Steven Altmann-Richer, Head of EU Negotiations at Confederation of British Industry (CBI), talked to Charles Ford about the CBI’s view on Brexit and their role in the UK-EU Brexit negotiations. He also gives insights into some of the key issues and challenges that lie ahead, as well as some guidance and advice as to how UK companies should be preparing to plan ahead.
Global-Britain: The Financial Conduct Authority (FCA) reports that some 5,500 UK firms are providing financial services to clients within the EU. With financial services underpinning the health of the UK economy, how critical is the continued reciprocal access between the UK and the EU for financial services, post-Brexit? And how best can this continuation be ensured?
Steven Altmann-Richer: The first point I would make is that financial services do very much underpin the health of the UK economy—providing things like entrepreneurial capital to start up new enterprises, payment systems that are the DNA of the day-to-day economy, finance packages, and a whole host of important services. As the financial services leader in Europe, the UK provides financial services and products to the EU and indeed to the rest of the world. So we do have the expertise and infrastructure to continue to be a global centre of excellence, not just in London, but also right across the UK.
It will be absolutely crucial for the UK government to secure reciprocal access to financial services for the UK and the EU; but we have to remember that whilst this is important for the UK, it is equally important for the EU—there are 8,000 EU firms selling financial services into the UK, some operating within the London hub. The FCA reported that there are some 5,500 UK firms providing financial services to clients in the EU. So any concerns regarding the future of financial services are very much a two-way street.
What I think we need going forward is to continue to keep this strong relationship going, and we think that third-party access or regulatory equivalence alone isn’t enough to ensure this continued financial services between the UK and the EU because it’s quite a patchy system and there is a risk of it being changed or removed with short notice. So essentially what we need to do is to negotiate a new solution that will ensure reciprocal trade—and this is something on which we are working with both the government and our CBI members.
Global-Britain: Following the recent votes in both Houses that have given the green light to Article 50 being triggered, the government had earlier been defeated in the House of Lords who required that the ‘right to remain’ for EU citizens currently living and working in the UK should be included in the Great Repeal Bill. However, with this requirement no longer an issue, what is the CBI’s view regarding this point and the significant potential impact on immigrant workers?
Steven Altmann-Richer: The CBI still regards this as a very important issue.
But what we at the CBI are looking for at the start of negotiations are some early wins that show some real momentum coming into the process—one of the early wins we would like to see is the rights of EU citizens in the UK and UK citizens in the EU to remain. We would like to see an agreement on that happening in the first few weeks of negotiation because we think that will give (a) an important sign of momentum early on in the negotiations and (b) because it is also the right thing to do, based on business sense and also of course in a personal sense, for those people that the decision will affect.
Global-Britain: The CBI has stated that consultation shows that there is ‘a whole-economy need for labour and skills from abroad’—and the agriculture and food production sector has been particularly prominent in voicing concerns about the loss of workers from the EU, a loss of workforce that many say would make their businesses unviable. Can you comment on these concerns?
Steven Altmann-Richer: This is an important issue for a wide range of sectors including of course not only the agriculture and food production sector, but also transport, construction, and many others. It’s also important in different parts of the jobs market as well; it’s very import for high-skilled individuals but it is also important for non-graduate migration, too, where we have the real skill shortages in certain sectors, and that’s why we were particularly pleased to see and to welcome David Davies’s recent remarks about the door remaining open to lower-skilled new migrants from the EU for some time to come. This is particularly welcome in certain sectors where skills shortages are a problem.
Global-Britain: Do you anticipate that the ‘right to remain’ will be a sticking point when the negotiations begin?
Steven Altmann-Richer: Well, we know there is a strong will from the UK government to have this important matter agreed and we have been doing a lot of work in talking to our European counterparts; we’ve talked in the last few months with senior political officials in 17 of the 27 EU countries and there is a clear de-sire on the EU side to get this formally discussed; so we’re hoping that this is something that can be brought forward in the negotiations.
