As Article 50 has finally been triggered, Michelle McGrade, Chief Investment Officer at TD Direct Investing, talks Finance Monthly through the key areas investors should consider, and answer a question many investors are thinking: ‘What are the investment opportunities open to me in a post-Brexit world?’

Following the UK’s vote to Brexit, our customers over at TD Direct Investing told us their biggest concern was how the UK Government would manage to implement its plans to trigger Article 50. And, more recently, we have seen increased uncertainty about what Brexit will actually mean, with approx. 40% saying they don’t know what impact it will have on their investments.

Here I’ve focused on six key areas I believe you should consider – and bring you 50 Investment Opportunities for Article 50.

In addition to our Best of British Fund Managers list, which highlights the 25 funds that have consistently performed over the past decade, we focused on some key topic areas: Disruption, European Recovery, Global Income, Small Caps, Contrarian and Sustainability.

Sector opportunity #1: Disruption

Politics are certainly disrupting the status quo around the world right now, but the wider theme of disruption is having a more profound impact on every aspect of our lives. Central to this is technology; a constant driver of new, and often simplified, ways in which we live.  According to a recent poll we conducted on our dedicated Article 50 hub, 57% of the 324 respondents believe that Britain has the ability to stand alone as a hub of innovation.

Sector opportunity #2: European recovery

65% of people who responded to a recent TD poll believed Europe has been wounded by the populist movement. However, I think the European economy is actually on a positive road to recovery with a selection of investment opportunities. What we’ve learnt from Brexit is that no one knows how key political events are going to turn out, and what the stock markets’ reaction to those events will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.

Sector opportunity #3: Global Income

Article 50 has been triggered, but does that mean we should start looking abroad for investment opportunities? In another one of our surveys, 57% of respondents agree with my belief that independent trade deals between Britain and other areas around the world are highly likely – therefore, looking beyond our own shores, there are a number opportunities from around the world.

Sector opportunity #4: Small Cap Recovery

The quicker a company can grow its earnings in a sustainable way the more attractive it is to investors. UK smaller company shares have delivered better total returns than larger companies over more than 60 years.  You can think of small-cap investing in the same way as parenting. When the companies are at a very early stage, they are problematic. Likewise, any parent will tell you the ‘terrible twos’ is a difficult time. And once companies get too big, they are then teenagers, becoming potentially hard to manage. But in between these two phases is potentially a sweet-spot for parents and investors alike.

Sector opportunity #5: Sustainability

With events such as the UK’s vote to leave the European Union taking centre stage and leading to market uncertainty and volatility, it is worth noting there are still long-term, structural themes which can benefit investors. Sustainability is one such theme. It is becoming ever more important not just because of its significance in environmental terms, but because companies which adopt a sustainable business model are also outperforming those which don’t.

Sector opportunity #6: Contrarian

Sometimes opportunities arise in the basic act of going against the prevailing sentiment – when a fund is unloved or has, let’s say been out of fashion.

Other opportunities: Best of British Fund Managers

A lot has happened in the markets over the last 10 years; the global financial crisis, the price of Brent crude oil falling to its lowest point since 2003, and more recently the EU referendum and the drop in sterling.

Despite the volatile market conditions - and headlines – some fund managers have truly earned their stripes. Our Best of British research, now in its third year, identifies the top 25 UK fund managers who have consistently outperformed their benchmark and sector average over the last decade.

There is some crossover between Britain’s Top 25 fund managers and the above categories, including MFM Slater, Royal London UK Equity Income and Kames Ethical Equity, who would all appear in both lists - double the credit for their potential.

JLT Specialty, the specialist insurance broker and risk consultant, saw a 60% increase in the number of insured deals during 2016 compared to 2015 globally. This type of Mergers and Acquisitions (M&A) insurance, also known as Warranty and Indemnity (W&I) insurance - of which the real estate and private equity sector remain the key beneficiaries of - is designed to pay out if a buyer discovers the business bought is not what the seller advised it would be.

In its annual M&A Insurance Index report, JLT found that the average limit of insurance (as a percentage of the enterprise value) increased by 16% in 2016 compared to the previous year. This equates to an average insured amount of 29% of the total deal value for global transactions outside of the US.

This may be a reaction to perceived heightened investment risk driven by economic uncertainty around the Brexit negotiations, but equally it may reflect the ever-falling premium rates, as today it is possible to get more protection for less premium. Levels of cover in the US were lower at 23% of deal value, but Japan and Singapore saw the highest levels of protection at 30% and 34% respectively.

Overall market capacity has increased, largely due to new insurer entrants. Existing insurers and managing general agents are also significantly increasing their individual line sizes with a number now able to deploy $US100m+ per deal, allowing high limits of insurance to be met by a single or small number, of insurers. This has advantages from an execution risk perspective, as well as potential benefits in the event of a claim.

The real estate sector continues to be one of the main users of M&A insurance. Alongside this, private equity deals still represent a majority of insured transactions, with industrial and retail markets becoming increasingly frequent users. In what is becoming common practice across numerous business sectors, the seller often facilitates the use of insurance very early on in the deal process to optimise its exit from the transaction.

Furthermore, JLT found that whilst the seller commences the insurance process 40% of the time, it is the buyer that is the insured party on 93% of deals. This reflects a strong seller marketplace where selling parties have been able to negotiate reduced liability under the sale agreement and offer a W&I insurance policy to the buyer instead.

Ben Crabtree, Partner, Mergers and Acquisitions, JLT Specialty, said: “The events of 2016 in the UK and Europe have served as a test of maturity for the M&A insurance market, which perhaps surprisingly, has continued to soften further, both in terms of premium rates and policy retention levels, compared to 2015. This underlines the fact that competition between insurers remains at unprecedented levels. However, the market may harden a little if the current increase in claims activity we’re seeing continues.”

(Source: JLT Specialty)

Article 50 has been triggered, Brexit has well and truly begun. While the European Chief Negotiator for Brexit, Michael Barnier, would like negotiations to be completed within 18 months, the market characterised by economic and political uncertainty looks set to continue long into the future. So how should businesses behave? Michael Gould, CTO and Founder of Anaplan, sets out a five point guide to making the most of your business in such scenarios.

With all this in mind, businesses need to ensure that they are prepared for every eventuality. We’ve already seen shifts in exchange rates and with knock on effects such as price rises and likely regulatory and even workforce changes, there are a host of factors which businesses should already have on their agenda as having the potential to impact their organisations. With Brexit now in full swing, here are my top five tips for wrestling business success from the jaws of economic uncertainty.

1. Stop Waiting

With so many politicians, academics and economists each throwing in their two cents on Brexit it can be hard find any clarity around the real outcomes of Brexit. A recent survey by the Bank of England has shown a modest pick-up in UK investment, but businesses are still holding off on some longer-term investment due to a lack of visibility around future trading relationships. Whilst it’s tempting to hold fire on any serious decisions and adopt a ‘wait and see approach’, it could result in falling behind competitors and losing market share.

