legal judgements. It applies between the EU and Switzerland, Norway and Iceland and sits alongside the Brussels 1 Regulation rules for the EU member states.
Although the UK will not be an EFTA member, the Convention is also open to non-members, such as the UK. In addition, the existing ETFA members (Norway, Iceland and Switzerland) have all supported the UK’s accession.
The decision to support the UK’s application should not be overly controversial. It eliminates the need for multiple legal actions in different countries, and the risk that companies can’t get their assets that are in other countries. As a result, the system significantly reduces the risk of doing business with someone in another country. Once a judgment is reached under the system, enforcement is rarely contested.
Without this system in place businesses will need to calculate for potentially multiple actions in different countries, especially in cases related to assets that are in another country.
Without Lugano accession enforcement of judgments will no longer happen automatically and the result is likely to lead to the other business party challenging the judgment. This can open up multiple issues, such as whether the compensation that the first court awarded is acceptable or whether the original judgment is questioned by the enforcing court. All substantive laws as to how disputes are settled are different from one European country to another and the Lugano/Brussels system is the only way to smooth these differences over and ensure that a pan-Continental dispute settlement system can work.
Most businesses aim to reduce these risks by agreeing choice of court clauses. Brussels I and Lugano reduce the risk further by setting the rules under which the choice of court clauses are respected by all. As national laws differ on this point, without the overarching framework, there is still the risk of litigation surrounding whether the choice of court clause that you have negotiated and expected to be able to rely on, is in fact valid.
If a business ends up in litigation, much more expense is needed to solve what are essentially procedural issues (such as whether you are in the right court that has the power to solve issue). Litigation also lasts longer as there are more complex issues to be solved. In addition, the end result can still be questioned by another court, costing businesses even more money.
This significantly raises the cost of doing business and this will often have bigger impact on SMEs. Smaller companies, without large legal departments, would have to budget for costs that have not existed in Europe since the 1970s, when the first Brussels convention came into force creating the system which is now applied throughout Europe.
Consumers on both sides of the channel also risk losing out, as under this system the legal system used is based on where the consumer is based, allowing consumers to easily get legal remedy. Without this, consumers buying across borders will be at a serious disadvantage and will find it far harder to enforce their rights.
The damage will not just be inflicted on UK based businesses and consumers. Those based in the EU will also suffer significantly and needlessly if there is no agreement on this point.
All trade needs a secure legal system to underpin it. We have one which already exists, and which works well. This hugely benefits businesses and if the UK does not have access to it, it will significantly increase the cost and reduce the amount of trade that will take place between the EU and UK.
The British government has recognised the benefits which comes with staying in the system. Switzerland, Iceland and Norway want the UK in the system. We urge the European Union to recognise this and ensure that the UK can swiftly accede to the Lugano Convention. In doing so cross border trade, which already faces significant challenges post Brexit, will at least be underpinned by a common legal system for civil and commercial trade.
Daniel Dalton – CEO
As part of the VAT consequences of the departure of the UK from the EU, Belgian VAT authorities have officially communicated to business their position as to the need for UK established companies, that currently are VAT registered in Belgium via a direct VAT registration, to appoint an individual fiscal representative as a result of Brexit.
The letter of the Belgian VAT authorities confirms that UK established taxable persons will have to fulfil the VAT obligations which are imposed on all VAT taxable persons who are not established in the EU. The most significant VAT obligation is the requirement to appoint an individual fiscal representative for VAT in Belgium.
Because of the general nature of this obligation, UK established companies will no longer be able to operate a direct VAT registration as from the date Brexit will be effective, in principle 30 March 2019.
To discuss this, please feel free to get in touch with Peter Empsten (details below) and ensure your business meets this new administrative formality. Peter will also be able to share a letter from the Belgian VAT authorities outlining the change.
Peter Empsten – Head of Indirect Tax
Crowe VAT Representation
E-MAIL : email@example.com
The chamber kicked off 2019 by discussing the state of play in three different areas, welcoming high-level and expert speakers.
With Kris Dekeyser, Director “Policy and Strategy” at DG Competition at the European Commission, we tackled merger policy. As the trends have shown the number of merger notifications submitted to the Commission has been increasing over the last years, with 2018 witnessing the highest number of notifications ever. While those were concentrated in some sectors at first (e.g. pharma), they then expanded to other sectors and will continue to increase for the coming years. To read more about this event, click here.
Next, with Gunnar Hökmark MEP we looked at the conclusions drawn from the Banking Union. In response to the crisis, a number of initiatives were put in place (the Single Rulebook in particular) in order to strengthen financial stability, and ensure that the banking sector is safe, reliable, and better supervised for the single market. Our report on the event can be found here.
On a totally different note, we then tackled the curious case of the Border in the Case of a No Deal Brexit with an expert panel, and learned that in the UK alone, there are up to 250,000 companies that only trade within the EU. Each one of these companies will need to consult a customs specialist in order to ensure they have the right certification when the UK begins to trade with the EU from the outside. However, a key issue lies with the amount of customs experts that exist, as it takes up to 3 years to become a fully trained and operational customs specialist. To read more about this pertinent topic, click here.
To make sure you don’t miss out on an event in the future, visit our website to see what we have coming up.
Stay tuned for our next monthly overview!
Head of Policy and EU Affairs
The British Chamber of Commerce | EU & Belgium
from Helena Raulus of the UK Law Societies
As the debate in the UK Parliament on the ratification of the draft Withdrawal Agreement begins, it is a useful time to analyse the consequences of the adoption (or non-adoption) of the Agreement from a legal perspective.
