A Considered Look at a Post-Brexit Business Environment: The Office of the Consul General at the British Consulate in NY lays out the government’s agenda

Monday, November 7, 2016 - 13:54
British Consulate General
Antonia Romeo

Antonia Romeo

To say that Brexit (the United Kingdom’s decision to withdraw from the European Union) has wide-reaching consequences for companies doing business in and with Britain is putting it mildly. Here, Antonia Romeo of 
the British Consulate General in New York discusses the positions to expect before and after the invocation of Article 50. Her remarks have been edited for length and style.

MCC: What is the UK government doing to mitigate volatility in markets from Brexit?

Romeo: The UK government is committed to supporting the economy through the process of transition as we leave the EU. The Chancellor of the Exchequer, Philip Hammond, has noted that the UK economy has indeed incurred “a significant shock,” and there inevitably will be “a period of uncertainty followed by a period possibly of structural adjustment – as we leave – the European Union.” The UK Treasury and the Bank of England were well-prepared for the possibility of a vote to exit the EU, were engaged in contingency planning and took all necessary steps to prepare for these events. The Chancellor and the Governor of the Bank of England have the tools they need to smooth the path to the new equilibrium as the economy adjusts, and they will not hesitate to take measures as required. The other important point is that we enter this period of transition from a position of strength. For example, the UK is projected to be the fastest growing economy in the G7 for the second year in a row this year, we have a record number of people in work, we have reduced the deficit by nearly two-thirds since 2010, and the UK is consistently ranked one of the best countries for ease of business.

The capital requirements of our largest banks are 10 times higher than before the financial crisis. The Bank of England is ready to provide more than £250 billion to ensure market liquidity. It is also able to provide substantial liquidity in foreign currency if required through agreed swap lines with other central banks.

MCC: How will Brexit affect the famed UK-U.S. “special relationship”?

Romeo: Friends and supporters on both sides of the Atlantic have been clear: The special relationship will continue to be vital to global prosperity and security. Our cooperation with the U.S. is a huge part of our global engagement. Today, we do more together than any two countries in the world and are natural, resilient and strong partners and allies. Our troops equip, train, fight and recuperate together, with several hundred UK personnel stationed in 34 of the 50 states. Our trade and investment partnership – worth over $200 billion a year – has created a million jobs on both sides of the Atlantic. Ultimately, our people are connected like no other, bonded by shared values and our close linguistic, historical, cultural and political ties. We are committed to ensure that the special relationship continues to flourish. As President Obama said, “The special relationship between the U.S. and the UK is enduring, and the UK’s membership in NATO remains a vital cornerstone of U.S. foreign, security and economic policy.”

MCC: How will Brexit affect the UK’s presence on the world stage?

Romeo: The UK remains a great country, and it will always be capable of thriving and prospering on the world stage. Our voice will always be prominent, and we will continue to be a strong and reliable ally to all our friends and partners, including in Europe. We are – and will continue to be – leading members of NATO, the G7, G20 and the Commonwealth, and permanent members of the UN Security Council. We remain resolutely committed to all our operations around the world, including countering Daesh [ISIS/ISIL], bringing peace to Syria, and supporting migration operations in the Aegean and Mediterranean. The UK has the world’s fifth largest defense budget and is the only country in the world to meet the 0.7 percent commitment to ) Official Development Assistance and 2 percent commitment on defense spending. And the Foreign and Commonwealth Office will continue to have an impressive reach, employing over 14,000 people in nearly 270 diplomatic offices around the world.

MCC: What impact will the referendum result have on the UK’s trade relationships?

Romeo: The UK always has been – and always will be – a trading nation. We expect this to continue and accelerate in the years ahead. Maintaining a strong economy and a strong, business-friendly environment for foreign investment is crucial. We’re also a major hub for talent and innovation, as home to three of the world’s top 10 universities, and combined with our world-class research base, a highly skilled workforce and a competitive tax environment (the lowest corporation tax rate in the G20), we are determined to be the best place in Europe to innovate, start and grow a business.