Staggeringly, our research revealed that two-fifths of businesses are yet to begin planning for Brexit. Avoid having to play catch up: take the time to gain an understanding of all the potential outcomes of Brexit and start from there. For example, businesses could use planning tools to simulate the impact of fluctuating exchange rates, or plan for potential scenarios on trade deals and tariffs. Another option is to explore different models of economic growth. A sensitivity analysis can then be run based on these projections, with the aim of mitigating risk and helping to plan for making the most of any opportunities.

2. Spot the opportunity

There’s no denying that the Brexit vote has brought an unprecedented level of uncertainty to the UK’s economy, but there are some forward-thinking businesses that have seen change as an opportunity to gain a competitive advantage, and adapt their services for changing consumer requirements. In fact, our research shows nearly one in three (29%) business decision makers say that the choice to leave the EU has already positively impacted their organisation. These uncertain times can be a chance to drive operational improvements or increased revenues.

The key is to identify the opportunities early. Once you understand where the openings are, success will emanate from effective planning. This means having a real-time view of the business and the market as a whole, and being able to react quickly to the slightest change. A good mix of teamwork and the right technology are vital here.

3. Take Control

To begin with, the success or failure of this transition will come down to the quality of leadership. Informed and confident business leaders will help engender a more positive attitude across the organisation. Our research found that many employees (40%) believe that knowledge and guidance should come from the CEO. But there’s a lack of faith: only 20% of respondents actually trust their leaders to provide this expertise. An effective leader inspires in times of change and uncertainty. Those at the helm of the organisation must seize the moment, take control of the situation, and crucially, be seen to be doing so by their employees.

4. Collaborate

Strong leadership from the top is vital for any business strategy, but collaboration throughout the planning cycle is just as important. Involving employees from different teams, disciplines and levels across the organisation will bring new ideas to the table, ensure everyone is bought into the strategy, and deliver a more robust approach moving forward. In uncertain times employees will value open communication and inclusiveness even more.

5. Adopt a Data-Driven Approach

While strong leadership and collaboration are both crucial to business success, companies must have the correct tools in place to take action, or they will struggle to adapt. With this in mind, it is surprising to see that so many British businesses are still relying on technologies that were developed over 30 years ago to plan in today’s market: pen and paper (58%), email (81%), Excel (86%) and Word (80%), to name a few. They simply are not fit for purpose anymore.

The data that a business produces has to be seen as one of its most valued assets. Organisations need to take full advantage of it and use the insight to make the most relevant and informed decisions. In such a volatile market, real-time data is invaluable. For instance, managers can use their company’s data to accurately simulate the potential outcomes of any decision, and forecast the possible impact.

Unfortunately, there isn’t a step-by-step guide or a defined roadmap for what the world will look like post-Brexit. However, businesses can make sure that they are ready for every outcome, modelling and planning for all possible futures. Organisational and cultural factors will play their part in ensuring that businesses are making the most informed decisions. But, those that also take a data-driven approach with the latest technologies will be a step ahead, and ready to take advantage of every opportunity in a dynamic and shifting economic market.

Financial passporting enables businesses across the EU to operate throughout member states without needing specific authorization for each country they trade in or provide cross border services within. Craig James, CEO of Neopay, explains to Finance Monthly that the EU stands to lose if financial passporting is revoked, and how a deal could be the best outcome.

Since the country voted for Brexit in June last year, there has been uncertainty about what the future holds, both for Britain and the EU. But, with Article 50 expected to be triggered anytime now, the next 24 months will be dominated by negotiations between the UK Government and the remaining 27 EU nations.

A major sticking point will be the role the City of London continues to play in the financial world in Brexit Britain – particularly when it comes to e-money and passporting. It goes without saying that the UK is considered the financial hub of Europe – most nations looking to do deals across the EU use London as a means of access – not to mention that as one of the world’s largest economies, our financial sector plays a big role in the rest of the world.

No matter what happens, or what deals are put on the table in the next two years, what is essential is that the Government recognises how important the UK’s ability to passport to the rest of the EU is to the wider economy – £27 billion in annual revenue according to Oliver Wyman.

The benefits of passporting for businesses and the economy are obvious.

Through the regime, firms can operate across the European Economic Area (EEA) with a single licence, from one jurisdiction, as long as the regulator is informed by the firm of their intention to use the licence to passport.

Whether Britain remains a member of the European single market could be a determining factor as to whether the country can remain a hub for passporting across the EU bloc, as being a member is a requirement for accessing the benefits this process brings.

If the UK withdraws from the single market, which the Prime Minister has indicated will likely be the case, it will signal the end of the established passporting regime, and could result in a US style arrangement where firms are required to register in each individual state.

However, while this would be a cause for concern in the UK economy, it could be a much bigger problem for the rest of the EU. As the fifth largest economy in the world, Britain will remain a nation that most e-money and payment businesses will want access to.

One of the reasons the UK is a preferred destination for firms looking to passport financial services is that the Financial Conduct Authority (FCA) has made it simpler for this to happen in the UK compared to the rest of the EU. This is not to mention that once the UK is free to make its own decisions on trade and regulations, it will have the ability to make itself an even more attractive prospect for firms.

The UK is also considered a pathway to the rest of the world outside of the EU, significantly including the US, so would likely remain a central destination for firms looking for efficient passporting.

On the other side, the EU would be required to establish a new finance hub. Some reports have suggested Luxembourg or Frankfurt could be gearing up for this role, but neither has the regulatory convenience of the UK and are far behind in developing these arrangements. That leaves the option of registration in individual nations, which again, increases the bureaucracy and is a convoluted and cumbersome regime for a fast-moving and technologically-developed market.

Considering that simply setting up a bank account in a foreign jurisdiction is already problematic and will cause significant delays, it will remain in the EU’s general interest to retain the status quo and allow the UK to remain the passporting destination for the wider union.

To highlight this point further, a Freedom of Information (FOI) request we filed with the FCA has revealed that as many as 75% of new payment firms authorised in the UK in the last eight years, including many from the US and outside the EU, have used the passporting regime to export their services. This is significantly higher than the number of firms looking to enter the UK from Europe and suggests the EU stands to lose out more than the UK if a deal is not reached to retain the current passporting regime.

Questions also need to be asked about the future of e-money and financial services with regards to passporting, especially in the area of expanding the market beyond the borders of the EU.

As a single entity, the UK would arguably be in a better position to negotiate deals with other nations to expand passporting rights. This would be an attractive prospect as emerging markets in the Middle East continue to grow.

While it could be argued that the UK’s financial market could be in a better position post-Brexit than the EU if passporting rights are revoked, it makes more sense for those involved to compromise on this issue above others.

No matter what the future outside of the EU looks like, or the EU’s without the world’s fifth largest economy on board, it is essential businesses can retain the ability to operate across borders as efficiently as possible, and retaining the one licence agreement is the best way to ensure that. Failing to establish this primary principle could lead to long term unrest and a detrimental business environment far beyond the two year negotiations ahead of us.

Following last week’s initiation of the Brexit process via the triggering of Article 50 of the Lisbon Treaty, Finance Monthly hears from Chief Market Analyst of Currencies, Jonathan Watson, who portrays a watchful outlook on the months to come, and how the tide can easily turn in the face of socio-political tiptoeing.

