WEEKLY COMMENT 30-03-2017
By Barry Edwards
Just about everybody has made some comment about the implementation of article 50 and some have made suggestions about what should happen now. The reality is that this is a massive task and the only similar precedent for England and Wales was the separation of the English Church from Rome In 1534 by King Henry VIII. This is the reason why government ministers are considering using the same process used by King Henry to adopt EU rules and regulations into English law. There are 12,000 of these so it is not surprising the government is trying to find a shortcut for the process.
It is clear the task of leaving the EU is fraught with potential upsets and disputes that could arise during the negotiations but it is the aim of the EU and the UK to make sure that when the actual separation takes place as many trading rules and regulations as possible are the same. This should make the trade deal to be negotiated much easier to conclude although it appears most diplomats believe it will still take more than two years to finalise.
The most important point for businesses is that there is a level playing field and the terms that are agreed are as flexible as possible when it comes to trade. However, financial services will be the main area for potential disagreement since London is without doubt the financial centre of Europe and that is not going to change for some time. The EU is keen to implement the Capital Markets Union (CMU) which will make it possible for companies of all sizes to access the capital markets to raise finance. The expertise for this to happen will still be in London and it will be a long time before that can develop in the EU if it ever does.
The biggest financial institutions already have operations in the EU and the process will probably be that the business generation will be done around Europe but the actual work done in London as it is now. It is not possible to uplift the people to somewhere else in the EU and create the ‘City’ in another town. If the transfer does happen it will be a slow progression and in the meantime everything will be fed back to London. Modern communications make it feasible for people to be situated anywhere although personal relationships are still important in financial dealings.
The desire of the EU Commission to develop financial centres around Europe is an ambition that will struggle to be achieved and consequently some kind of working arrangement will have to be negotiated to make sure the capital markets expertise can be provided throughout the EU. This should mean that the financial services arrangement to be agreed will be much more favourable than many are anticipating, at least for some years to come.
In my view, once the UK financial commitments to the EU have been agreed which the government has already stated it has no intention of reneging on, the agreements on trade and financial services should proceed fairly smoothly and all the comments I have read from both the UK and the EU are suggesting that will happen since the interrelationships are very deep. The commentators are saying it is in no one’s interest to complicate matters and therefore common sense should rule the day.
The potential for things to go wrong is always there but the many areas of common interest in defence, intelligence, climate change and science to name a few should ensure cooperation prevails and sensible agreements and arrangements are most likely to be the eventual outcome. Whatever one’s opinion of Brexit the only the only real problem is the time it will take to make all this happen and the possible disruption to the economy in the process. Looking at the economic outlook so far, it is difficult to see how all this is going to affect the nation especially since the EU is beginning to flourish and grow again.
This is a period of enormous change both for the UK and the EU and we will all have to live through this time with the hope a satisfactory solution is found that ultimately benefits everyone in Europe. An event such as this has big implications around the world so it is vital reason and a desire to bring this to a satisfactory conclusion prevails.
That’s all for this week, more observations next week.