Some, even ardent Brexiteers in their private moments, are asking whether the UK is collectively about to commit an infinitely more serious act of hubris with its departure from the EU on February 1st. Might the UK, in decades to come, meekly re-apply, as an Associate perhaps? as suggested by former EU Trade Commissioner Peter Mandelson on the eve of the UK’s departure from the EU last month, for admission to an EU that itself may evolve to rectify some of the objectionable features that prompted Brexit in the first place.
Brian Hayes
Our story on tax on page 6 overleaf lists the 42 European jurisdictions covered in a recent survey by the World Bank of tax rates in the European continent, 26 of whose members are in the new UK-less EU27, the remaining 15 mainly small states in Eastern Europe.
Of this collection of ‘outer Europe’, only three have never expressed a desire to join the EU, - Iceland, Switzerland, and Norway. Two of those (Norway and Iceland) have strategic and resources considerations for this, while Switzerland is the only truly neutral.independent nation, a reflection of its own unique history as a haven within Europe that survived even the voracious nationalism of the Nazis in WW2.
Time will tell as to whether the UK can become ‘Switzerland II’ as a financial centre of Europe, or whether onshore-offshore models, such as Ireland, Luxembourg and Netherlands will be the bigger success stories of the coming decade. Swiss banks have been a pillar of Switzerland ’s success as an international financial centre, and banking will continue to be at the core of the IFS story for the UK. Time will tell as to whether a UK decision to remodel itself as a huge offshore tax/regulation haven will work, or whether that model, by now, might already have passed its sell-by date.
Tim Maloney is a partner at the international law firm Dorsey & Whitney and the head of it's London office. Maloney advises clients both in the public and banking sectors on issues related to Brexit.
“Uncertainty in the banking sector and among the business community is understandably very high”, he said on the eve of the UKs exit on January 31st. “Whether it is a deal or no deal Brexit on 31 December, there is little or no clarity at all for the banking industry. The Withdrawal Agreement contains nothing about banking. This means that banks will have to work on potential and alternate outcomes, depending on how it all unfolds”.
“Businesses need to plan for a “No Deal” scenario and to conduct a root-and-branch evaluation of their operations. For companies that have not developed contingency plans already, businesses will need to prioritize by deciding what actions need to be taken now (e.g. whether to list in the EU or the US), what can be deferred, what actions might be left and where they should remain flexible if the political landscape changes.”
“As an example, in the financial services sector, more than 1,000 banks, asset managers and insurers from the EU have announced plans to open offices in post-Brexit UK Britain. They have applied to the Financial Conduct Authority for temporary permission to operate in the UK after Brexit so that they can continue to serve their UK clients to cover the possibility of two-way access between the UK and EU coming to an end following expiry of the Transition Period”.
Ernst & Young reported on the eve of Brexit that large UK-based financial services firms have implemented plans enabling them to continue operating in the EU involving approximately around 7,000 positions being relocated from London to the EU, and a further 2,400 jobs being created and hired locally in their new EU hubs.
“Banks and other financial institutions operating within, from and into the UK now face a period of market volatility and weakness together with prolonged uncertainty with some of the important details that may only be settled towards the very end of the negotiations,” Maloney says.