Posted by Chris Walklett on June 22, 2018
As Brexit negotiations between the UK and the European Union (EU) reach a critical stage, International Tax Partner, Chris Walklett, spearheaded an informal Brexit survey of European Business leaders at a recent Kreston conference in Zurich. It was an enlightening exercise.
Politicians on all sides are jumping to make political capital from the B word.
Pundits and commentators are ramping up the political rhetoric. A plethora of Brexit voices speaking over each other, like a party where it gets louder and louder and eventually impossible to hear what anyone says. Through this noise investors and entrepreneurs are trying to make sense of what the true implications are. At the end of the day this is about business and economics – not politics (but try telling the media that).
There has much been written, surveyed, and analysed about UK opinion. But what do the Europeans think?
No, not Messrs Juncker and Tusk et al but European businesses and their advisors. Are they wringing their hands with worry? Rubbing them with glee, or is it a case that they couldn’t care less? We were interested to find out – so at a conference attended by business advisors from all over the world, including representatives from over 30 European countries, we decided to ask.
As one of those asking the searching questions, I couldn’t wait to get in amongst some European perspective. It would be an engaging and receptive audience, surely. Full of opinion, full of sympathy perhaps– a metaphoric arm round the shoulder – ‘we feel your pain – we are here for you; it will be ok’. Not quite.
Some of the statistics are not surprising.
One area we were keen to explore was the extent of changing attitudes of EU companies in terms of working with, and investing in, UK endeavours. Of the European delegates surveyed, 90% reported that their clients had pressed pause on investing in UK businesses – be that directly or in commercial contracts. However, without exception those same respondents predicted that this would only be a temporary hiatus – with business continuing as usual in due course.
Austrian commentators reported a degree of ambivalence to Brexit and its impacts that makes one wonder what all the fuss is about.
‘Wait and see’ was a common sentiment. But in some quarters this had a more sinister edge. From a country perspective, delegates from 5 key countries admitted they were excited about the prospect of US investment into the EU going direct to mainland Europe and not via the UK.
Belgian delegates reported interest from a number of UK firms operating in the financial services sector to relocate to mainland Europe; interestingly one of these ended up investing in Hungary – a decision driven more by cost than Brexit.
Maltese advisors, who can offer a favourable 5% corporation tax regime, are excited by the prospect of setting up EU service hubs; although the EU’s views on Maltese structures may hamper their ambition before too long.
Delegates were fearful that at a time when there was a need for Europe to be ‘joined up’ in the face of competition from the US and China, the EU was fragmenting – and that the EU would seek to make an example of the UK to dissuade other member states from taking the Brexit plunge.
Continental commerce clearly has a view on Brexit. But the reality of life on the mainland was far more overbearing. In fact our European cousins are too busy grappling with their own issues and distractions at home to care about ours.
Spanish commentators reported that they were more concerned about their own ‘Brexit’ style issues – Catalonia is of much more pressing concern than Brexit. The strength of feeling in the region itself is fuelled by the fact that they contribute 20% of Spain’s GDP, with an economy larger than most Eurozone countries. Catalonia represents 16% of the national population but accounts for over 25% of foreign investment. 10 years ago 4% of Catalans wanted independence – now it is 50%. Caxit is their focus; and speaking personally as the recipient of some distressing messages from friends in Catalonia at the peak of the troubles, I can forgive them for caring little of Brexit.
Specific to business, the typical view of ‘wait and see’ was playing out in terms of investment decisions, but many are harbouring a wish that Spain will be able to attract direct investment into Spain that hasn’t gone via the UK. A hope shared by French respondents.
Czech respondents surveyed reported concerns that whilst Brexit was having no discernible impact in commercial terms – Germany being their biggest trading partner – it was, however, fuelling nationalism – and rising voices demanding a “Czechit” vote.
By contrast, the UK is one of Denmark’s closest trading partners, and Danish respondents expressed concerns. They also feared that an EU referendum in their country would result in a majority vote for leaving.
Meanwhile Italy’s political and economic future is being driven by a most unlikely coalition – between the Five Star Movement on the left, and the right wing ‘League’ party; for whom 50% of Italians voted in March. Two parties that had historically campaigned to leave the euro. Italy was one of the founding fathers of the EU – now it is one of the most Eurosceptic nations; but we’re unlikely to see ‘Quitaly’ any time soon. Italians are too busy worrying about their own political and economic ‘lot’ to care about Brexit.
Swiss delegates observed an interesting contradiction – they felt the UK was mad to leave the EU but based on current polling the Swiss would not want to join the EU. The Swiss have a selective relationship with the EU, and one that the UK is unlikely to be able to mirror; delegates remarked that they were glad “they weren’t having to pay for Greece”.
Just to add to the mix 10% of delegates reported doubted that Brexit would ever happen, with the majority of Hungarian respondents harbouring this view. An unlikely outcome, but it may be indicative of the disdain with which the process is being observed by some.
A good friend of mine observed “From chaos comes opportunity”. He is right of course, and UK plc must do all it can to ‘control the controllables’ – either to mitigate risk or exploit that opportunity.
Olives aren’t the only fruit – i.e. there is a world of opportunity beyond the EU. Just don’t assume the EU is as pre-occupied with the fall out as we are. They have their own challenges to face, not all of which are as laden with opportunity as Brexit might be. The world will continue to turn, but it clearly doesn’t revolve around Brexit.
Bishop Fleming is currently helping clients to prepare for the consequences of Brexit. More information about our Brexit team can be found on our Brexit advice page.