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Abu Dhabi, UAESunday 23 September 2018

Shape of post-Brexit Britain to become clearer in 2018

For UK businesses, the year ahead is critical as they race to get ready for the country’s departure from the EU

FILE PHOTO: The late winter light shines on the buildings in the City of London financial district of London, Britain November 24, 2017. REUTERS/Simon Dawson/File Photo
FILE PHOTO: The late winter light shines on the buildings in the City of London financial district of London, Britain November 24, 2017. REUTERS/Simon Dawson/File Photo

As Britain steels itself for another year of gruelling Brexit talks, the boss of Europe’s largest airline, the budget carrier Ryanair, has decided to take matters into his own hands.

After months of dire warnings from chief executive Michael O'Leary about the risks of flights being grounded after the UK leaves the European Union in 2019, the company has applied for a licence for the airline, based in Dublin, Ireland, which would allow it to continue operating UK domestic flights after Brexit.

This may be required “in the event of a hard Brexit”, Ryanair said.

The licence would guarantee the airline could continue to its operate routes between London, Northern Irish and Scottish airports, as it could otherwise be classified as a “foreign” airline in the UK after Britain leaves the European Union, regardless of whether or not aviation is included in the divorce negotiations, Business Insider reported.

Ryanair filed for a licence just before Christmas using a new UK subsidiary, after a similar move in October from the Hungarian budget airline Wizz Air, which wants to expand operations at its base in Luton.

Such moves underline the ongoing contingency planning taking place at both British and European firms as the clock ticks down to March 29, 2019, the date that the UK officially leaves the union.

2018 is seen as a critical year in which the shape of post-Brexit Britain will become clearer, and in which UK businesses will make major decisions about their plans for life outside the EU.

Trade talks are set to begin this March, after EU leaders said “sufficient progress” had been made on the divorce deal at the end of last year.

By October 2018, the British government and EU aim to have an agreement on the split and at least the outline of their future trading relationship.

The EU’s chief negotiator, Michel Barnier, has said he wants all talks wrapped up by then to allow ratification of the deal in time for the UK’s ultimate exit the following year.

But some see the threat of a potential fly in the divorce ointment - and a growing one at that.

The Brexit campaigner Nigel Farage said on Sunday he was increasingly concerned that a vote for Britain to leave the European Union could be overturned by a powerful group of the bloc’s supporters.

In an interview with Britain’s Observer newspaper, Mr Farage, the former head of the eurosceptic UK Independence Party, said a well-organised and funded group of campaigners that wants to remain in the EU was drowning out those who want to leave.

“The Remain side are making all the running,” he said. “They have a majority in parliament, and unless we get ourselves organised we could lose the historic victory that was Brexit.”

Last week, Mr Farage said he was warming to the idea of holding a second vote on Britain’s membership of the EU to settle the argument - an idea written off by other Brexit campaigners who urged the government to press on with exit talks with the bloc.

Several pro-EU campaigners say the need for a second referendum has become more pressing because public opinion is showing some signs of turning against Brexit as the difficulty of negotiations to leave the bloc becomes increasingly clear, according to Reuters.

On Thursday, a ComRes poll for the Daily Mirror newspaper of 1,049 adults showed that although more people think there should not be a second referendum (51 to 43 per cent), if there were to be a re-run, voters say they would opt to stay in the EU by 55 to 45 per cent.But, a possible second referendum aside, businesses want to see an agreement on a transition deal to bridge Britain’s likely leaving of the EU in March 2019 into a new relationship with the bloc.

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Chief executives are calling on the government to secure that as early as possible in 2018 in order to give them confidence that they will be able to continue accessing the EU single market after the UK’s departure.

For the financial sector, the first quarter of 2018 has been dubbed by experts as the “point of no return”. If details on the transitional period are not clarified by then, banks, insurers and asset managers have said they will have no choice but to start moving staff and operations from London to mainland Europe, in order to prepare for a worst-case scenario in which no deal is reached.

“Many firms are already well under way with their contingency plans,” Miles Celic, head of the country’s most powerful financial lobby group TheCityUK, tells The National.

“Those which remain are ready to ‘press go’ by the end of March 2018 at the latest. There is still time to slow or adapt these plans but without progress soon, it may be too late.”

The insurance specialist Lloyd’s of London is one example of a company that is already pushing ahead with its post-Brexit contingency plans.

The chief executive Inga Beale welcomed the recent progress in the Brexit talks, but said the firm is nevertheless pressing ahead with its plans to create a foothold in the EU.

“We continue to move ahead with our plans to establish a Lloyd’s subsidiary in Brussels – which will provide certainty for the market and our clients,” she tells The National.

Through 2018, the group plans to finalise its office location in Brussels and hire in the necessary people to ensure it is open for business on January 1, 2019 – several months before Britain formally leaves the EU.

Ms Beale says a transition deal is imperative to instil confidence in financial firms.

“The insurance sector still urgently needs certainty on the UK’s future trading relationship with the EU.

“We therefore remain very keen to see an agreement that puts in place a sensible transition period and a broad and expansive post-Brexit free trade agreement, which includes the financial services sector.”

The asset management firm Standard Life is also using 2018 to flesh out its post-Brexit plans.

“In view of the ongoing uncertainty over the direction and likely outcome of the negotiations, we continue to develop our contingency plans,” a spokesperson for the company tells The National.

The spokesperson said that Dublin is the most likely choice for its new European base, and that the firm is already in talks with the central bank of Ireland with regard to regulatory requirements.

Uncertainty about Britain’s prospects after it leaves the EU is also casting a shadow over UK manufacturers.

Since the Brexit vote, exporters have been in a “sweet spot”, boosted by sterling’s fall but still able to trade as before.

However, the sector is plagued by fears over future trading tariffs and customs delays if the government fails to strike the right Brexit deal.

“We need zero-tariff and free trade with the EU,” a spokesperson from Jaguar Land Rover, Britain’s biggest car maker, tells The National. “No deal is not an option we can afford.”

The maker of James Bond’s cars of choice, Aston Martin, urged the government to secure a swift transition deal to give car makers peace of mind.

“The UK automotive industry has been consistent in warning of the risks associated with a cliff edge beyond March 2019 – with this in mind a transitional deal is essential,” a spokesman says. “We have a contingency plan in place and continue to review the likely impact on our business.”

Meanwhile, BMW – which owns the British brands Mini and Rolls-Royce – is reviewing its factories in the UK and says it has the flexibility to move production elsewhere.

Recruitment poses another challenge for businesses this year, with the prospect of new immigration rules after Brexit already taking a toll on hiring.

A recent survey by the British Chambers of Commerce (BCC) warned that skills shortages in the UK are reaching “critical levels”, with 71 per cent of services firms reporting recruitment difficulties.

The findings confirm fears that the economy is set to suffer a brain drain thanks to Brexit, with sectors such as health care, finance, construction and hospitality expected to be hardest hit.

The BCC warned that Brexit-related recruitment issues could prove the biggest drag on business in 2018 if not addressed.

Mr O’Leary has said that the airline industry needs clarity on a UK-EU Brexit deal by this summer as that is when airlines will publish their schedules for the year ahead.

"Time is running short,” he said.

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