This week the triggering of Article 50 marks an important phase in the Brexit process. It is the beginning of the legal process by which the UK will leave the EU, signalling an end to months of uncertainty as to whether Brexit will happen. It is also the beginning of a whole new set of questions relating to the Brexit and how it will impact both the UK and the EU. From a currency perspective, I believe the Pound will have further to fall as the reality of some tough negotiations ahead weigh more on the UK. Nevertheless, Theresa May’s steely determination and clear vision has won her lots of support and indeed helped Sterling back from the brink earlier this year. Whilst I wonder whether such tenacity will be enough for such a monumental task ahead, I am also reminded that recent events have so often proved the more literal analysis of many of the negatives of Brexit have been proved wrong so far. It is still early days but it is in everyone’s interest to make this work and to remain hopeful for the future.

The UK economy is performing significantly better than feared which is extremely encouraging for the future. The weaker Pound has driven growth in firms who export as the discounted UK represents a good investment. However, the weaker Pound has pushed up import prices and costs across the UK from supermarkets to manufacturers, which is gently being absorbed into the wider economy.

The falling Pound has also led to a rise in Inflation which paradoxically, has seen Sterling higher as Bank of England policymakers debate whether or not to raise interest rates. Therefore, fears over higher inflation may not be such a problem, as rising interest rates may help the UK avoid any of the negatives associated with high inflation. Once Article 50 is triggered I can see Sterling falling as the complexity of negotiations becomes apparent. Nothing will happen quickly, already it has been made clear that the ‘Brexit bill’ must be agreed before negotiations commence. Trying to get all 27 members to agree one coherent position will also hinder time frames. France and Germany will also have elections to contend with this year.

These roundabouts and diversions on the path to Brexit will make life very difficult for Theresa May and the UK Government. All of this can very easily be seen to be damaging for the UK economy and Sterling. A lower Sterling is generally not a good thing for the UK as since we are a net importer (we import more form overseas than we export) a weaker Pound makes life more expensive for the UK as a whole.

However, I cannot help but be troubled by some of the looming questions and uncertainties arising from Brexit. A falling out with your biggest trading partner is never going to be completely without risk and the unpicking of some deep rooted social, political and economic ties is not good for business and confidence.

Whilst the resilience and flexibility of the UK economy coupled with Theresa May’s vision is gently receiving the backing of financial market, things can change very quickly. This leads me to suspect that whilst perhaps the worst fears will continue to be abated, longer term there could be greater challenges ahead which will harm the UK economy until we have clarity and certainty.

Business and consumer activity thrives when there is confidence and certainty, Brexit represents a massive change in the status quo which goes against what we know from a fundamental view.

Like it or loathe it, Brexit is happening and we must all come together and embrace it to make the very best of it. Business should be looking to make the most of Britain’s new place in the world but also remain cautious and plan for troubles ahead.

With Article 50 now triggered and the formal Brexit process underway, the world’s eyes will remain on Europe for the foreseeable future. Here, Michelle McGrade, Chief Investment Officer of TD Direct Investing, discusses for Finance Monthly the investment opportunities on the horizon and the relevance of the socio-political environment that surrounds businesses.

The UK’s vote to leave the EU last June was likely to catalyse political uncertainty across Europe. This was especially true with a number of Eurozone countries, including the Netherlands, France and Germany, holding elections over the course of 2017. With Donald Trump’s unexpected election victory in the US, concerns around the rise of populist governments gaining power in Europe have been further raised.

The result of Dutch election recently, in which the populist measures proposed by the Party for Freedom (PVV) lost out to the current People’s Party for Freedom and Democracy (VVD) government, was a positive outcome for European markets looking for stability. The risk of a potential exit from the European Union (EU) and the euro, as well as further restrictions on immigration, have all receded.

But, what does this mean for investors?

According to our most recent customer survey, 65% of respondents believe Europe has been wounded by the rise in the populist movement. But when asked whether a populist movement – in this case triggering Article 50 - will have a positive impact on their portfolios, investors were split; 38% were unsure while only 32% thought it would.

While the Dutch result suggests this risk might be over-inflated, the uncertainty will persist until the outcomes of these elections are known.

We need to stop being blinkered by the politics

When the Dutch election vote came through I said publically that instead of focusing on politics, we should probably concern ourselves more with the fundamentals. Ian Ormiston, fund manager of Old Mutual Europe (ex UK) Smaller Companies, agrees. He believes there are reasons to be positive on the outlook for European equities and agrees that we should largely ignore politics. “Investing in European equities is not the same as investing in Europe,” he says. “Next time you are tempted to talk politics, opinion polls, and the vagaries of the US Electoral College system, try restraining yourself, however tempting. No one knows how key political events are going to transpire, just as no one knows what the stock market’s reaction to those events is likely to be. As investors, let’s try to stick to the knitting and focus on company fundamentals.”

The cyclical recovery across Europe is showing signs of gaining momentum. Lead indicators remain positive and there are signs of improving confidence from companies and consumers. Eurozone unemployment is also continuing to fall, supporting the recovery seen by consumers. This is being aided by easier borrowing conditions for both corporates and households, helped by a European banking system which is finally becoming better capitalised and willing to lend. The threat of deflation is also abating, with inflation approaching the European Central Bank’s (ECB) target of 2%.

So, where are the European fund opportunities?

John Bennett, head of European equities at Henderson Global Investors and manager of Henderson European Selected Opportunities, points to a meaningful move away from growth and towards value investing. He is particularly keen on European banks.

“While it is early days, the signs are good that this change in leadership [from growth to value] could be durable,” says Bennett. “Such a shift, should it continue, favours Europe, home to many ‘value’ stocks, and is positive for the kind of stocks and sectors that investors have found easy to avoid for much of the last decade.”

“Our tilt to value accelerated significantly in the second half of 2016,” he continues. “That acceleration was writ large by our move into European banks despite, like many other investors, finding the sector still very easy to dislike. History shows that investing in European banks would have been a spectacularly wrong call from 2008 until recently, but we feel a combination of vastly improved capital ratios and a turning point in interest rate expectations has made the industry once again investable.”

In addition to these funds you could also tap into opportunities in European equities via BlackRock Continental European Income, which seeks to generate income by investing in companies with a strong competitive position and earnings stability, and with sustainable and growing dividends, or Jupiter European Special Situations, which invests in high quality companies whose profits are growing.

For European equities, the strengthening economic backdrop is improving earnings prospects. Following several years of moderate or no growth, expectations are for high single digit earnings growth this year, with further improvement in 2018.

Europe now turns its attention towards France and its upcoming presidential election. Should Marine Le Pen’s Front National win there could be consequences for the EU, but the two-stage electoral system in France could act against her. Nevertheless, investors are likely to remain cautious until the political risk across Europe reduces.

What we’ve learnt from Brexit is that no one knows how key political events are going to turn out, and what the stock markets’ reaction to those events will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.

A new survey, sponsored by The Brexit Tracker, has calculated that Brexit planning has already cost UK businesses, £667.2m so far in executive man hours and this figure is set to rise to £813m after Article 50 is triggered.

