Brexit AssignmentThe European Business EnvironmentGuillaumede Kinderen / 1612 Table of Content Introduction. 3 What is the Brexit?. 4 Time schedule.
5 Custom Union. 5 Customs formalities. 5 EU legislation.
6 Duties. 6 Free traffic of labour. 6 Adversely affected by Brexit 7 Gain from Brexit 9 Conclusion and future. 10 References. 11 Introduction In this paper, I willidentify a company (or any relevant business entity or facility, e.g.investment fund, port, etc.
) that can be expected to be adversely affected byBrexit. I will propose a strategy for damage limitation and recovery. Then I will identify acompany (or similar, see above) that stands to gain from Brexit and propose astrategy for taking advantage of Brexit. In both cases, IexplainG1 what, why, how and when. The choice of theUnited Kingdom (UK) to leave the European Union (EU) has shocked the currencyand equity markets and has led to business, economic and political uncertainty.Some acts are already noticeable, especially in the form of exchange ratemovements, but the consequences in the medium and long term still remain to beseen.
What isthe Brexit? Before we want todiscuss which, companies benefit or is adversely affected by Brexit, we mustunderstand what the Brexit is and means. For companies, it is also importantthat the negotiations are over as soon as possible, in this way they will havecertainty and companies need certainty to decide for investments. As we all known, theUK has decided through a referendum to leave the EU. The general population ofthe UK wasn’t satisfied with the policy of the EU, in particular: theimmigration policy and the costs of the EU. They tough the benefits of the EUweren’t as big as the disadvantages.G2 A vote in whicheverybody (or about everybody) of voting age can partake was hung on Thursday23 June 2016, to choose whether the UK should leave or stay in the EuropeanUnion. Leave won by 51.
9% to 48.1%. The choice turnout was 71.8%, with morethan 30 million individuals voting. Britain voted infavour of Brexit, by 53.
4% to 46.6%. G3 Walesadditionally voted in favour of Brexit, with Leave getting 52.5% of the voteand Remain 47.5%. Scotland and Northern Ireland both supported remaining in theEU. Scotland supported Remain by 62% to 38%, while 55.
8% in Northern Irelandvoted Remain and 44.2% G4 Image Source: Unknown. (2017).
EU ReferendumResults. Available: http://www.bbc.com/news/politics/eu_referendum/results.
Last accessed 18 Dec 2017. After the referendum,the government of the UK itself changed a lot. Britain got a new Prime MinisterTheresa May. The former home secretary took over from David Cameron, whoannounced he was resigning on the day he lost the referendum.G5 Normally on 29 March2019, the UK is planning to leave the EU. There are 3 main subjects that needsto be discussed. Such as the focusing on how much the UK owes the EU, whathappens to the Northern Ireland border and what happens to UK citizens livingelsewhere in the EU and EU citizens living in the UK.G6 The UK wanted to talkabout future trade relations and a plan for a 2 year “transition”period to smooth the way to post-Brexit relations.
But the EU said they wouldnot talk about the future until enough progress has been made on the otherissues.G7 Now after months ofnegotiations, they finally had come to an agreement. There is a lot goingon in the United Kingdom economy since the Brexit vote.
David Cameron, hisChancellor George John James Osborne and lots of different senior figures whoneeded to remain within the EU expected a direct financial condition if theUnited Kingdom voted to go away and it’s true that the pound slouched the dayonce the vote and remains around 100% lower against the greenback and V-daydown against the monetary unit.Butpredictions of immediate doom were wrong, with the United Kingdom economycalculable to possess mature in 2016, second solely to Germany’s among theworld’s G7 leading industrial nations. The United Kingdom economy has continuedto grow at virtually an equivalent rate in 2017. Inflation has up since June2016, the state has continued to fall, to face at a forty-two year low. Annualhouse value will increase have fallen in June 2016, however, were still atassociate inflation-beating five-hitter within the year to August 2017, in linewith official ONS figures.G8 G9 G10 G11 G12 TimescheduleThe British governmentmust create the capacity to renegotiate trade agreementsreplacing the existingtrade agreements of the EU (with 53 countries).
