Will Brexit Be A Series Of Challenges Or Opportunities?
Preamble
Before I get to the nitty-gritty of this post, I should say the following.
- I voted for Remain.
- When it was created in 1985, I felt that the UK should have been part of the Schengen Area.
- When the idea of the euro was first floated, it seemed like a good idea to me.
The last two, are because I like nice simple and efficient systems and not for any political reasons.
These days with modern technology, I believe that a Europe-wide free-movement area is possible, but it would need that everybody carried an identity card or a chip in their finger. Some individuals might have objections.
As to the euro, it would be possible to have a world currency based on contactless technology, which would go a long way to eliminating the need to carry cash, if you didn’t want to.
This would also have the ability to add your preferred currency to the card and on-line account, so when you paid a bill, a first tap gave you how much you would be charged in your preferred curency, be in pounds, euros, dollars or Ruritanian groats. It’s only software for heaven’s sake!
My random thoughts follow.
After The Vote Everything Has Changed
Prior to the vote on Thursday, both the Remain and Leave camps were speculating about what would happen should we either Remain or Leave.
We will never know how good two of the forecasts would have been.
In some ways the vote was like driving home through terrible weather and knowing that your two preferred routes home could be having trouble. So you are listening to the radio, in the hope that before you have to make the decision, you will be told that one route is so much better than the other.
But that clinching information never comes and when the routes divide, you toss a coin in your brain and let your heart or your head decide.
You never know if you’ve chosen the right route until you’re safely home.
No wonder we got such a close result, as half the country looked at the economy and the others looked at all the immigrants, who were taking their jobs, housing and schools.
The vote for Brexit has changed everything, in that it will shut up the Brexiteers for ever.
If we had voted for Remain, even by a large majority, I don’t believe they would have shut up and they would have constantly been a disruptive influence, until they got another vote. And if that one went the wrong way, another one! And another!
As it is the Remain camp is starting a petition for another referendum, as this article on the BBC, entitled EU referendum petition signed by more than 1.5m reports.
There is a time to shut-up, but I don’t believe those words are in the dictionary of the Brexiteers.
So was Brexit inevitable. Sadly, I think unless we had a complete realignment of British political patyies after the 2015 General Election, I think the answer would always be yes!
A Single Objective
The biggest change is that we now have a single objective, which we must get to work and that is for the UK to have a workable relationship with the EU, whilst remaining outside.
There will also be lots of decisions to be agreed between the UK and the EU. But many will be simple ones, where both parties will have to agree a specification for something used on both sides of the Channel.
But, if we organise this process correctly with goodwill, it is a parallel one, where large numbers of teams can look at the thousands of areas.
But, if there is no goodwill, it would take years.
A Simple Example
If the objective can’t be agreed, then an awful lot of companies with interests in both the UK and in mainland Europe will have severe problems unless they relocate all production to one side of the Channel.
A simple example is Siemen’s Class 700 trains, which are built in Germany for Thameslink and other British train companies. On this page on their web site, Siemens state that components for the trains are made in the UK.
Siemens might be able to move component production, but would Airbus want to move their multi-billion euro wing plant in Wales to France?
Transfer Pricing And Duties
I think we’ll come to a very sensible agreement on transfer pricing and import duties
As in my simple example,much of this will concern companies or commercial organisations with interests in both the UK and Europe.
- Airbus have a massive wing factory in Wales and assemble the planes in Toulouse.
- BMW produce Minis in Oxford and engines in the West Midlands.
- Deutche Bahn owns Arriva in the UK.
- Eurotunnel runs the Channel Tunnel
- Ford builds cars in Belgium and Germany and engines in Wales and England
- IAG own British Airways, Iberia and Aer Lingus.
- Tata in Scunthorpe produce a lot of rail for SNCF
We will certainly be seeing more reports like this article in the Daily Post, entitled EU Referendum: Airbus assessing impact of ‘disappointing’ Brexit vote.
But would the EU impose an import tax on the Welsh wings for the Airbuses? If they did, there would be the mother of all battles.
As to transfer pricing for smaller and hi-tech companies, the nightmare for legislators would be no easier, especially as a lot of companies use Luxembourg and Ireland to minimise tax. Many are American too, which would inject a lot of urgency and complication into the solution.