The survey, conducted in January, polled 168 Board Directors of UK companies with a turnover of £10m - £150m to discover the impact and cost of Brexit planning. The associated costs were a conservative calculation based on current working hours spent on Brexit planning, accounting for one individual per organisation and factoring in that 68% of organisations have at least two staff involved.

Ben Martin, founder of The Brexit Tracker said, “Our research suggests that 40% of firms have already started planning for Brexit and with 70% CEOs and CFOs being tasked with that planning you can see how already it’s becoming an expensive business.”

However, despite anticipated costs, the survey found UK businesses were predominantly positive about Brexit and leaving the EU. While many are in ‘wait and see’ mode almost twice as many respondents are positive about the benefits Brexit has had on their industry sector than are negative (39% v 21%).

37% of respondents felt there would be a positive impact on business following the triggering of Article 50 while 30% thought there would be a negative impact. But optimism rises again to 42% v 34% when considering the impact of leaving the EU in 2019.

But the survey showed that Brexit was having a negative impact on general business planning and investment. Three quarters of organisations stated the level of uncertainty impacted their ability to invest. The biggest area facing one third of organisations is developing new markets (34%) and this is most notable in Construction (58%), Professional Services (47%) and Business Service (45%). Investment in technology and recruitment were the other main areas facing uncertainty.

Ben Martin explains the thinking behind The Brexit Tracker: “Our research highlighted that although76% of respondents understand the general implications of Brexit that falls to 67% when looking at how Brexit impacts their own business. Clearly there is a knowledge gap.

“The Brexit Tracker analyses 390 economic indicators pertinent to the sector and the firm’s particular circumstance. Stakeholders can understand likely implications for their business and compare their views with those of their peers. Our tool enables expensive resource to be smartly invested in strategic planning, not squandered in trying to make sense of a myriad of factors that may or may not be relevant to the business.”

(Source: The Brexit Tracker)

For months, businesses, consumers and authorities in both the UK and the EU have been waiting for the triggering of Article 50, which initiates the Brexit procedure. However, the lack of details due to the mantra "no negotiation without notification," means that uncertainty has likely been the most mulled over word in media right now.

Tomorrow is the due date for the UK to initiate the process, and the impact will be both immediate and long term, with lengthy negotiations to take place on the back of already what seems lengthy planning time. Finance Monthly has this week heard from numerous sources across the UK, from experts and specialists in several sectors, to businesses forecasting the opportunities and risks, on what might be once Article 50 is officially triggered. Here’s Your Thoughts.

Markus Kuger, Senior Economist, Dun & Bradstreet:

Theresa May’s plans to start Britain’s withdrawal process from the EU will set off a series of tough negotiations. The complexity of Brexit poses unique challenges, with overall sentiment and fiscal numbers continuing to paint a mixed picture: although forward-looking indicators are still reasonably strong, they have deteriorated since the start of the year and, simultaneously, inflation has registered its highest reading since Q3 2013. In this vein, it’s far too early to realistically assess the potential political and economic impact of Brexit – a real bone of contention will be the controversial departure bill, which may well see the UK pay in excess of £60 billion to officially leave the EU. With negotiations about future EU-UK trade relations expected to take longer than the two years available, it is likely that an interim agreement will have to be struck, and we do not expect full independence to be secured until the 2020s at the earliest.

The public’s interest will focus on what kind of deal Theresa May can strike with the EU, especially as the President of the European Commission, Jean Claude Juncker, has reinforced his position that the UK will not be able to ‘have their cake and eat it’. The EU still seems to have the upper hand in the upcoming negotiations, but a disorderly Brexit would also hurt the remaining 27 members of the bloc (although not as badly as the UK). From an economic perspective, the UK is actually performing just as well as it has done since before the country voted to leave the EU, but it’s unlikely that this strong growth will continue throughout 2017. Politically, events in Europe over the next few months could have an impact on negotiations; elections in France and Germany, should they unexpectedly go the way of anti-EU parties, will likely destabilise the two powerhouses’ control over the European bloc. For now, the priority is to start developing official plans for the UK’s departure from the EU. Businesses must monitor the uncertain and fluctuating economic situation that is to be expected over the next few years, and mitigate risks as best they can.

Mark Billige, Managing Partner, Simon-Kucher & Partners:

After the referendum, we have already seen a notable impact on prices, with the inflation rate before the vote hovering just above 0% but now nearing 2%, the official target rate of inflation in the UK. More price rises are imminent with Article 50 being triggered.

Research by Simon-Kucher shows that the severity of price increases passed to consumers has been gradually rising since the referendum. This means that as we move closer to the point at which Theresa May looks like she will trigger Article 50 at the end of this month, companies look set to pull the trigger on increasingly significant price hikes.

But businesses need to be careful. For instance, a survey conducted by Simon-Kucher shows that level of concern about price increases resulting from Brexit does vary within the UK, with 97% of Remain voters concerned about price increases, versus 57% of Leave voters. The research also shows that holidays and grocery bills are feared as the most likely culprits to face price increases. Many people, especially those who support Leave, take a dim view of companies attributing price rises to Brexit.

Chris Baker, Manging Director, UK Enterprise, Concur:

I think businesses have been pretty clear right from the outset about the deal they want with the EU once we're officially no longer part of the 'club.' What will be interesting is how corporate behaviour changes over the course of the next couple of years. We already know from reports that many are stockpiling cash rather than investing, but a new development is also emerging. Many of our customers are reviewing their supplier strategy with a view to forming partnerships with UK companies in order to reduce Brexit risk and turbulence from the FX markets.

Such a strategy makes sound business sense, but longer term if the UK withdraws into itself commercially it will be much harder to forge trade agreements with China, India, the US and of course the EU. To get the best deal we have to be seen as a global economic force, not an island. Businesses need tangible incentives that will give them confidence to invest both in the UK and abroad.

Michelle McGrade, Chief Investment Officer, TD Direct Investing:

Rising employment continues to propel the Eurozone region towards 2% growth. Add in inflation and operational gearing, and growth at a company level starts to look interesting. There are some selected good structural growth stories across Europe. No one knows how key political events are going to transpire, and what the stock markets’ reaction to those events, or indeed the effect on the euro, will be. As investors, it is better to stick to what you do know and focus on a long-term investment horizon.

Rob Halliday-Stein, Managing Director & Founder, BullionByPost:

We've got a lot of uncertainty at the moment and when you look at things and people tend to see gold as a good thing to hold during those times and if you look at Brexit, for example, even though it has not actually happened yet, that could still have a big impact as far as business is concerned. Our most profitable times are always during times of uncertainty.

As a business, somewhat sadly, we always tend to do well at times like that. No one really knows how this Brexit is going to play out over the next two years once Theresa May pulls the trigger to trigger article 50. There are a lot of unanswered questions and a long road to go down. We don’t yet know what is going to happen to UK and EU nationals working and living abroad and those from other European countries that are living and working here in the UK. Indeed, as part of our business, we do employ a few EU nationals so the future for them is somewhat uncertain.