It takes time. The UK has notindividually negotiated over the past 40 yearsa trade agreement andthe government has the capacity for this G13 and ability to build. The negotiationsthat determine the future relationship of the UK with the EU are thereforeexpected to last longer than the two years of the exit negotiations. It istherefore good to see that Brexit is a process is not an action. Against thisbackground, the EU and the UK are expected to avoid a disruptive break, butrather strive for a phased process in the implementation of Brexit. For companies, thismeans a longer period of uncertainty. Irrespective of the direct reactions tothe foreign exchange markets, organizations must check immediatelyG14 to think about their risks in terms oftrade and supply chains, regulation, foreign direct investment, the labourmarket, scale and legal structures and other sector-specificeffects, and to make the necessary adjustments to their value chain.
Custom UnionThe EU member statestogether form a customs union, which means that theEU is treated as asingle area for customs purposes and in principle the same rules and tariffsapply in each MemberState. Once goods are in ‘free circulation’ (i.e. all import duties have beenpaid and all import formalities have been fulfilled) a Member State, they maybe freely transported to the other Member States without further payment ofcustoms duties or further customs formalities. In addition, the EU memberstates apply the same external rates to third countries. As such, all MemberStates are benefiting from the preferential rates agreed in the context of theEU’s free trade agreements.G15 Customs formalitiesWhen the UK becomes athird country after the withdrawal from the EU, customs duties will be due forthe trade of goods between the EU and the UK.
This has potentially greatconsequences international trade, but these will only become clear when theBrexit negotiations are progressing and a trade agreement is within reach. Indoing so, the UK will want to take the opportunity to negotiate preferentialtrade agreements throughout the world.At the same timeensuring that cross-border trade with the EU continues as smoothly as possible.It remains to be seen to what extent the EU is prepared to agree to this.
Furthermore, regardless of the type of trade agreement eventually agreed, allgoods crossing the EU/UK border must be declared and cleared by customs.This process involvescosts, additional administrative procedures and possible delays. EU legislationAnother sector that isaffected is the EU’s legislative system on customs licensing that applies toborder crossings. When such a permit has been granted and is being managed in theUK, it is required that this license is transferred to one of the remaining 27EU Member States to keep it. However, this requires that the company hassufficient size in that Member State to support the administrative processesand allow the customs authorities toG16 G17 the right way tocheck. In line with this, a practical consequence may also be that customsregimes of the EU (on tariff classification binding tariffs and binding origin information)are no longer binding. DutiesWe note that althoughexcise duties are national which is basically imposed in the country in whichthe goods are consumed, there is nevertheless an EU directive to ensure that auniform system is applicable within the EU for the movement of excise goodsbetween the Member States under excise duty suspension.
When the UK leaves theEU, the UK can be excluded from this system and excise goods may be deemed tohave been exportedG18 from the UK and imported into the EU and viceversa. A consequence of this may be that additional formalities and possiblythe provision of additional guarantees are required.G19 G20 Free traffic of labourAfter the UK’sintention to leave the EU internal market, Brexit would mean that the currentfree movement of persons from the EU is coming to an end in the UK. This wouldhave consequences for European citizens looking for work, studying, or simplymoving to the UK and also for it British citizens who want to move to the EU orwant to live and work in the EU. It also has consequences for companies’ability to recruit high and low educated people in the UK and to deploy them inthe EU, and vice versa.A possible newagreement between the UK and the EU may give partial access and allow a certainfree movement of persons. For companies, it isimportant that the 4 freedoms will remain the same. Adverselyaffected by BrexitTheScottish whisky manufacturers are going to suffer from the Brexit.
They risklosing margin with trade barriers. They can also lose the protected name ofScotch whisky. Whiskyis a very important export product from the UK. It is being manufactured inEngland, Wales and Northern-Ireland. But the majority comes from Scotland,which is a region where most people voted against the Brexit.
TheScotch Whisky Association (SWA) says that Brexit is an opportunity and threat.I personally believe that is more likely to be a threat. A very important issueis that the name Scotch Whisky is protected by the European Union.
So, thisprotection will drop.Withregard to intellectual property rights, it is uncertain whether, after Brexit,registrations in the EU will also provide protection in the UK and vice versa.Parallel registrations in the UK may be advisable in order to protectintellectual property rights in the UK.Anotherissue is the low tariffs that the EU discussed with countries like South-Africaand South Korea will no longer be applicable to the Whisky manufacturers.