If the Agreement is not ratified, the main concern is that this could lead to a ‘no deal Brexit’, whereby the UK exits the EU without concluding any overarching deal (or deals) with the EU.
Due to the very different legal mechanisms governing international rules on trade and other areas of cooperation, both the UK and EU will face a distinct fork in a road at the end of March next year.
Ratification of the Agreement will ensure on the one hand that the UK leaves the EU on 29 March 2019 and, on the other hand, that its departure takes place in an orderly manner. The Agreement sets out the framework that provides for a transition period, during which time negotiations for a new EU-UK relationship can take place, in addition to new agreements with third countries.
The ratification also guarantees the package of rights for UK citizens in the EU and EU citizens in the UK, as well as the Northern Irish backstop after the transition period (the backstop will become applicable only if the new agreement requires specific measures to be taken).
A ‘no deal Brexit’, in contrast, will bring an immediate end to EU-UK cooperation and the existing legal framework. The trading and legal relationship will change abruptly and the UK will revert to a third country framework, where there are no special trade agreements to facilitate relations.
The pressing question in this situation is: what can be introduced quickly to help the continuation of trade and cooperation between the UK and EU?
The first question is whether the Withdrawal Agreement could be applied in parts in this situation. It would be useful to mitigate against the worst effects of a ‘no deal Brexit’. However, this is doubtful as in this situation Article 50 will have run its course and will not be applicable anymore.
In this scenario a new UK-EU agreement would need to be negotiated under the rules set out in the EU Treaties. This comes with the consequence in that if a matter falls under national competences, the new agreement will need to be ratified not only by the EU itself but also all of the member states. This would be case in particular with regard to the transition period, as it aims to replicate the full EU legal framework, and deeply covers both EU and member state competences. The Treaties are clear in that, for example, internal market rules fall under mixed competences, not under exclusive EU competences.
Consequently, any measures taken will need to be assessed through the prism of who has the power to adopt the initiatives agreed. This leaves three options.
The first is where the EU and UK can take unilateral measures to facilitate trade in a ‘no deal Brexit’. For example, the EU has the power to declare adequacy or equivalence with regarding to passporting for financial services and data flows.
However, where there is a requirement of reciprocity, things may not be so straight-forward. This is the case for example in relation to visas, where the EU declared that is willing to waive visas for UK citizens, but only if the UK does not require EU citizens to apply for visas.
Then there are areas where a specific agreement between the parties is generally required to provide for reciprocity.
It is possible to conclude an agreement between the EU and the UK, or between an EU member state and the UK. It is also possible to conclude a mixed agreement, where the EU, the member states and the UK are all parties to the agreement.
The quickest form of agreement to ratify is one where there is an agreement between the EU and the UK. This type of agreement requires a reading in the European Parliament and the member states to sign off in the Council. However, this process can be used only where the EU has exclusive competence – for example with regard to the trade in goods and services, but not internal market access, for example.
In all other cases, where the EU does not have exclusive competence, it is possible to work out bilateral agreements with the member states. It would be possible to make a mixed agreement with the EU and all the member states, but the negotiations of these agreements are complicated, not to mention the ratification which usually takes at least a couple of years. Therefore, bilateral negotiations may be the quickest route should the UK find itself in a ‘no deal’ scenario.
However, it must be kept in mind that any bilateral negotiations cannot breach or infringe upon the exclusive competences of the EU. Trade in goods and transport are of particular interest here, as one of the crucial priorities in a no deal situation would be to ensure that food and medicines can reach the UK market.
As a result, the consequences of a ‘no deal Brexit’ would set the UK on a very difficult and radically different path compared to that of the Withdrawal Agreement. This is a path from where it will take time to recover and reach the agreements needed to fully resume trade between both blocs.
A version of this article has also been published in the November edition of the UK Law Societies’ Brussels Agenda.
We talk to Helena Raulus of the UK Law Societies, Chair of our Single Market Task Force and member of the EU – UK Future Relations Committee
What are your biggest priorities at the moment?
As Head of the UK Law Societies’ Brussels Office, my daily work revolves mainly around Brexit right now. I have a particular expertise on the different forms of EU cooperation in judicial matters and the functioning of mutual recognition within the Single Market. Of course this has a special relevance now , as the UK and EU are currently in the act of re-defining the structure of their relationship.
The discussions in the Single Market Task Force support my work, as many of the EU internal market developments will still be of great relevance to UK lawyers and their clients who operate in the EU.
What single market issues are on the table now?
The tax transparency and fairness, and the anti-money laundering initiatives are of particular interest to the legal profession, and to businesses operating in a cross-border context. Both the EU and the UK will try to maintain an open and well-regulated digital economy, which means that there will be further proposals on data transfers, data localisation or blockchain technology.
What should we be looking out for?
Both sides will have to examine how to regulate the platforms of the sharing economy: are these really new forms of doing business? Or are they just extensions of a franchise-type of activity where the same mechanisms of employment or the provision of services for money take place? If so, how can the current regulations apply to these new businesses?
Given that these challenges are the same both for the EU and the UK, and that it is foreseeable that the EU and the UK economies will be linked for the coming decades (regardless of the shape of the ultimate deal), it is useful for me to participate not only in the Brexit discussions, but to be aware of the developments in the single market more generally. This is something that the Task Force provides me with, as I have access to its members’ broad expertise.
How do task forces work? How can members get the most out of them?
The job of the chair and vice-chairs is help ensure that the chamber’s meeting programme is really valuable to members. We advise on the priority issues for business, who are the key players and what are the key points in the decision-making process. That way we can say who members need to talk to, about what, and when.
Any member can influence our programme by letting us know what’s important to them. Drop us a line here, or talk to me or a member of the chamber team!