Brexit vs. Bremain - The business perspective
On 24 May 2016, Mannheimer Swartling and the ICC (International Chamber of Commerce) jointly organised a seminar on the topic “Brexit vs. Bremain - The business perspective”. The seminar was hosted at the ICC and attracted around 120 participants who came to hear senior business leaders discuss the potential impact of a Brexit in an informed debate on the international repercussions of a potential UK exit from the EU.
The seminar opened with a welcome speech by Fredrik Cappelen, Chairman of ICC Sweden, who emphasised the challenges facing Europe. Following this, the case for both sides, the exit and the remain, was presented through presentations and discussions.
John Longworth, Chairman of the Vote of Leave Business Council, had been invited to share his views on what a Brexit would imply for the UK. John was Director-General of the British Chambers of Commerce until 6 March 2016, when he resigned after having been suspended for breaching the BCC’s policy of neutrality on Brexit. Among the Brexit supporters he is sometimes referred to as “the first Brexit martyr”. At the seminar John strongly argued for a Brexit by saying that UK need not be a member of the EU to benefit from international trade deals. Being the 5th largest economy in the world, he stated that other countries will still want to access the UK market, and leaving the EU will imply more freedom to negotiate deals where the EU would not allow it.
“The moment we decide to leave the EU we can start pre-negotiations with third party countries on setting up additional trade deals. Right now, we have no freedom to negotiate these deals because the EU won’t let us. I know that many Commonwealth countries and European countries would negotiate trade deals with Britain in the blink of an eye.”
Pehr Wissén, General Director of the Institute for Financial Research at The Stockholm School of Economics, was of a different opinion: “if I were a politician in another EU country I would not give UK an easy deal signing a free trade agreement – I mean they are actually the ones leaving the EU and hurting the collaboration”, he countered the argument.
On a similar note, Hans Stråberg, Chairman at Atlas Copco, added “tariffs are not the issue, they are relatively low in both EU and US for example. We should focus on standards – they are more important. The beauty with TTIP (Transatlantic Trade and Investment Partnership) for instance is the harmonisation of standards. If leaving the EU, UK would have to adapt to standards set and negotiated by the EU, standards set by others that they have no control over but have to comply with. The same goes with negotiations of new trade agreements with other major economies.”
If the vote falls in favour of leaving the EU, the question is whether London will continue to be an international financial centre or if business will move to Frankfurt or Paris. And will the UK still be an attractive location for European headquarters for multinational corporates? Jan-Olof Jacke, CEO of AstraZeneca, believed that London will continue to be the financial centre but only because it holds a lot of competence. However, as many of these people are not British but immigrants, his view is that London will have to find a way to keep them if the UK leaves the EU. AstraZeneca is very connected to the UK and the company has both its international head office and European office in London. The offices build on many different nationalities and if the UK leaves the EU Jan-Olof Jacke holds it likely that there might be a level of uncertainty because of the regulatory changes. Pehr Wissén agreed that some businesses might move their activities from London. John Longworth was of a different opinion: “People come to London for a variety of reasons - EU is not one of them. London will probably become even more global if UK left the EU.”
A Brexit will no doubt have effects also outside of the UK. It will certainly affect the businesses in Sweden. The voices of the senior Swedish business leaders were in many respects critical, stressing that there will be much uncertainty, not least because of the regulatory changes. Hans Stråberg asserted that investments and uncertainty is not a happy marriage: “In the short term there will be a lot of advantages competing with UK companies and playing the uncertainty card. In the long term, I think it is a tragedy.”
Although most of the relationship between the UK and Sweden will depend on the relationship between the UK and the EU, there is also a bilateral dimension. The continued relationship between the UK and Sweden after a Brexit also gave rise to speculation. Andreas Hatzigeorgiou, Chief Economist of Stockholm Chamber of Commerce, stated:
“Brexit would be devastating on many levels, not only for the UK but especially for a country like Sweden. The UK is one of Sweden’s best allies in the EU. We stand together on a wide array of issues for a more free trade-oriented and competitive Europe. For Stockholm, Europe’s fastest-growing capital, the UK is our most important economic partner. It is in our direct interest that Britain remains part of the EU.”