Eachyear more than 4 billion euro of Whisky is being exported. 1/3 is going to theEuropean Union. So, if there will be tariffs for export to the EU, then thiswill damage the sector.Therework over 20.
000 people in this sector. Ibelieve that the first thing the SWA should do is to protect their name.Because the USA is already asking to lower the protection of this name, so thatthere could be more competition from other players in the USA.
If they losethis name, they will lose an important advantage.G21 G22 TheSWA should ask the UK government to protect this name and to help the sector. TheUK should keep the current tariffs between the European Union so that 1/3 ofthe production will stay safe without higher costs of export to the Europeancountries. What’s going to happento all or any the EU laws operative within the UK?The Conservativegovernment has introduced the European Union (Withdrawal) Bill to Parliament.If passed, it’ll finish the importance of EU law within the United Kingdom ofGreat Britain and Northern Ireland. This “Great Repeal Bill” becauseit has been referred to as, is meant to include all EU legislation into UnitedKingdom of Great Britain and Northern Ireland law in one lump, once that thegovt. can decide over an amount of your time that components to stay,modification or take away. the govt.
is facing claims from stay supporting MPsthat it’s giving itself sweeping powers to vary legislation while not correctParliamentary scrutiny. Theunion ensures EU member states all charge similar import duties to countriesoutside the EU. It permits member states to trade freely with one another,while not onerous customs check at borders, however, it limits their freedom tostrike their own trade deals.G23 G24 Itis totally different from a trade space. in a very trade space, no tariffs,taxes or quotas area unit charged on merchandise and services moving insidehowever members are absolved to strike their own external trade deals.Thesingle market could be a terribly totally different beast – it’s not regardingthe interchange merchandise. It permits the free movement of individuals, cashand services as if the EU was one country. TheTrade deals that the European Union has with other parts and countries of theworld should be copied as much as possible.
Of course, this will be no easytask. The SWA can lobby to convince the government to keep as much trade dealsas possible. Ifthe trade deals disappear and they will not come with a good substitute thanthe SWA should try to open a factory in the EU, so they can keep the Europeanmarket. Unfortunately, a large part of the production will disappear, whichmeans that they will have to fire people in the UK.
Theycan try to boost their own market or that of other countries so they can keepthe production level at the same level. In this way, they don’t need to firepeople.G25 G26 Gain from BrexitBigbusiness with many exceptions cared for be in favour of England staying withinthe EU as a result of it makes it easier for them to manoeuvre cash, folks andproduct around the world.G27 Given the crucial roleof London as a money centre, there is interest in what number jobs are alsolost to different hubs within the EU. Some Great Britain exporters say they’vehad multiplied orders or enquiries as a result of the autumn within the priceof the pound. Others area unit less optimistic, fearing product for the G28 EU market could need to be created at plants within theEU.
G29 Financialand professional services contribute to around 12% of GDP in the UK. Thefinancial sector alone offers indispensable support for the economy. Sheemploys more than a million people.
Followingthe Brexit vote, the Head of the European Central Bank said that London couldlose its status as the financial capital of Europe. Reports in the mediasuggest an important movement of financial jobs in Europe. Accordingto calculations by PwC for professional organization TheCityUK, an EU exit mayjeopardize 100,000 jobs in financial services. Banks may lose their authorityto advise on European deals and to sell in euros if the United Kingdom losesaccess to the internal market.
This would, in turn, mean a move to Europeancities such as Paris, Frankfurt and Dublin.G30 G31 Withregards to Brexit’s champs and failures, Berlin looks set to catch a couple oftriumphs particularly the city’s developing money related innovation area. Germany’scapital has created buzz for its endeavours to draw in London’s Intechorganizations and different new businesses since the UK voted a year ago toleave the European Union. A moving board (“Keep quiet and move toBerlin”) is one of the tricks that have unsettled British quills. However,Berlin’s increases won’t originate from a Brexit-driven mass migration that is,from UK-based innovation organizations relinquishing their country. Rather, itsIntech scene will profit by the US and Asian organizations currently pickingBerlin, and not London, as their EU base.