Global-Britain: The CBI constantly emphasizes that ‘the whole economy benefits from minimal barriers to trade in services between the UK and the EU’; in establishing what will be a new relationship between the UK and the EU, do you believe that the decision makers within the EU share the UK government’s eagerness to make this work?
Steven Altmann-Richer: Yes, from the engagement I’ve had, I sense there is a real desire on both sides to get a good out-come from this process. I think we shouldn’t under estimate the challenges—there are obviously a great many tricky issues that we will need to work through and this is why, as I mentioned earlier, getting momentum into this process early on is important, so that it can be seen there is goodwill on both sides moving towards the final deal. That means getting movement on the ‘right to remain’ issue; it also means making sure we have a parallel negotiation regarding both the exit deal and the new trade deal at the same time; and then, finally, we want to make sure that there is early agreement on the importance of an interim arrangement should a deal not be completed within the requisite negotiating period of two years, as set out within Article 50.
Global-Britain: Many UK industry sectors have said they would like to see continuity between the regulatory sys-tem that has been implemented over many years by the European Commission and the regulatory system the UK government will be putting in place. Do you think this harmonization is possible to achieve (when we consider, for example, the many thousands of EU directives that continue to be implemented) and, if so, how can such continuity be achieved without EU involvement and cooperation, and within the two-year negotiation period that Article 50 allows?
Steven Altmann-Richer: Regulatory harmonization is a very important factor in order to secure the sort of frictionless trade that both the business community want and the government has set out as its objective. Which is why it makes sense to welcome the Great Repeal Bill that will carry over the great majority of legislation, so that the regulatory framework looks the same for businesses, on the day we leave the EU; but there is still a debate going on as to how that long-term regulatory cooperation between the EU and the UK could work—and we know that regulatory cooperation is really important for keeping markets open. So we want to see that cooperation continue because it’s vital for goods sec-tors (in terms of product standards and that sort of thing), it’s also really important in service sec-tors, for data agreements, mutual recognition of qualifications—these are really important, so we need to find a way to work constructively in the negotiations to make sure this sort of regulatory cooperation can continue.
Global-Britain: With regard to funding, the European Investment Bank (EIB) provides a significant amount of funding for UK infrastructure from the EU. Between 2011 and 2015, the Bank invested over €29billion in British infrastructure, with the energy, utilities, construction, transportation and education sectors all benefiting in various ways. Is the CBI satisfied that the government is providing clarity as to how it will replace this EU funding?
Steven Altmann-Richer: We see it as a positive that the government has moved quite quickly to reassure those research and innovation programmes that are currently being funded by the EU and will continue to be funded up to, I think, 2020. So that is a positive step.
We obviously then need to think about what the framework looks like going forward. The issues that our CBI members talk about most are the funding for research and innovation, as well as funding and for infrastructure through the European Investment Bank.
What we think the government should do is keep open the option of continuing to be part of some of those EU funding programmes where international or national alternatives don’t exist. So if you look at something like the Horizon 2020 programme, that would be a really good example because it’s such a collaborative programme, it comes with both the funding and the collaboration. And the prime minister has left on the table the possibility of continuing to pay into specific EU programmes. There is more work to be done, but this is an area we would like to see explored.
Global-Britain: When the UK is free of EU regulations, some of which are bureaucratically burdensome; do you believe that leaving the EU27 may present opportunities for UK regulators that will benefit industries through a greater domestic regulatory flexibility?
Steven Altmann-Richer: There will be opportunities down that road, with greater domestic flexibility possible in some areas. The point that our members would make is that we should focus on opportunities for regulatory flexibility that don’t impact on the ease of trade—which is why there has to be a balance between that regulatory equivalence that keeps markets open, balanced with taking domestic opportunities; but there is also a stability point here which is that it is absolutely vital that we keep the regulatory system as stable as possible. This is why we would support the approach where we bring across all of the EU regulations into UK domestic law through the Great Repeal Bill process, and then start from there to see where regulatory flexibility and opportunities might be. So that is the stability point: you want to make sure you have the stability first, and then you can work through in a systematic way about where the opportunities for flexibility might be. There will be opportunities for flexibility but we have to balance these with the need to keep markets open.