And then there’s the bill for leaving the EU and the estimates are that that could come to around £50bn for our share of liabilities. What will happen to the EU laws that we have been bound by for more than 40 years? Are there similar bills going to have to be rushed through parliament? Theresa May is really going to have to tread carefully here to get the best deal for us upon leaving the EU – otherwise this could end up costing the country dearly.

For me balance of payments is a big issue for then UK right now. We need to be selling more goods and services than those that are bought in from elsewhere. The UK’s 2016 international trade statistics released this month show the deficit of Britain’s balance of payments increased by nearly £10 billion, and is currently just short of £40 billion. This is something that simply needs to be addressed when we go it alone.

However, this is all good for business. With all the uncertainty in the world people still know there's a very strong case for holding gold as part of their portfolio. It will, at the very least, keep its value and preserve wealth. It may spike much higher than that at points of crisis and then it tends to bounce back a bit.

Mark O’Halloran, Coffin Mew:

Over the next two years the ‘Great Repeal’ will become as a common a phrase as ‘Brexit’ has been in the last two. But Great Repeal Bill is misleading as the government’s key task will be enacting legislation, not getting rid of it.

The adoption of EU legislation is not going to be a smooth process. It is going to be complicated by an expectation that negotiations between the UK, the EU and its member states won’t reach resolution till near the end of the two years, potentially leading to a mad rush to get laws adopted.

Patent law is a prime example of an area that is going to be of shared concern for many areas of UK industry going forward. The Government still appears eager to move forward with both a unified European patent court and a unified European patent, and there is logic for this. British businesses will want the security of knowing that their patents are protected as widely as possible, without the hassle of having to prepare and file applications in multiple countries.

As it is, it is far more expensive to protect designs through patents in Europe than in the US and the new unified European patent court and a unified European patent is aimed to address this. The price we may need to pay, however, is continued EU political influence through, perhaps, the involvement of the ECJ. Despite Brexiteer assurances, we will not be able to have all our cake and eat every morsel of it.

There is much uncertainty in how the extraordinary challenge of Brexit will be handled; and two years for global events to take unexpected turns. At first, don’t expect all that much to change. Theresa May’s Government will be closely watched and scrutinised over the next two years and their remit will be to simply ensure we have working legislation in place for us officially leaving. It is once this formal process is complete that the fireworks will fly.

Owain Walters, CEO, Frontierpay:

We expect to see some initial volatility or “noise” in the market once Article 50 is triggered at the end of the month, however, there won’t be any significant developments until we learn more about the detail of the negotiations and any deals become clearer. Our advice to businesses is that they take advantage of the remaining two years in which we will have access to the single market to prepare for life outside of the EU. Laying the necessary groundwork to ensure that they have access to international markets and currencies upon our departure is the best way for businesses to ensure that they are successful post-Brexit.

Alex Edwards, Head of the dealing desk, OFX:

When Article 50 is triggered, it will doubtless have an economic impact. But although the currency market is often the first to react to political developments, we’re unlikely to any significant moves on the day itself.

When the Prime Minister first announced that she would trigger Article 50 on 29th March, the pound was quick to fall against the US dollar. In the end, this was only a minor blip in sterling’s recent gains – on the whole, traders have been focusing on positive economic data from the UK, along with rising headline inflation and a hawkish stance from the Bank of England.

Investors know that Article 50 is coming, and to a point, the market has already priced in a lot of the potential negatives that could arise around the coming Brexit negotiations.

In the longer term, the strength or weakness of the pound will largely depend on the progress of EU negotiations, rather than monetary policy. If negotiations are seen to be going well for the UK, then this will undoubtedly be positive for sterling, particularly against the euro. If they are perceived to benefit both the UK and EU, then this will still be favourable for the pound, as it would bring some certainty to the market. After all, it’s traditionally political and economic certainty that’s good for a country’s currency.

Failed negotiations, you won’t be surprised to hear, will not be positive for the pound. Any negotiations will also need to be voted on, certainly on the European side, and possibly in Parliament here. Like any vote, if we know it’s going to be tight, this creates uncertainty – not good for either the pound, or the euro. On the other hand, if the outcome is predictable, then the market reaction will likely be mild when the deal is passed, perhaps even supportive for the pound, as investors buy the fact rather than the rumour.

Overall though, there are still many unanswered questions about what shape these negotiations will take. It’s uncertain, and we know what uncertainty means for a currency. We’re already seeing this affecting exchange rates – the pound has been at historic lows since the Brexit vote, and has been under and close to 1.20 against the US dollar for some time.

When Brexit negotiations begin, clarity should start to be restored. As such, there may be some positive surprises in store for the pound over the next two years – the risk, as they say, could well be to the upside.

Robert Hannah, COO, Grant Thornton UK LLP:

More than nine months after the referendum result, the lion’s share of the government’s and the media’s attention is still being granted to big business brands. However, we know that mid-sized and smaller businesses are the strongest growing sections of the business world and form the backbone of Britain’s economy as significant employers and economic contributors, with strong growth projections.

Brexit should be seen as an opportunity for these businesses to open up to new, more competitive, markets and the catalyst for exploring how we unlock overseas opportunities beyond the EU.

Seeking out areas where good practice is already in place and learning from it, is key to this. A good example is Scotch whisky, a leading UK export enjoyed globally worth £4bn a year. The sector has had an excellent champion in the Scotch Whisky Association, who work hard to ensure fair access across all markets and the industry, and has built an enviable distribution network throughout the globe.

If the British government is serious about getting match fit for the new global economy, they could do a lot worse than sitting down for a dram with Scottish whisky producers to understand how we can get our mid-sized and smaller businesses set up for success.

Rob Douglas, VP of UK and Ireland, Adaptive Insights:

Although the triggering of Article 50 was arguably inevitable it is still likely to cause fluctuation on the global markets and businesses need to be prepared. At the very least, businesses are at risk of the impact of currency fluctuations, but they also face years of negotiations and debates, the outcome of which will have a knock-on effect on finances.

Above all else it is important for finance teams to carve out a degree of stability for their business. The best way to do this is to take an active approach to planning and ensure that they are as agile as possible to respond to wider economic changes. For example, ‘what if’ scenarios that model currency changes can give the finance team and business greater insight into where they may see hikes in costs, which, if not adequately prepared for, could be fatal to a business.

What’s more, finance teams also need to be sure they are considering the entirety of the business. For example, business drivers are not exclusively financial. Non-financial KPIs need to be worked into models if the team is to get an accurate view of the business both now and how it will fair in differing economic environments.

Article 50 undoubtedly spells a volatile time ahead for the UK business community, but successful corporate performance will depend on ensuring the business is as agile as possible. A finance team needs to have its hands on all the business levers, understanding how it can respond to changing market conditions to preserve–and even enhance–the health of the business. Done in the right way, a finance team will cushion its business when times are bad and make it thrive when times are good. It is only with an accurate view of the business, being prepared and predicting possible threats and opportunities, as well as modelling these across the whole enterprise, that a finance team can truly steady the ship in the tumultuous post-Brexit world.

James Roberts, Director, Sanctuary Bathrooms:

As an independent business owner who deals internationally and domestically, we’ve seen rising costs from suppliers since the announcement of the Brexit vote. The rise has been on average around 7%, but as the dollar and euro start to level out, this should hopefully reduce. This has impacted UK consumers, as we’ve unfortunately had to factor this increase into our prices.

