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Road ahead to Brexit becomes clearer

Earlier this week we had the first concrete action that provides a sample of what lies ahead on the road to Brexit. The European Union (EU) voted to move two London-based EU agencies out of the UK when Britain leaves the EU in March 2019. The European Banking Association (EBA) will more from London to Paris and the European Medical Association (EMA) will go to Amsterdam. Of course nothing has happened yet and it was just a vote, but it was one that didn't include the UK, just the other 27 EU states, many of which campaigned vigorously to host the future headquarters of two of Europe's influential institutions.

Loss of EU passport a 'legal consequence' 

This could be a taste of what's to come over the coming months, as global banks consider the benefits of being more heavily based in Frankfurt, Paris or Dublin. A substantial move out of the City seems all the more likely since the EU’s chief Brexit negotiator Michel Barnier emphasised this week that a legal consequence of Brexit is that the UK's financial services providers will lose their EU financial passport following Brexit.

UK lags behind

Shedding more light on how the reality of Brexit could affect UK companies, a report by Euler Hermes – Brexit: Taking the pulse of the UK economy – suggests that the EU economy as a whole is doing well, while Britain's economy is seeing a slowdown. The report shows that the Eurozone GDP growth forecast for 2017 has been revised upwards by +0.2pp to +2.1 per cent, due to stronger trade and investment growth. The UK's GDP growth for 2017 is forecast at 1.4 per cent, on a par with Italy's growth but behind that of Germany, France and Spain. The data also shows that UK consumers face the “double-whammy of high inflation and sluggish wage growth” and that Brexit has clouded the outlook for private consumption, while the UK now has the highest inflation rate among major EU countries. And while firms’ investment intentions picked up again in Q1 2017 despite Brexit-related uncertainty, the Euler Hermes report forecasts that a “cut-back in investment will become more pronounced in 2018 in line with slowing domestic demand”. The report also found that sterling’s depreciation following the Brexit-vote has so far failed to incite a strong surge in UK exports. The report summed up the importance of a transition deal in the following graph, arguing that this is essential to minimise Brexit-related economic disruption and avoiding a cliff-edge scenario in March 2019:

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Cash & Liquidity Management
Cash & Liquidity Management in Europe

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