Brexit Is Here, But What Happens With Finance?
The issues around Brexit have been all over the news for the past couple of years.
On the 31st of January 2020 however, the divorce between the United Kingdom and Europe was finalized.
Officially, the UK has now entered into the final agreed transition period until the 31st of December 2020, and on that day it will become a non-European Economic Area (EEA) country.
Things are a bit more complicated than that, though.
Here’s what’s expected to change in the finance sector as the UK “walks out” on the EU.
London is known as the “capital” of Europe in the business sector, as it consists of many well-established companies, thus making it a global financial centre.
The whole Brexit situation, however, has caused uncertainty to these businesses which could eventually move to a whole different country that has more to offer as an EU member.
So, what’s going to happen to the finance sector after the UK officially “kisses” the EU goodbye?
Before you start worrying, it’s good to point out that things won’t change right away in the finance sector or the economy.
Until the transition period is completed in December of this year, the UK will continue being a Member State of the EU.
This also implies that the Brits will have to continue obeying EU rules, as well as pay the necessary fees.
Regardless, many businesses are worried and frustrated about the unpredictable future, and this could be catastrophic for them.
Christophe Rieche, CEO and co-founder of a credit platform for small businesses called iwoca, stated that “London offers deep pools of talent for native speakers across all levels of seniority and functions from developers, marketers, account managers to credit analysts. If we cannot hire people easily from these regions in London we will have to relocate some or all of our operations.”
Additionally, professor of economic geography in the Faculty of Social Sciences at the University of Nottingham Sarah Hall agreed with this statement and explained that “Attracting the international ‘tech talent’ that has been vital to London’s FinTech success could be harder after Brexit. This depends on the immigration rules that are put in place by the U.K. after Brexit.”
Therefore, it is very possible that the UK will potentially stop being the capital of the business, finance and technology industry’s most attractive destination.
“Sorry Boris, EU Can’t Sit With Us”
The European Commission does not kid around when it comes to Brexit.
What we mean by that you ask?
Well, for starters, the UK won’t have any representatives at the European parliament, and this is happening already.
Faces such as Nigel Farage and Ann Widdecombe are among the UK’s 73 MEPs who will automatically lose their seats.
This is mainly because with the transition period in place, the UK must leave the EU’s political institutions and agencies.
Although the MEPs will be absent from all hearings, the EU has the last word over legal disputes.
Additionally, the UK’s Prime Minister Boris Johnson cannot attend any more EU summits unless specially invited. This also includes any EU meetings that decide things such as fishing limits.
The European Payments Council (EPC) designed the SEPA schemes for credit transfers and direct debits and is developing a scheme for payment cards.
In UK’s case, even though the Brits have now become a non-EEA SEPA country as of 1 February 2020, they shall continue operating within the SEPA schemes.
Also, the UK must comply with EU rules and any relevant participation criteria.
Between the 1st of February and the 31st of December 2020, there shall be no new requirements or changes regarding transactions to and from the UK.
No changes will be made for SCT/SDD transactions to and from the UK either.
The European Payments Council also stated that based on the EPC Board decision on the 7th of March 2019, the EPC shall monitor any Brexit developments throughout the transition period, and after.
“Are EU Okay?”
Another industry that you will be hearing a lot about because of Brexit, is trade.
The UK will have to arrange talks with countries around the world independently in order to settle agreements about importing and exporting goods and services.
It is yet to be announced how trade negotiations with countries like the US and Australia will evolve since the UK is still currently following EU rules.
According to the BBC, if any trade deals are reached, they won’t be able to start until the transition period ends.
For the time being though, if you are in the EU you can freely travel to and from the UK, drive, and use your European Health Insurance Card.
Additionally, UK nationals will still be able to live and work in the EU as they currently do, and the same applies to EU nationals wanting to live and work in the UK.
“Getting (EU)sed To It”
The UK’s first priority is to negotiate and settle a trading deal with the EU’s customs union and single market.
Obviously, the Brits hope to access the EU market as much as possible, but since talks are still in order, the future isn’t certain.
However, we have to accept the fact that although things are not drastically changing, many changes will soon be established one way or the other.
The BBC stated that if no trade deal has been agreed and ratified by the end of the year, then the UK faces the prospect of tariffs on exports to the EU.
It is safe to assume that only time will tell the true future of established EU companies in the UK.
For better or for worse, let’s hope that the UK isn’t making a “EUge” mistake after all!