Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Impact of no-deal with EU will alarm British firms

Andy-Jalil
Andy-Jalil
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During the British Prime Minister, Theresa May’s visit to Brussels last week, it became increasingly clear that UK’s exit from membership of the European Union without a deal on their future relations, remains a strong possibility. The UK government recently produced papers assessing the impact of a no-deal Brexit scenario on various sectors, including financial services. It is concerning for the sector that the government recognises that a no-deal situation is not looking unlikely.


The Bank of England governor Mark Carney ranks this possibility as “uncomfortably high” while foreign secretary Jeremy Hunt suggested that there would be “unintended geopolitical consequences” should the UK crash out. European leaders are also trying to evaluate the likelihood of a clean break from the UK/EU bond, which reaches its 45th anniversary this year.


Latvia’s foreign minister Edgars Rinkevics has suggested the chance of a no-deal Brexit stands at “50-50”. But what does a no deal mean for a financial and other related professional services firms on both sides of the Channel? Essentially, it means a great deal of uncertainty — uncertainty where they can operate, who they can employ, and whether they can honour all their commitments to cross-border customers?


This is the reality facing firms if both sides finally walk away from the negotiating table. This option would leave too many question marks looming over firms’ heads.


It would be the worst of all possible scenarios, as felt by the City of London Corporation. It’s not just financial firms that would bear the brunt. Consumers could see payments become slower, a hike in credit card charges, and even failure to pay out on pensions and insurance plans.


Recent data reveals that in the past five years, the EU’s financial exports to the UK have increased by 51 per cent, while the UK has increased its exports to the continent by 35 per cent. These figures reiterate just how connected the two markets are, and how vital it is that strong trade ties are maintained, as chairman of the City of London Corporation, Catherine McGuinness said.


It’s very much on both sides’ interest to secure a deal that supports cross-border trade in services. Earlier this year, the Bank of England made provisions for EU financial firms operating in the UK. The central bank and regulator committed to EU firms that, for up to three years after Brexit, they could continue operating here much in the same way that they do at present.


So far, the EU has not reciprocated this gesture, which is a worry for UK firms, operating in the bloc. It’s not enough to hope for the best and expect firms and regulators to work it out themselves. A clearer picture is needed from EU regulators — both at European and national level — on how firms can continue activity across the channel post-Brexit.


The papers produced by the UK government, in the case of a no deal, went even further than the Bank of England’s announcement nearly six months ago.


It demonstrates how the UK is putting in place measures to protect against negative impacts in a no-deal scenario for UK-based customers and businesses, including firms doing business in the UK. It is clearly over to the EU to do the same.


Time is moving on, its just six months until Britain leaves the Union. Its time the EU clarifies — particularly after rejecting Theresa May’s Chequers plan last week as “it would not work”, how trading arrangements might continue post Brexit, and take steps to reciprocate the action taken by the UK government and regulators. If the EU fails to do so, it’s not just the UK this will affect, it will harm EU businesses and consumers too.


A survey of 3,044 members of the public commissioned by the audit and consultancy giant KPMG showed 54 per cent consider no-deal as the likeliest outcome of the Brexit negotiations.


With just 20 per cent thinking this result was unlikely. The public also expect prices to rise in the event of a disorderly Brexit and plan to rein in spending.


Seventy per cent think prices would rise and 69 per cent say they would change their consumer behaviour after a no-deal Brexit, with 43 per cent saying they would cut spending on essentials, while 48 per cent would cut luxury spending.


(By ANDY JALIL  - our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)


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