Listen to our Deloitte Brexit webinar hosted on 6 September 2016 featuring Herman Van Rompuy
View the recording of the one-hour webinar presentation assessing the impact of Brexit, and gain insights into the challenges and opportunities that lie ahead.
- Current status of the post-referendum context, from both EU and UK perspectives
- Possible outcomes of the negotiations
- Business implications
- How Belgian businesses and organizations should respond to the changing environment
View the recording
View the recording of the one-hour webinar presentation on Brexit, and gain insights into the challenges and opportunities that lie ahead. You need to register before you can access the recording.
Herman Van Rompuy
A former economist at the National Bank of Belgium, Herman Van Rompuy began his political career in 1973 as national vice-president of his party's youth council. He has held various responsibilities within his party and in the Belgian Parliament, serving in turn as Senator (1988-1995) and Member of Parliament (1995-2009).
Elected as the first full-time President of the European Council in November 2009, Herman Van Rompuy took office when the Lisbon Treaty came into force on 1 December 2009.
In 2012, he was re-elected for a second term starting on 1 June 2012 and running until 30 November 2014.
Questions & Answers
A selection of questions asked by members of the audience during the webinar, with answers from Deloitte subject matter experts.
|How dependent is the UK on trade with the EU compared to other EU countries such as Germany and The Netherlands?
The importance of the EU’s internal market is underlined by the fact that intra-EU trade in goods (dispatches and arrivals combined) was higher than extra-EU trade (exports and imports combined) for each EU Member State, with the exception of the United Kingdom, for which it is almost exactly 50% (see Figure below: intra and extra EU trade 2015, imports plus exports in n% share of total trade). The proportion of total trade in goods that was accounted for by intra-EU and extra-EU flows varied considerably across the Member States, reflecting to some degree historical ties and geographical location. The highest shares of intra-EU trade (around 80 % of total trade) were recorded for Luxembourg, Estonia, Hungary, the Czech Republic and Slovakia, with this ratio falling to 49.7 % in the United Kingdom.
|As a result of Brexit, how do you see the impact on capital markets' trade volumes in the EU?
This question is difficult to answer as many things may still happen in the next 24-60 months and the eventual form that Brexit may take is far from being clear.
Our specialists’ view today is that few impacts will occur as market makers / brokers are organized around the main pool of liquidity - independently of regulatory considerations. London will likely remain the key market in derivatives / equity and will do everything it can to keep this business in the City.
A practical example to support this view is that the UK was already outside the European T2S Market infrastructure and sterling was out of the T2S currency; but this ‘exit T2S’ position has not prevented UK / London from maintaining its leadership position in the derivatives / equity market vis à vis Frankfurt (which is at the heart of the R2S / T2 system).
|We rely on passporting into Europe from the UK. Do you envisage any changes to this facility?
It is difficult to answer this question – as the eventual form that Brexit may take is far from clear and much could happen over the coming two-five years.
While we may expect that the UK will try to maintain the passporting facility, a consensus has to be found on this and all other issues among the 27 other European Union Member States. Given the major significance of the Financial Services industry, the issue will be one of the most important in the negotiations. It may be that the discussion will be balanced between one where remaining Member States seek to strengthen their industry’s position inside the EU at the expense of UK-based financial institutions, and potentially a broader fear of jeopardising Europe’s financial services strength as a whole if London is weakened and the industry becomes more fragmented across Europe.
|How do you think the ending of EU investment policies (e.g. R&D through H2020 and ERDF) in the UK will be replaced by domestic UK funding?
Horizon 2020 projects that UK universities have been awarded will be underwritten by UK government up until the UK exits the EU and, to the extent any projects signed before the UK’s departure continue beyond the date of exit, will continue to be underwritten. It will be entirely up the the UK to decide if and how to continue to support UK researchers after the UK leaves the EU. Several non-EU countries participate in H2020 Projects and the UK may decide to seek such participation in agreement with the EU after Brexit.
ERDF works slightly differently, as the UK government is responsible for distributing funding across a wide range of projects. HMT have agreed to underwrite all projects agreed before the Autumn Statement. Any further projects will be assessed on a case-by-case basis. They’ve also committed to underwrite some agricultural EU funding under CAP until 2020.
|How is the manufacturing sector in the North East affected by Brexit? Could the impact potentially be positive?
It is unwise to speculate on what the terms of the Brexit agreement might be, and on what the future British government policy would be in terms of particular regions of the UK or sectors of the economy, or on what the potential economic impact on regions or sectors might be.
|The main reason for Brexit was uncontrolled immigration - from the EU and from outside the EU. Similar worries are heard from Germany, France and the Netherlands. To prevent the collapse of the EU, what is being done to reassure voters that uncontrolled immigration is being properly addressed?
The UK government and other EU Member States do not permit "uncontrolled" immigration from outside the EU. A major increase in the arrival of refugees and migrants from outside the EU occured in 2015. There are a range of proposals under discussion to manage this situation. An agreement between the EU and Turkey greatly reduced the number of migrants arriving in Greece in 2016.
The European Commission has put forward ideas on how to reform the current system, inter alia in its Communication “Towards a Reform of the Common European Asylum System and Enhancing Legal Avenues to Europe”. Such ideas include “reducing irregular flows to and within Europe, and protecting our external borders, [which] can only happen effectively if we look at the migratory phenomenon in a broad and comprehensive perspective: this means that we need at the same time to enhance legal and safe pathways to Europe, to improve the use and implementation of existing legal migration instruments, to strengthen the Common European Asylum System as well as to continue tackling the root causes of migration. If we want to improve our way of managing migration, we have to become better at attracting the skills and talents that we will need in the future, and at reaping the benefits of migration by ensuring effective integration and participation into the host society of all - refugees or legal migrants.
Specific solutions include the Commission’s proposal to extend the scope of the Eurodac fingerprinting database as a means to contribute to the fight against irregular migration by allowing the system to be used to facilitate the return of irregular migrants. Proposals like this need the agreement of the European Parliamnet and the EU Member State governments in order to be adopted and implemented.
An existing EU agency, Frontex, has just been transformed into the European Border and Coast Guard Agency. The new Agency is designed to be better equipped to tackle migration and security challenges at Europe’s external borders. It will have new coast guard functions, and conduct stress tests at the external borders to identify vulnerabilities before a crisis hits. It will now also be able to share intelligence on cross-border criminal activities with national authorities and European agencies in support of criminal investigations.
|How long can the UK government wait to trigger Article 50?
The UK Government can decide when to trigger Article 50 of the Lisbon Treaty, and is not bound by any legal obligation to respect a specific timeline or even to act upon the result of the referendum (which was not legally binding under UK law - but which obviously had huge political impact). However, during a speech at the Conservative party conference in early October, the UK Prime Minister announced that her government would trigger article 50 and initiate the negotiations by end March 2017, setting in motion the two-year process of leaving the European Union.
|Will the process and impact of UK exit (emerging difficulties and impact as opposed to economic opportunities for the UK) have a pro EU exit or pro EU strenghthening effect in French and German elections, or in Europe in general?
Whether the negotiations strengthen or weaken the pro-EU forces will depend on how they go, how Brexit will affect the British economy and how Europe develops. Our economist's Eurozone article in the next Global Economic Outlook will deal with sentiment in France and Germany regarding the negotiations and will be published at the end of October 2016 – we can provide a copy to those interested.