During the past years there have been tensions in the EU between the federalists and the free-traders and between the Eurozone and the non-Eurozone. In these situations Sweden and the UK have almost always been on the same side. Without the UK there will be a different dynamic in the EU and Sweden will have lost a non-federalist allied. According to John Longworth, Sweden is one of the countries most interested in reforming the EU. “I have spent 32 years trying to reform the EU, and up until today I have reached the conclusion that the European Union is incapable to reform in the way UK wants it to reform. Britain should be in Europe, but in a reformed European Union. A Brexit would allow and bring about necessary changes, hence a Brexit is not only better for the UK but also for the rest of the EU because from the outside I believe we will have better impact possibilities influencing the EU to reform”, he claims.
Hans Stråberg did not agree with John about having better possibilities to change the EU from the outside. ”If the UK votes for a leave – Sweden will lose an important allied.”
How should Sweden deal with an EU without the UK?André Andersson, Global Relationship Partner at Mannheimer Swartling, contemplated the relationship between the two countries and the EU:
“When preparing the seminar, I came to realise that Britain and Sweden have a very similar relationships with the EU. Both countries joined the EU in the middle of a crisis and for pragmatic economic reasons rather than for any high-flying peace vision. Like Britain, we have water between ourselves and the rest of Europe, which probably re-enforces the idea of some kind of splendid isolation. But there are also differences. Sweden never had an empire, at least not during the last 300 years. Stockholm is not one of the world’s leading financial centres. The UK is the world’s 5th largest economy. Sweden is number 23. So it may be possible to contemplate a Brexit but much harder to imagine a Swexit.”
Shedding light on the complicated legal aspects of a Brexit, Thomas Pettersson, Tommy Pettersson and Andreas Johansson, representing Mannheimer Swartling’s EU & Competition and Banking and Finance expertise, gave a presentation on the legal process for Brexit and its consequences. Leaving the EU is no swift process – it will take some time and imply a lot of regulatory changes. After notification there will be a two-year suspension periodintended for EU-UK negotiations on a withdrawal agreement. The period may be extended through agreement between UK and the EU as a whole, but any Member State may veto. During this period, the UK continues to be bound by EU law. If there is no agreement, the UK leaves the EU anyhow at the end of the suspension period. Thus, there will be no exit before June 2018, but possibly later.
In the concluding remarks of the seminar, Erik Belfrage, Chairman Partner of Consilio International AB and Former Swedish Diplomat and Member ICC World Council, also emphasised the legal aspect:
“Many domestic UK laws are based on EU directives and all new business arrangements would have to be screened with a Brexit perspective. Over time, a Brexit would lead to differences in the areas currently covered by EU law, a situation which could lead to unforeseen consequences. As such, what we can be sure about is that a Brexit would definitely create a bonanza for lawyers.”
The seminar provided not only a strong business focus, but covered both the legal and commercial aspects of a Brexit. Susanna Zeko, Acting Secretary General, ICC Sweden, underlined the importance of the discussions held at the seminar as both sides were represented and given the opportunity to voice their positions: “An issue of this dignity has to be based on facts rather than on emotions. This is especially important in regards to the debate on TTIP and ISDS where the opponents rarely or never meet in transparent manners – which has caused a debate based on myths and falsity rather than on facts.”
Given the uncertainty and difficulty to predict the consequences of a potential Brexit, the UK is likely to hold its breath. As Stephen Powell, Partner at Slaughter and May, put it: “everything is very uncertain...to the extent that possible transactions are at the moment put on hold to await the outcome of the referendum.” With three more weeks until the referendum on 23 June it only remains to be seen what the outcome of the vote will be.