We’ll carry on being a leader in global free trade and take the opportunity leaving the EU gives us to strengthen further our relationships with trading partners across the world, especially our largest trading partner, the U.S.A. The government believes that free trade brings growth, prosperity and jobs to people across the country and the world. Alongside exploratory discussions with new trading partners, we will of course continue to honor our international obligations, to secure the benefits of trade and investment for the UK, and to take effective and proportionate action to tackle unfair trade where it arises. There will be no immediate changes to our relationship with the EU. As the PM has said, “Britain [has pressed] for an ambitious EU trade agenda, including implementing the EU-Canada deal and forging agreements with Japan and America. And we will continue to make these arguments for as long as we are members of the EU. As we leave the EU, we will also forge our own new trade deals. And I am pleased to say that just as the UK is keen to seize the opportunities that leaving the EU presents, so too are many of our international partners, who recognize the attractiveness of doing business with the UK.”

MCC: What will happen to the trade deals currently under negotiation between the UK, EU and U.S., such as the Transatlantic Trade and Investment Partnership (TTIP)?

Romeo: Until we leave the EU, we remain members of it, with all the rights and responsibilities that that brings. The UK will continue to support the EU’s trade agenda and participate constructively in EU decision-making on trade issues, including supporting implementing the EU-Canada deal and forging agreements with Japan and America. And we will continue to make these arguments for as long as we are members of the EU. As we leave the EU, we will of course increase our focus on new trading arrangements with partners and allies across the world, and on forging our own new trade deals. The UK and U.S. remain each other’s largest investors: Every day, a million people in the UK go to work for American companies, and every day in the U.S., a million people go to work for British companies. That means we have a strong bilateral relationship in economic terms. The UK is focused on growing our excellent trading partnership for the future.

MCC: Will there be a post-Brexit UK-EU trade deal?

Romeo: We’ll certainly seek robust trading relationships with EU member countries. The UK has a unique opportunity to shape a bright future for the UK as a global trading nation and open economy, and the Prime Minister has been clear that we are not looking for an “off the shelf” deal for our future relationship. We will do what independent sovereign countries do: Decide for ourselves how we control immigration, and we will be free to pass our own laws. We want to give British companies the maximum freedom to trade with and operate in the single market – and let European businesses do the same here. Although we’re leaving the EU, we’re not turning our backs on international trade with our European neighbors.

MCC: When will Prime Minister Theresa May invoke Article 50 of the Lisbon Treaty, which sets out how an EU country might voluntarily leave the union? 

Romeo: The PM has said we will invoke Article 50 no later than the end of March next year. We will take the time we need to prepare for negotiations in the interests of securing the best deal for Britain, and only trigger Article 50 at that point. The negotiations will be complex and extensive, so there is much policy work to be done in advance to work out our negotiating position and strategy. The Prime Minister has also been clear that we will not give a running commentary on the negotiations or reveal our negotiating position ahead of time.

MCC: Will the UK continue to have a role in normal EU business? How’s that going to work?

Romeo: We are still a member of the EU and will remain as such until a new relationship has been agreed with the EU. In or out of the EU, we will continue to work with our partners and allies for a stronger Europe.

MCC: What has the UK done to protect itself from the economic impact of Brexit?

Romeo: Britain is ready to confront what the future holds from a position of strength. We have today one of the strongest major advanced economies in the world, and we are well-placed to face the challenges ahead. The UK has the highest employment rate in its history, low and stable inflation, and rising real wages. The budget deficit has been cut by almost two-thirds from its postwar peak in 2009 to 2010, and banks are required to hold more capital reserves than before the financial crisis. The Treasury, the Bank of England and the Financial Conduct Authority are monitoring financial markets closely, and the governor has said that the bank [has] taken all the necessary steps to prepare and will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward. We intend to continue to maintain strong access to EU’s single market too. The Chancellor has made clear that in our negotiations to leave the EU, we must work hard to get the best deal for Britain, and that includes ensuring that British companies can continue to trade with the single market in goods and services.

Antonia Romeo is the British Consul General in New York and Director-General Economic and Commercial Affairs USA.