One other area of opportunity would be thinking again about EU regulations that we might have ‘gold plated’, for example—there are a lot of CBI members who talk about EU rules and regulations that we’re following, but in future making sure that we’re not gold-plating them and making additions that are not necessary.
Global-Britain: With regard to sector-specific regulation and the very large number of sectors that make up the UK’s industries—such as construction, housing, real estate, manufacturing, agriculture, hospitality, leisure and tourism, to name a few—will the CBI play a role in the consultation process with these sectors, a process which we imagine will start in the very near future, aiming to provide clarity?
Steven Altmann-Richer: Yes, the CBI is very involved with the process; we’re absolutely committed to working with the government. So we will be feeding in all sorts of different ideas, examples and concerns from our members. One thing worth mentioning is that the CBI also has around 140 trade association members and we already work very closely with those members to ensure that the concerns of the many different sectors are being put forward to the government. We think that to make a success of Brexit, we must have a whole economy approach, ensuring that there are no sectors that get left behind.
Global-Britain: Turning to a focus on the UK’s future global economic relationships … are you able to give some pointers to UK businesses as to why they should feel optimistic about new global trade opportunities? And why UK business should not under-estimate the significance of the UK in the context of global trade?
Steven Altmann-Richer: Where there are new business and new trade opportunities emerging, companies certainly need to be sure that they seize them. We recently produced a paper with Clifford Chance, the law firm, where we reviewed examples of the types of opportunities companies should be planning for over the next couple of years as the UK embarks on its new trading relationships.
One thing that’s important for companies is to really drill into what sort of trading relationships they have at the moment, and ask themselves what are the regulatory frameworks governing those relationships and what might the changes be. That is the first step to understanding fully where new opportunities might be. For example, what would the impact be on a company if the UK left the EU without a deal? That’s a very important question for companies to ask themselves in relation to future trading opportunities.
Global-Britain: But it may be difficult for many SMEs, for example, to find the time or to have the expertise to start delving into what are obviously very complex trade issues. In these instances, can these companies come direct to the CBI for advice?
Steven Altmann-Richer: Yes, the CBI has a range of materials that we’ve put together to help companies ask themselves the right questions. This ranges from very detailed and complicated questions which a larger organisation might ask themselves, to a smaller organisation that perhaps wants to get to grips with more of the basics—and we can absolutely help in these instances, and that is ultimately what the CBI is here for, helping the business community prepare itself for the future.
Global-Britain: You earlier raised the point: what would the impact be on a company if the UK left the EU with-out a deal. One aspect of this would be that the UK then has to adopt the WTO regulatory system.
Steven Altmann-Richer: It’s an important point because we need to be prepared for all eventualities which is why the government is getting on with sorting out our position within the WTO—this is separate to the point of what might happen if we are trading under WTO rules if we left the EU without a deal—this is about what the UK’s tariff schedules look like with the WTO, which we need to sort out in any event to ensure better trade deals with other countries outside the EU.
Our exit from the EU may bring companies new trading opportunities, so we need to be prepared.
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CBI View on Brexit: Further Information
CBI Report, ‘Making a Success of Brexit’, www.cbi.org.uk/insight-and-analysis/making-a-success-of-brexit/
CBI Report, ‘EU Regulation and the UK’ – www.cbi.org.uk/insight-and-analysis/eu-regulation-and-the-uk/
CBI and Clifford Chance Report, ‘The Future of Trade for the UK: a Guide for Business’ – www.cbi.org.uk/insight-and-analysis/the-future-of-trade-for-the-uk-a-guide-for-business/
Horizon 2020, ‘The EU Framework Programme for Research and Innovation’ – https://ec.europa.eu/programmes/horizon2020/
Institute for Government, ‘Brexit Explained: the Great Repeal Bill’ – www.instituteforgovernment.org.uk/brexit-explained/brexit-explained-great-repeal-bill
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