Brexit continues to be omnipresent. From British Airways’ Business Life (September 2016 p. 11-12, “Post Brexit, Brand Britain must show its mettle… and its sense of humour”) to the Spectator, articles are a mixed cocktail of seeing Britain great again to worries about what’s next. It really depends on the lens through which you are looking.
Theresa May’s recent meeting with Wall Street nobility has left no doubts about expectations. The message was clear: we prefer access to the single market, but if that proves impossible then the transition period will have to be longer (possibly five years).
The data released by the FCA to the Parliamentary Treasury Committee shows that close to 5,500 UK registered companies make use of the passporting rules to access the European Single market. On the other hand 8,000 firms registered across the 27 EU countries use this route to access the UK.
Of course, access to the single market is the single biggest issue for companies operating from the UK. Some are among the biggest in the industry. The FCA data highlighted that many countries outside the UK have a lot to lose as well.
Deutsche Bank, Commerzbank, BNP Paribas and Société Générale run large branches in the UK. Even bigger is the impact on the insurance business with AIG and Tokyo Marine two of the most prominent names.
Clearly in times where profit margins are being squeezed, no banker has any appetite to place further burden on profitability. In other words, the extra Brexit burden is simply inconvenient.
Creativity is in high demand. Bankers, lawyers and advisers will work on solutions over the months to come. Passporting is an efficient and proven mechanism. Alternative solutions are less likely to provide better customer outcomes. Higher cost and decreasing efficiency are also less likely to lead to increased shareholder value.
The conundrum remains: access to the single market versus free movement of people. It is highly unlikely the UK will sacrifice one of the key demands of the Brexit supporters – better immigration control. EU membership seemed to have defined by this perceived evil. Access to the single market will come at a high price, as both sides will strengthening their bargaining positions in the coming months.