Brexit - Change & Opportunity

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Brexit – Change & Opportunity

The UK formally invoked Article 50 of the Treaty of the European Union at 13.30 CET on Wednesday March 29, 2017, signaling its intent to withdraw from the EU. At that moment, negotiations between the UK and EU began, fundamentally redefining the political and economic relations between the two in the future. Britain should, according to the conditions of the Treaty, leave the EU by April 2019 at the latest – possible extensions to the deadline notwithstanding. From that moment on, all EU treaties will cease to apply to the UK and the UK’s access to the EU could change profoundly.

Critical changes could include:

  • The complete or partial loss of free trade access to a ‘home market’ of over 500 million consumers within the EU countries.
  • The complete or partial loss of access to a vast array of suppliers and consumers.
  • The complete or partial loss of ability to freely sell goods and services within the EU without customs or non-tariff barriers.

Companies whose business models are reliant upon these aspects will face a difficult decision where to further conduct some or all of their business.

This Brexit special section of our website will provide an overview of the ongoing negotiations and their ramifications, as well as providing a perspective on how the foreign investment landscape could be affected.

Latest News

July 21, 2017 | Jim Cowles, Citigroup’s Europe, Middle East and Africa chief, has told his staff the bank has decided to base its EU broker dealer — its main trading operation — in Frankfurt, while Deutsche Bank CEO John Cryan says that his bank will begin to book the “vast majority” of the assets in its UK global markets business to Frankfurt. Both are said to be “assuming a reasonable worst outcome” from the Brexit talks. The Financial Times, July 21.
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July 3, 2017 | Japanese Bank Sumitomo Mitsui becomes the third Japanese financial institution, after Nomura and to head for Frankfurt as a consequence of Brexit. PA/Reuters, July 3.
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July 4, 2017 | The UK financial services industry is still leading the way in terms of attractiveness for international investment, but as Brexit concerns take hold, the gap to the rest of the field is narrowing. Independent, June 29.
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July 14, 2017 | Samsung Next Europe, a technology firm, has decided to set up its European Headquarters in Berlin rather than London, citing London as unaffordable, hard to do business in, and no fun. Independent, July 12
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June 23, 2017 | A number of the world’s biggest banks are looking to Frankfurt in the wake of the Brexit vote, including Bank of America and Goldman Sachs. Bloomberg, June 23.

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June 22, 2017 | British Chancellor Philip Hammond is already seeing foreign direct investment in England fall as businesses hesitate and wait for the full ramifications of Brexit to become clear. The Independent, June22.

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June 13, 2017 | The upheaval caused by a poorly-thought out election has made Britain look toxic to investors, while credit ratings agency Moody’s is seeing Britain’s credit profile suffering. The Economist, June 12

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June 13, 2017 | The European Banking Authoriuty and European Medicines Agency are both set to leave London in the waker of Brexit, with Angela Merkel keen to bring them to Germany

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June 13, 2017 | New financial rules created as a result of Brexit may ensure London the ability to host financial market clearing houses which deal in Euros

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May 30, 2017 | German Chancellor Angela Merkel has made it clear that the EU will be in direct competition with the UK post-Brexit for a free trade deal with India, a market of 1.2bn people.

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April 27, 2017 | Chancellor Merkel insists Germany will maintain a strong stance against British attempts to bargain over Brexit conditions.

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April 19, 2017 | An internal memo in Brussels is instructing officials negotiating over contracts to begin freezing out the UK from certain projects because of Brexit. Where legally possible, the commission and its agencies will be expected in all activities to “take account” of the fact that Britain may be “a third country” within two years, including in appointing staff and in awarding billions of euros of direct contracts for research projects or services. ( Financial Times; NB - link is subscription only)

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March 30, 2017 | More and more large companies are looking to relocate to the EU, potentially costing the UK thousands of jobs, following the triggering of Article 50

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March 30, 2017 | Berlin has noticed a surge of start-ups coming into its boundaries, and is preparing for more as uncertainty grows over London’s viability outside of the EU

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EU considers leeway for banks
March 27, 2017 | Banks could be granted significant flexibility to align with EU conditions if they decide to leave Britain and relocate to the EU following the onset of Brexit, according to a senior ECB supervisor.

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Hedging strategies
March 21, 2017 | Many companies are looking to hedge their positions in a post-Brexit Europe by setting up in continental Europe so as to potentially avoid international trade issues.

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Where do the banks go?
March 21, 2017 | Frankfurt and Dublin look to be the most popular choices among those banks considering a post-Brexit move away from Britain.

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Fintech gains popularity in Germany
March 14, 2017 | As another German fintech start-up receives a huge dollop of funding, a review looks at the growing fintech investment trend in Germany in the context of Brexit.

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Mini moves
February 21, 2017 | BMW is considering manufacturing electric versions of the Mini outside the UK because of the uncertainty over Brexit.

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Studies / Surveys / Data / Stats

July 7, 2017 | The German Federal Financial Supervisory Authority (BaFin) has set up an information portal for financial firms looking to move to Germany in the wake of a spike in demand. BaFin, July 7
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June 13, 2017 | A study by Germany’s Ministry for Economics and Energy has shown that the UK’s GDP could fall by as much as 1.7% following Brexit, while the EU’s would only fall by 0.3%

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June 13, 2017 | A study by Harvard’s Kennedy School has shown that an overwhelming majority of British businesses would prefer to remain in the EU, or at least avoid a hard Brexit, as they fear it may damage investment and trade opportunities.

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May 31, 2017 | EY gives Germany top billing: Germany leads Europe in EY’s Attractiveness Survey 2017

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April 28, 2017 | UK house prices slow down, the first possible indicator that Brexit is beginning to impact.

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April, 2017 | Germany has jumped up two places to number two in A.T. Kearney's Foreign Direct Investment Confidence Index for 2017, with the leading consultancy citing heightened interest because of Brexit as one of the possible reasons for the rise. (www.atkearney.com)

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UK venture capital market stays strong
March 22, 2107 | Venture capitalists have not been dissuaded from putting their money into Britain in the wake of the Brexit vote, with the U.K. able to increase its share of total European venture investment to 43 percent in 2016 from 32 percent in 2015.

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Germany poised to become Europe’s No. 1 foreign direct investment location following Brexit – Ernst & Young say
January 2017 | International companies in finance and high-tech are the most likely to increase their presence in continental Europe. A full 72% of high-tech companies are planning to invest in European expansion over the next three years. And this is not just a trend of large global corporations but 69% of medium-sized foreign investors say they plan to increase their involvement in continental Europe.

When asked which country is the most attractive in Europe for foreign direct investment, Germany wins with a whopping 40% compared with 22% for the UK and 8% for France. This coincides with large majority of 54% of investors choosing Germany if they are shifting operations from the UK.

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