The Brexit negotiations have officially (finally) started on June 19. The United Kingdom accepted the EU’s conditions and timetable. First there will be talks about the terms of the “divorce” and only after “enough progress” is made in this area, the parts will discuss a new trade deal. Some reports in the British media have said that “the UK already lost the first battle with the EU”, as Theresa May had tried to persuade the other European leaders to discuss both issues: the break-up as well as the new agreement in the same time.
But the big loss for the British PM was at home. Theresa May was hoping for a landslide victory when she called for an early general election. She said she needed a stronger position for the tough negotiations with Brussels and believed she could secure a larger Parliamentary majority for the Conservative Party. But elections are tricky and so they were this time, too – some blame campaign mistakes, the fact that the young people participation was unexpectedly high or that Brexit fears were also playing an important role, assimilated to the campaigning messaging. The Tories lost the majority in the Parliament. Theresa May is now working to obtain the support of the Democratic Unionist Party in the Parliament, which would ensure the majority for her new government. Yet, she faces increasing criticism.
The results of the elections have no impact on the UK-EU divorce decision, but they do have an impact on Brexit negotiations. The president of the European Parliament said that Britain would be welcomed back with open arms if voters changed their mind about Brexit. But that would require another referendum and Theresa May has said that there is no turning back, refusing to call for a new vote on the decision.
Which makes us look into how negotiations shape further opportunities coming out of Brexit challenges:
- Member states have no reasons to fear that the EU led negotiations will overlook their interests, especially after a new ruling given by the European Court of Justice regarding the EU-Singapore free trade pact, signed in 2013. The court ruled that parliaments in all 28 member states must vote before the deal comes into force. This sets a precedent for a future EU-UK trade agreement. It becomes very likely that the agreement will have to be ratified by the parliaments of all the EU remaining states. Therefore, should any state consider that it is negatively affected by the outcome of the negotiations, it can block the deal. The European Court of Justice said that the EU Commission does not have exclusive competence in areas like foreign investment or intellectual property rights. Therefore, only because the EU-Singapore deal has such provisions, it needs to go to all 28 parliaments before it becomes legal. It is possible that only parts of the expected EU-UK agreement will need ratification. Even so, this leads to another problem. It stretches even more the time frame of the negotiations. Unless the deadline is modified, the two years of negotiations are likely to be challenging considering the details of a new trade pact that need to be agreed on.
- While most continental Europe member states are busy courting banks to move their headquarters on their territory as they think leaving London, they overlook that Brexit might bring important opportunities in other sectors as well. For example, those in the mining sector. The mining Russian giant, Nordgold, NV, controlled by billionaire Alexey Mordashov is looking for alternatives to relocate from its “natural” home, London, for future listings. It is not unlikely to see other firms doing the same, in spite of the announcements they made one year ago that they will not change headquarters, immediately after the referendum.
- The Greek government found another way of getting profits out of Brexit. It hopes to convince ship-owners and shipping-insurance firms to relocate their EU headquarters from the UK to Greece. The Greek shipping minister was quoted by the press saying that there are talks with “five large ship-insurance brokers” who want to move their headquarters from London. Yet, the companies are considering various EU member states – like Cyprus or Luxembourg – for this transfer. As for the ship-owners, at least for the Greek ones, because the government in Athens isn’t in the position to offer any financial incentives, it hopes to convince them to come back to Greece by appealing to their patriotism. Greece is the largest ship-owning nation in the world, ahead of countries like China or Japan. But Britain is “home” to about half of the biggest marine insurance companies in the world and clearly dominates the market.
- Even the film industry will be subjected to change because of Brexit. Here, as well, there will be winners and losers. Although the full scale effects of Brexit are difficult to foresee, one thing is clear: British films will no longer be tagged as European. Consequently, they will lose access to the EU funding and it is likely that selling price in Europe will also be modified accordingly. European regulation with regards to TV air time is giving an advantage to the “made in the EU” shows and movies. As the UK programs will no longer be “made in the EU” after the UK formally leaves the Union, the continental European productions will be at advantage on the European market. For business purposes, the UK film producers interest into collaborating with producers within the EU is likely to increase, which is to the benefit of continental Europe film business. Even the US producers, which are usually going to Britain in search of new opportunities, might also take a closer look to other EU countries, considering the benefits of the EU funding that they are currently enjoying because of the UK being still a EU member.