Financial Services
\Reports are starting to appear like this article on the BBC entitled City firms may lose ‘prized’ EU access, say eurozone leaders.
Negotiations on this will be tricky, especially as it is more important to the UK than the EU.
But London has the advantage of time-zone, language, expertise, experience, reputation and lifestyle.
But I don’t believe an acceptable solution can’t be found.
I also believe that IT people and others would come up with solutions that get round any restrictions.
I always remember the story of a Dane, who set up a world-wide, on-line shopping and delivery system for provisioning cargo ships as they sailed around the world. He did it in London, as everything he wanted was there.
I also believe that the herd of rhinoceres that is disruptive innovation will run riot, creating new financial businesses and destroying old ones. This is already happening and all Brexit will do is increase the pass of development, as it will throw up nice meaty billion euro/pound/dollar applications.
By choice, they will probably base themselves in London or across the Atlantic.
The only way, the EU will keep them out, will be to make use of these new systems illegal.
Never Underestimate The Power Of IT
As someone who in 1977 was part of the team setting up Metier Management Systems, whose software called Artemis, completely changed the Project Management business, I can assure you that disruptive innovation will completely change the world of financial services.
Look at how the dark web is used for nefarious purposes like pornography, drugs and guns.
Despite the best efforts of law enforcement agencies with large Government budgets, they fail to stop this illegal tide.
But use similar techniques and all sorts of methods could be used to pass information across the Internet to control manufacturing, management and financial services.
Unless a decent and fair agreement is reached between the EU, the UK and other countries, the failure to agree will cost the dissenting party dear!
This failure will just create opportunities for the disruptive innovators.
There Will Be A Lot Of Problems With Trade
With trade the devil will be in the detail and there will be challenges galore.
But in a lot of cases, everybody will just use the standard rules and we can change them if we need. and the changes will be in most cases, solely down to us.
I think too, that these days most manufactured products are now the same for most markets, with many of the differences handled by software or good engineering.
With agricultural products, it’s probably true, that many are to worldwide standards.
There will be scare stories about how some products will not be available after Brexit, but as one country’s import will be another country’s export, the differences will be solved.
The French will finally have an excuse to ban Welsh lamb for ever!
Migration
This will be the biggest challenge.
Legal EU and other migrants living and working in the UK will probably be handled by a similar system to now, but then they aren’t the difficult problem.
Their numbers will fluctuate as the work in the UK is available, so if Brexit is the disaster predicted by some forecasters, many will probably go home. It has always been thus!
There is this article on the BBC, entitled EU Brexit referendum: France’s Calais seeks border deal changes, which talks about the general unhappiness of the French. This is said.
The mayor of Calais wants changes to a deal which allows Britain to carry out immigration checks on the French side of the English Channel, after a UK vote to leave the EU.
If the French decided they were just going to put all the migrants on a ferry for Dover there would be trouble.
I think a lot depends on the French elections next year.
Ireland
Ireland is an integrated island with part in the EU and part in the UK.
But then the Irish have always helped each other out in times of troubles, like World War II and the 2007-8 Banking Crisis.
Will the whole of Ireland finally unite, as I have always believed it should?
Scotland
I actually believe that Scotland leaving the UK, could be a more difficult set of negotiations, than those for the UK leaving the EU, as there are so many state-owned assets on both sides of the Border.
The Effect On Europe
I read a piece by Katya Adler on the BBC web site last night, but can’t find it this morning. In it, she said that there will be a lot of repercussions in the EU, as Germany will become even more powerful, as the balance the UK helped provide will have gone.
Some could argue, that Merkel’s open door for migrants has caused a lot of the EU’s and especially our problems.
Conclusions
There will be opportunities and challenges.
But many of the challenges will occur in areas where big EU- or UK-based companies have substantial assets on both sides of the Channel.
The deal must satisfy the likes of Airbus, Aviva, BAe Systems, Barclays, BT, Deutsche Bank, EdF, Mercedes, Renault, Siemens and Volkswagen, and what they get will set a lot of precedents for every company or organisation in the deal.
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