That at any rate is the expectationfrom Stefan Franke, CEO at Berlin Partner, a business advancement office. Hegauges that Berlin is home to around 80 to 100 fitness and anticipates thatthat number will twofold by late 2018. Themajority of that development will originate from “our own particularenvironment here in Berlin, and that individuals from Asia and America who needto enter the European market that they will do it more from Berlin than fromLondon since no one comprehends what the Brexit implies for their ownparticular business circumstance”, Franke disclosed to FN’s sisterproduction Market Watch. He was talking a year ago, yet the current hindrancesto the British government’s EU withdrawal design have just elevated thevulnerability. Particularly with the overall pattern to digitalize banks.Fintech organizations in Germany can accomplice up with the banks that movefrom the UK to Germany. Inthe meantime, Germany is as of now getting up to speed, by a few measures.
Subsidizing inflows for the nation’s Intech division totalled $421 million in ayear age’s initial seventy-five percent, besting the UK’s $375 million, asindicated by figures from bookkeeping mammoth EY.Someexamples: Fin Leap a self-described “organization developer” that has propelled11 Intech wanders utilizes English as its in-house dialect, said primesupporter Raman Normand, as there are around 30 distinct nationalities amongits about 400 workers. Akeeping money stage Solaris Bank is the Fin Leap wander that may profit mostfrom Brexit, as it helps organizations working in the EU, Normand said.
Heincluded that its different endeavours won’t see much effect. The Berlin-basedorganization’s portfolio ranges from protection specialist Clark tospeculations stage Saved.Conclusionand future Both companies will have to adapt tothese new situations. They will have to follow up new developments. Becausethere is still a lot that needs to be discussed.
If the leaders in the Brexitnegotiations come up with new regulations, then the companies much see if it’sbeneficial for them or not. For example, with the new regulations the Whiskeycompany can maybe benefit and the Fintech companies in Germany not. There will be a further reduction of thecredit rating. It did not take long before the three largest credit ratingagencies in the world Moody’s, S&P and Fitch reduced British credit. Thismeans that the country loses its AAA status.
And that lowered credit rating has itsconsequences. The consequences for the British Treasury in the short term arenot yet known, but there is a chance that S&P and Fitch will further reducethe score of the United Kingdom. If that happens, the British governmentdebt looks less attractive to investors. British government bonds will then beexcluded from the safest part of investment portfolios. The demand willdecrease and the financing costs of the government will increase. The impact of Brexit on other forms ofborrowing is still unclear.
In order to stimulate inflation, it is very likelythat the central bank will lower the interest rate before the end of the year.This can ease the cost of loans. As we have seen in the course ofEntrepreneurship, economists and investors are particularly concerned about anincrease in the cost of loans for businesses and consumers. Even if the baserate of the Bank of England drops.
Due to the economic uncertainty, lendersmight increase financing costs to compensate for the higher risk of lending inthe United Kingdom. Higher financing costs will then have a negative effect oncompanies, especially if the economy enters a recession. The weak pound could stimulate Britishexports, but many financial experts are not convinced. To begin with, theUnited Kingdom relies much more on imports than on exports. In addition,specialists explain that the production and export of services have a highadded value in Great Britain. They are more sensitive to changes in demand thanto changes in price.
Approximately 28% of British products are sold abroad.45% of this is exported to EU countries. Access to the internal market isuncertain at the moment, but European demand will undoubtedly be affected. Incombination with the already weaker demand from the most emerging markets, thechances are that the cheaper pound will benefit the economy less than expected.Indeed, the UK economy is likely to feel the pressure from higher import pricesthan any growth in exports.G32 G33 What also will play arole is that the EU can impose a tariff and quota for British exports to Europeand thus limit the number of goods and services sold.G34 G35 G36 The prospects for business and theeconomy of the United Kingdom are uncertain at the moment. They are too dependenton the negotiations about a withdrawal from the United Kingdom from theEuropean Union.
Business Secretary Sajid Javid has onemajor priority in the EU negotiations: ensuring that the United Kingdom hasaccess to the internal market. But it is not certain that he will succeed. References· Alex Hunt & BrianWheeler. (2017). Brexit: All you need to know about the UK leaving theEU. Available: http://www.bbc.
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