Theresa May said that the UK will leave the single market. Her aim is to achieve the “freest possible trade” deal with the EU countries, while avoiding major disruptions to the economy. As the U.K. Parliament has backed May’s intentions to trigger Article 50 of the Lisbon Treaty by the end of the next month, these last weeks are announced to be crucial. London, Brussels and all other EU capitals are preparing their negotiation mandates and businesses from all over the world are weighting in on the risks and opportunities derived from this unprecedented change.
Some challenges that could become opportunities:
- The EU budget formation is at stake. Contributions and allocation of funds will certainly change. There will be winners and losers and countries need to evaluate their positions early, in order to be prepared for the tough negotiations that will follow. At the moment, Britain is a net contributor to the EU, with about 10 billion euros per year. The EU budget has a multiannual framing. The current one has started in 2014 and will end in 2020, yet Britain will most likely stop its contribution before 2020. The Jacques Delors Institute has warned that bitter struggles are about to come among EU members who will have to fill this financial gap over the next few years. Beyond 2020, remaining states will have to negotiate a new multiannual financial framework.
- While de Theresa May’s cabinet is setting up the Brexit strategy, many businesses are cementing their plans to relocate their main hub from Britain. As Brexit will deprive them from the access to the single market, in the past weeks, more and more banks have announced their interest to move thousands of employees to mainland Europe or Ireland. Among them: JPMorgan, HSBC, Goldman Sachs, UBS, Lloyds, Credit Suisse, Barclays. Dublin and Frankfurt have emerged as the top destinations for financial institutions seeking to relocate. Wherever they decide to relocate, banks will create new jobs as well. However, relocating their staff is not an easy process, as employees have families that need to accommodate to a new environment. Therefore, some might decide they would rather stay in London and force the companies to seek and hire local staff even for the higher managerial positions.
- London may lose its status as the world’s biggest center for clearing euro-denominated financial contracts. The London Stock Exchange Group’s chief executive, Xavier Rolet, has warned that tens of thousands of jobs may be lost if euro clearing shifts to mainland Europe. There would not be only a loss in financial jobs, but also in ancillary services, like IT support or administrative staff. The ECB has raised concerns over the past years about the development of this major financial market infrastructure outside the eurozone. And some continental policymakers have repeatedly argued that euro clearing should be shifted into the eurozone.
- Second-line business centers in Europe can benefit from Brexit, as long as they set a clear plan and stick to it. Indeed, Berlin, Paris and other important cities in the Eurozone are the most attractive to companies fleeing London. Yet other countries can take a piece of the pie as well. Poland, for example, said it plans to attract as many as 30.000 British jobs to its business sector in 2017. Its government has already spoken to over 30 financial and other types of companies about moving some of their workforce from the UK to Poland. It is a cynical turn of fate, as up until now, Poles were migrating to Britain to get better paid jobs than in their own country. Companies seeking to relocate from Britain have already established their criteria lists for their decision. They are reportedly mainly interested in taxes, the level of bureaucracy, the legislative framework (especially related to workforce) and infrastructure.
- Brexit may be a great opportunity to attract investment from elsewhere into Europe. A survey recently published by Business Awards Europe has shown that 25% of companies who wanted to invest in the UK are reanalyzing this decision. As the economy is always in motion, these companies would certainly keep their expansion plans, if not in the UK, in other EU states. Actually, 9% also reported that they have been approached by multiple organisations looking to attract investment, from different European countries.
- And finally, who wants to buy cheaper properties in exotic locations, should look for British owners. Due to the pound’s drop after the Brexit vote, British second-home owners are selling for good profits, even if they sometimes make a discount. Bloomberg reports that this trend has been most evident in southern Portugal. Algarve has been one of the favourite destinations for British travelers, but now there is a growing demand coming from French property buyers, while most Brits are selling their real-estate.