One unseen benefit of this upheaval has been an increase in orders from other EU countries, who are taking advantage of the weak pound to grab themselves a bargain.

Frustratingly, we’re still in the dark in regards to the full impact of Brexit, but early indicators are a mixture of positive and negative. It’s difficulty to say with any certainty what post-Brexit Britain will look like as it’s uncharted territory.

Before the referendum last June, many economists produced gloomy forecasts which have since been proved wrong. Consumers' confidence has not suffered, and, by and large, things have gone on as before. Personally, we are quietly confident that our business may benefit from a boost in EU orders in the near future which will sufficiently counter any losses in sales domestically.

Michael Hatchwell, Director, Globalaw and Senior Corporate lawyer, Gordon Dadds:

When the UK Government triggers Article 50 there will be no immediate changes in law or treaties; therefore a trigger of Article 50 will not in itself have any economic effect. Markets may experience some movement, but there will be no immediate effects as the United Kingdom remains part of the EU until it leaves.

Once triggered, the UK will have two years to agree not only the exit terms but also the principles for future relations between the EU and the UK. When one considers the vast array of issues to be thought through and covered, bearing in mind that we have a history of some 40 years of integration, and that major issues such as financial passporting and access rules for UK and EU citizens (both ways) are but the tip of a huge iceberg, it is not surprising that many are of the view that there is not much chance of negotiations concluding in two years.

Two years from the trigger of Article 50 the EU treaties will cease to apply, unless that period is extended by the European Council with the agreement of all 27 other member states.

If no Free Trade Agreement (FTA) is agreed and two years expire without extension, because the UK is a member of the World Trade Organisation (WTO), the EU will treat the UK as it does other WTO members, such as Brazil, Russia or the USA. The same EU tariffs will have to apply to the UK because it will be illegal, absent an FTA, not to do so.

Given the volume of UK/EU commerce, this fallback position will not be welcomed by either side.

Ultimately, because nothing happens immediately and because nobody knows what the outcome of negotiations will be as no country has previously triggered Article 50, the only certainty over the coming 2-3 years is that there will be uncertainty.

This is problematic for those making key investment decisions, as well as in terms of important choices that need to be taken by individuals and companies whose lives and business are entirely intertwined with the EU.

So, can big business afford to wait? Absent some clear indications on key issues, it is likely that businesses will need to anticipate the prospect of trade between the UK and the EU not remaining as easy as it is now. If moving certain functions to another EU location now resolves that issue, then why would such a step not be taken? Of course it may prove to be an unnecessary step, but the risk of not acting may not be acceptable. The decision will of course depend upon a company’s particular trade and issues.

Further, companies are aware that it is unlikely the 27 other member states will make negotiations easy for the UK as they do not wish to encourage any other countries to leave. They may also want to attract as much business as they can from the UK to their own states and play on the uncertainty that will exist.

As regards rushing into new treaties with non-EU countries such as the USA and China, the EU has made is quite clear the UK cannot do so until it has left the EU, creating a potentially longer period of uncertainty before treaties with our key trading nations can be agreed.

It is therefore quite likely that if Brexit does prove to be of benefit to the long-term interests of the UK, it is unlikely that the short-term unavoidable and inevitable uncertainty affecting so many key critical issues will not have a real and negative short-term impact on the UK economy. Put another way, it would be quite surprising if it did not.

The government and the Bank of England will have to act carefully and decisively to ensure that they make the UK a seriously attractive place to do business to counteract the uncertainty that will exist.

Gary McIndoe, Latitude Law:

When assessing a business's needs from an immigration perspective, Brexit creates the potential to incur real financial burden. Changes to existing practices need to be identified and managed as soon as possible, both to minimise costs and to streamline processes (and perhaps even achieve financial savings). As a starting point, business should assess their exposure to the impact of Brexit - some businesses will employ a far higher proportion of migrant workers than others, particularly if in a sector such as construction, hospitality or manufacturing. Review your workforce now and determine what proportion of current employees might be affected. Your business can take steps now to calculate and secure staff retention.

The next step should be to limit the immediate damage - we do not know whether the UK government will guarantee the rights of EU workers already in the UK, but we can be reasonably confident that some sort of provision will be made for those who already have employment, particularly if long-term. Speak to your existing workforce about their feelings towards Brexit, they might need guidance on securing their position. Employers can run workshops for staff members to discuss their eligibility for securing confirmation of residence rights. While this can incur an initial financial outlay, staff retention rates may benefit from a proactive approach. Many EU nationals do not hold a UK-issued residence card, but it would be a good idea to apply for one now. In some cases, a permanent right of residence can be confirmed immediately, but for those who do not satisfy those requirements, a time-limited card from the UK government is likely to give the best protection and offer a level of reassurance for employer and employee alike.

Once you have secured your current workforce, you should consider future recruitment needs, including where your staff are currently recruited from and how might the end of ‘free movement’ affect your hiring strategy. Depending on the scheme on which the government chooses for future EU migration, large-scale recruitment from specific countries may become costlier and more complicated. Familiarise yourself with the schemes applicable to non-EU migrants; formal sponsorship might never be a requirement for EU nationals, but knowledge of more flexible measures both past (such as the Seasonal Agricultural Workers Scheme) and present (e.g. Tier 5 Temporary Workers) could be of use to your business as Brexit negotiations continue.

Finally, you need to prepare your HR team. This will depend on the measures introduced when Brexit takes effect, but your HR team’s processes need to be checked to avoid illegal working may need to change. Consider reviewing your personnel files now to update ID documents and best protect yourself from illegal working penalties in years to come. Future document requirements for EU nationals are not yet known, but reintroducing document checks (or re-familiarising your team with the requirements) at an early stage might help you to transition to a more robust system required from 2019, and save costly penalties in future.

Declan Harrington, Financial Advisor, Savage Silk:

We expect that the economic and social effects of Brexit won’t become completely clear for at least six years. During this period of adjustment, we believe that the majority of companies and even individuals will see very few significant changes in their circumstances.

The only certainty is that fruitful financial opportunities will still exist once Article 50 has been triggered, and businesses should not use Brexit as an excuse to shy away from jumping on them. We are already working with companies and individuals to help them identify these opportunities and take advantage of very benign investment and credit conditions.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

As Parliament has now confirmed the implementation of Article 50 and the notification that the UK will commence negotiations to leave the EU tomorrow, the 29^th March, FDR Law’s Commercial Partner John King, considers how commercial contracts could be affected by Brexit.

The Prime Minister has now announced the formal Brexit negotiation process will now be triggered Wednesday 29^th March, following which the UK will then have two years to negotiate an exit deal. This commencement of the exit provisions has now been authorised by Parliament and it is expected that the Prime Minister will make a speech next Wednesday in the House of Commons to set out her aims, shortly after invoking Article 50.  For the time being, EU law continues to apply until the exit negotiations are finalised and it has been suggested that the task of reviewing and, where appropriate, repealing or amending legislation could take up to 10 years.

