REPORT
By Gökhan Kurtaran
London letter, week beginning Jan. 23

-Brexit means “free trade deals” but how easy will it be to achieve

U.K. Prime Minister Theresa May’s speech on Brexit strategy have further clarified some of the crucial aspects of leaving the European Union but have also  brought a fresh round of uncertainties. It looks definite that Article 50 will be triggered by the end of March, and that the U.K. is in preparations to leave the single zone. Even though the timeframe to leave was long speculated up to last week, it was never openly confirmed by the U.K. government. Markets, however, digested the new direction outlined by May and welcomed the final deal to be voted by Parliament. But the U.K.’s decision has initiated action by big corporations to move operations and staff to Paris and Frankfurt to secure access to European markets.

HSBC will move staff responsible for generating around a fifth of its U.K.-based trading revenue to Paris following Britain's exit from the European Union, Chief Executive Stuart Gulliver said last week at the World Economic Summit in Davos. HSBC’s global banking and markets division that houses trading jobs made profits of $384 million in the U.K. in 2015, according to the company’s records.

Britain’s largest business group, which supported the country remaining in the European Union, said May’s speech had “changed the landscape.”

Carolyn Fairbairn, director-general of the Confederation of British Industry said, “Ruling out membership of the single market has reduced options for maintaining a barrier-free trading relationship between the U.K. and the EU.”

However speaking at the World Economic Forum (WEF) in Davos, May promised a “great, global trading nation that seeks to trade with countries not just in Europe but beyond Europe too.”

This sounded convincing for some, however, free trade deals could take years to achieve while the U.K. has only two years to complete negotiations with Europe which need to be ratified at the parliaments of 27 member states and the U.K., starting from March 2017.

Taking into account the fact the free trade negotiations between Canada and EU lasted for seven years, which finally concluded last year, it might take many years for the U.K. to reach a free trade deal with the EU while leaving the union. This was also well acknowledged by Chancellor Philip Hammond. Speaking at the WEF, Hammond said interim arrangements would be put in place if discussions “haven’t quite got there” within the two-year deadline.

The Chancellor implied negotiations could carry on in some areas

“If we are making good progress but haven’t quite got there we will simply agree Britain will leave the EU and we will agree some interim arrangements while we complete the discussions,” he said.

23 Jan,2017

Download
REPORTS