Both in the run up to and following Brexit, Britain will clearly continue to do business with the rest of the world, so it is important to understand what ‘rules’ are likely to apply to commercial contracts which underpin their business relationships, particularly with EU companies. So to what extent will developments during the negotiation period affect some of the commercial and legal areas?

On the face of it, many commercial contracts would seem to be neutral as to whether the UK left or remained in the EU. They are generally less heavily regulated than many other areas of law, and, as the name suggests, tend to be based on the commercial bargain between the parties. But what if that commercial bargain is in itself significantly affected by Brexit? Now is a good time to start identifying any potential risk areas in your commercial contracts. These could include increased trade barriers, currency fluctuations, the territorial scope of your agreements, and changes in law.

Existing contracts

The UK leaving the EU may well affect the operation of existing contracts, possibly in a manner that the parties had not foreseen or planned for at the time of entering into the contract. For example, if the operation of the contract was wholly or largely dependent on the ongoing operation of some particular EU legislation it is possible that the contract could be frustrated (i.e. terminated) or the force majeure provisions could be triggered at the time of Brexit (or indeed possibly before when the terms of Brexit become clearer).

Short term contracts

Short term contracts are less likely to be affected by the UK leaving the EU due to the two year negotiating window that will start once Article 50 is invoked. This negotiating period should give both parties time to consider how the terms of Brexit might affect their longer term contractual arrangements and give rise to re-negotiation.

New contracts

Before entering into any new contracts with corporates in other EU Member States, careful consideration should be given to these areas if the contract is likely to continue post Brexit, and you should seek to provide provisions in the contract that might include:

• Either expressly including or excluding the UK leaving the EU in or from any force majeure provision
• Giving the parties termination rights when the UK leaves the EU
• Providing for/referring to an alternative mechanism which will apply once the UK leaves the EU

Overseas contracts

The greatest economic impact is being felt by businesses bringing in materials from abroad. Both the annual and monthly rate of producer price inflation increased in February 2017. Output prices rose 3.5% on the year to January 2017, which is the seventh consecutive period of annual price increases and the highest they have been since December 2011. Prices for materials and fuels paid by UK manufacturers for processing (input prices) rose 19.1% on the year, a slight decrease from the year to January 2017 but the second fastest rate of annual growth since September 2008*. The expectation is that in the event that Brexit means that the UK ends up trading with Europe under WTO (World Trade Organisation) rules, anticipated EU import tariffs would add approximately 10% to the price of UK goods sold to the EU. Any party to a contract that is no longer economically viable will need to review their contractual (and common law) termination rights to see how quickly they can bring the contract to an end or whether the contract offers opportunities to re-negotiation the commercial terms.

In these circumstances force majeure and material adverse change provisions are relevant. Whether they are triggered will depend on the exact drafting of the contract and the application of the rules of contract interpretation. Currently, the market consensus seems to be that it is relatively unlikely that force majeure clauses will be triggered in the absence of wording specifically contemplating Brexit. It may be easier to argue that financial consequences following on from Brexit constitutes a material adverse change but not every contract includes a material adverse change provision.

Next steps

If any of your key contracts are likely to be affected by Brexit, you could consider seeking to negotiate amendments to terms that are materially affected. It is also worth considering whether the contract contains any contractual remedies that could be triggered by Brexit.

Trade deals with the remaining EU states are highly likely to take several years longer than that. In the meantime, the ramifications of Brexit will hopefully become clearer so that businesses are able to confidently deal with any contractual issues that it may bring.

*ONS UK producer price inflation statistical bulletin: Feb 2017

Movinga, Europe’s leading online removals platform, has released a study revealing the cities in which London professionals displaced by Brexit would feel happiest. Dublin is the most favourable city for bankers, based on the average high-end rent prices, language spoken, cuisine, luxury stores and bars, pushing the cities of Frankfurt and Paris unexpectedly far down the list. Startup employees, on the other hand, should try to convince their boss to consider Berlin due to the low income tax rate, average rent, number of co-working spaces, travel costs and the widespread use of English.

There is much uncertainty surrounding the future of London’s banking sector and it is widely reported that banks, British and foreign ones, are looking to move a large part of their workforce to cities such as Frankfurt and Paris. Movinga’s new study shows, however, that the banks might be overlooking the needs of their employees, who are likely to want to continue enjoying an excellent choice of restaurant and bar options, while wanting to keep the costs of monthly essentials, ranging from dry and house cleaning to gym membership, to a minimum. According to the study, Dublin ranks first and is followed by Amsterdam in second and Valletta in third, while Frankfurt trails far behind in sixth place and Paris in ninth.

What is important for bankers is often unaffordable for startup employees. Their requirements are directed more towards travel costs, combo lunches, shared rent prices as well as the price of beers instead of expensive cocktails. Rather than an office in a high rise, they also prefer to have an array of co-working spaces to choose from. The study confirms what many already believe: Berlin is the up and coming startup capital of Europe, closely followed by the cities of Warsaw and Budapest, in second and third place respectively.

“Everyone talks about Paris and Frankfurt as the new financial centres of Europe after Brexit,” said Finn Hänsel, Managing Director at Movinga. “But other cities like Dublin, Valletta, Luxembourg and Amsterdam may actually be better equipped to make these workers feel happy and at home. Individuals and businesses alike should consider the unique factors important to their relocation before planning their move.”

City Banker Index: Results

The results reveal that Dublin is the most desirable city for London bankers to relocate to, scoring high for proximity (70 minute flight), English language comprehension (100%), and more affordable high end rent prices (£1,669.08).

Milan was found to be the least desirable city for London bankers to relocate to due to the expensive high end rent (£2,461.00), the long distance from home (130 minutes), expensive flight tickets (£180.78), and low English comprehension (34%).

*In total, the cities were ranked based on 12 factors, you can access them all by visiting the results page.

Other findings in the city banker index include:

• Valletta, Malta has the lowest maximum income tax rate at 35%.
• Dublin and Amsterdam have the highest maximum income tax rate at 52%.

• Brussels has the most affordable high end rent prices at an average monthly cost of £1,283.56
• Paris has the most expensive high end rent prices at an average monthly cost of £2,841.69.
• The most affordable cocktail on average can be found in Valletta (£4.61) and the most expensive in Paris (£10.14).

• Paris had the most Burberry stores (8), followed by Madrid (4) and Milan (3).
• Paris has the most Michelin starred restaurants (82), followed by Brussels (19) and Milan (17).

Startup Cities Ranking: Results

The results reveal that Berlin is the most desirable city for startup employees to relocate to, scoring high for proximity (115 minute flight), English comprehension (56%), and shared rent prices (£393.47). The city ranks second for availability of capital (9.90) and number of coworking spaces (93), second only to Paris. However, the relative affordability of living in Berlin compared to Paris makes the city far more suitable for startup employees.

Copenhagen was found to be the least desirable city for startup employees to relocate to due to the very expensive shared rent (£957.60), low access to capital (3.62), and the high price of a 0.5L beer (£5.11).

*In total, the cities were ranked based on 12 factors, you can access them all by visiting the results page.

Other findings in the best cities for startup employees include:

• Budapest has the lowest income tax rate of 25%.
• Copenhagen has the highest income tax rate at 43.42%.

• Unsurprisingly, Dublin has the highest English comprehension at 100%. This is closely followed by Amsterdam at 90%, making Amsterdam the non-native English speaking city with highest level of English.
• Budapest has the lowest English comprehension at 20%.

• Paris is ranked with the highest access to capital at 10.00.
• Bratislava is ranked as having the lowest access to capital at 0.00.

• Paris has the highest number of co-working spaces (148).
• Brno has the least number of co-working spaces (9).

• Bratislava has the most affordable shared rent (£195.15).
• Copenhagen has the highest shared rent (£957.60).

• Brno has the most affordable monthly travel costs (£17.19).
• Dublin has the most expensive monthly travel costs (£103.07). Both are still more affordable than London (£122.27).

(Source: Movinga)

The latest House of Lords Brexit report focuses on trade in non-financial services and concludes that a comprehensive Free Trade Agreement (FTA) with the EU is needed. To enable UK companies to continue to operate within the EU, without serious non-tariff barriers, this would need to include a range of complex mutual provisions.

In the absence of Single Market membership it will be much harder to provide for liberalised trade in services than trade in goods.

A 'no deal’ scenario, or a UK-EU trade deal which gave no special consideration to UK non-financial services, would risk serious harm to sectors such as professional business, digital, broadcasting, aviation, and travel services.

In aviation and broadcasting services, WTO rules do not provide for trade with the EU at all. Instead, UK firms would have to rely on outdated and restrictive agreements, so there is no adequate ‘fall-back’ position in the event that no deal is reached. Businesses could be forced either to re-structure or relocate their operations to the EU27.

The Government has also under-estimated the reliance of the services sector on the free movement of people. In forthcoming immigration legislation, the Government must ensure that it retains sufficient room for manoeuvre to negotiate an agreement on this key issue.

These are among the conclusions of the report, Brexit: trade in non-financial services, published today by the House of Lords EU Internal Market Sub-Committee.

Commenting on the report, Lord Whitty, Chairman of the EU Internal Market Sub-Committee, said: “The UK is the second largest exporter of services in the world and the EU receives 39% of the UK's non-financial service exports. This trade is critical to the UK's economy as it creates employment and supports goods exports - we can’t afford to lose that.

“To protect the UK’s status as a global leader of trade in services, the Government will need to secure the most comprehensive FTA that has ever been agreed with the EU. Walking away from negotiations without a deal would badly damage UK plc, particularly in sectors such as aviation and broadcasting which have no WTO rules to fall back on.

“Given the consequences of a 'no deal' scenario and the length of time agreeing an FTA will take, the Government must prioritise securing a transitional trading arrangement with the EU. This would operate as we leave the EU in 2019 until a full comprehensive FTA with the EU can be concluded. This re-iterates the recommendation we made in our report, Brexit: the options for trade, published in December 2016.”

The Committee concluded that, in negotiating a UK-EU FTA, the Government should seek to secure market access and specific reciprocal arrangements in a number of areas. The following are examples:

• Professional business services
  A FTA should include significant provisions surrounding the mutual recognition of professional qualifications and regulatory structures. It should also include rights of establishment for all types of UK service providers, particularly legal services, in the EU and vice versa.
• Data protection standards
  The UK should aim to secure an adequacy decision from the European Commission, which recognises that the UK has adequate data protection standards, in order to maintain the free flow of data. This is particularly important for digital service providers.
• Telecommunications
  To ensure UK consumers do not suffer increased prices, a UK-EU FTA should include provisions extending the abolition of roaming charges in the UK beyond 2019.
• Broadcasting licences
  Broadcasting licences from Ofcom should continue to be recognised in the EU.
• Intellectual property
  Strong protections should be afforded to intellectual property rights across the creative services sector, such as for registered and unregistered designs.
• Aviation
  UK airlines should be able to fly to any point within the EU and provide intra-EU services, either through full voting membership of the European Common Aviation Area (ECAA), or by means of a comprehensive UK-EU air services agreement. This will allow UK airlines to continue to offer the routes they fly today.

The continued movement of workers and service providers in both directions is seen by the UK’s booming services sectors as necessary to support growth.

In a ‘no deal’ scenario, WTO rules would not sufficiently facilitate the cross-border movement of people nor would they ensure the free flow of data. Rules on market access also differ between EU Member States - increasing the regulatory complexity for UK firms.

The Government must narrow down uncertainty so the UK’s services sector can prepare themselves to survive and flourish post Brexit.

(Source: House of Lords)

In a keynote speech to the American Chambers of Commerce, in Brussels last week, Fiona Dawson (Global President of Mars Food) warned that failure to reach a new UK-EU free trade agreement for food would threaten jobs and lead to higher consumer prices.

Noting that protectionist trends are threatening to undermine global trade and make the world less connected, she noted that the future relationship between Britain and the European Union is a critical test as to what future will unfold. Specifically she:

• highlighted how a return to trade barriers would undermine integrated supply chains, which are vital in the large food sector;
• warned that the higher business costs arising from such trade barriers would ultimately flow through to consumers in higher prices and could threaten jobs;
• cautioned that regulatory divergence could undermine future UK-EU trade, and should be avoided;

Jobs and Consumers Must Come First

• urged all parties to the Brexit negotiations to focus on the mutual benefits that close UK-EU economic ties provide; and
• emphasised that politicians must put workers and consumers at the forefront of Brexit negotiations.

Key extracts published pre-speech:

"Brexit clearly poses some problems, but the fact is Britain has decided to leave the EU and the task now is to look forward and ensure that the decisions taken from this point forward achieve the most positive outcome for all concerned."

"The absence of hard borders with all their attendant tariff, customs and non-tariff barriers allows for this integrated supply chain, which helps to keep costs down. The return of those barriers would create higher costs which would threaten that supply chain and the jobs that come with it."

"If Britain ends up trading with the EU on the basis of WTO rules, 'Most Favoured Nation' rates would come into force. In the area of confectionery that alone would mean tariffs of around 30%. For animal products, it would be 20%; for cereals over 15%; and for fish and fruit over 10%. Significant new tariffs would also apply outside the food sector, notably in the area of clothing and textiles. Unfortunately there is no way that those costs could be absorbed without flowing through to consumers in the form of higher prices."

"It is a fact that Europe after Brexit will remain a critical market for UK exports and likewise the UK will remain an important market for goods produced and manufactured in other European states. There can be no economic advantage either side restricting trade with a large market situated on its doorstep. In simple terms, if the UK and the EU fail to agree on a new preferential deal, it will be to the detriment of all."

"Reaching an agreement will require compromise and an appreciation of the economic interdependency between the UK and EU. It requires an acceptance of the benefits that common regulatory standards and the movement of labour can bring, and an understanding that the imposition of significant trade barriers would ultimately hurt everyone and undermine, rather than strengthen, European unity."

"Other member states should remember this is not about 'punishing' Britain for her decision to withdraw but rather about finding the best solution for European and UK workers and consumers. That consideration must come first as we build the future."

(Source: Mars, Incorporated)