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EU is ‘a difficult place for business’, says Pippa Malmgren

Pippa Malmgren, who is a leading US economic adviser, has ripped into business scaremongering around the Brexit uncertainty.

Dr Malmgren, who also serves as an adviser to the UK Department of International Trade, pointed out that foreign investment in the UK is still rising despite Project Fear.

She added that Britain is far better place to do business than Europe, where taxes and regulatory red-tape are an economic barrier to investment.

These remarks follows news that the pound has fallen to its lowest level against the dollar and the euro this year.

At the same time, Britain’s economy rebounded in the second quarter this year despite Brexit uncertainty according to Office for National Statistics figures.

Dr Malmgren, who previously served in the White House under George W Bush, discussed the British economy in light of the growing risk of a no deal Brexit.

The businesswoman told Bloomberg: “The key thing to remember is that many of the investors are saying I may not like the uncertainty of Brexit, but it is not easy to make money on the continent.

“It is not an either-or situation. Foreign direct investment in the UK is still rising.

“The huge irony is that the weaker the sterling is, the more competitive the UK is.”

She added: “Money is a lot like water and it will move where it faces the least resistance.

“Unless the UK raises its taxes and regulatory red tape above the EU, then capital will continue to flow into the UK.

“More so still if the sterling is weaker.

“This idea that the City of London has to be smaller if there is no deal after Brexit simply doesn’t add up.”

The growing possibility that talks between the UK and Brussels will break down in the coming months has sparked economic fears.

Despite this, long-term investment in Britain by foreign businesses stood at £1.564 trillion, which is £12 billion or 0.8 percent higher than in 2016.

The world’s fifth-biggest economy relied on the services industry for growth in the second quarter.

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German businesses reluctant to invest in UK over Brexit uncertainty

German business leaders have issued a strongly worded statement warning they are reluctant to invest in Britain because of Brexit uncertainty.

The intervention from German Industry UK (GIUK), which represents firms including carmakers BMW and Mercedes-Benz as well as the Lufthansa airline, came as the UK’s largest carmaker, Jaguar Land Rover (JLR), said a bad Brexit deal would put £80bn of investment and 40,000 jobs at risk.

Amid mounting anxiety from some of the UK’s largest manufacturers, politicians from both sides of the House of Commons lined up to criticise the government’s attitude towards business concerns during Brexit negotiations.

The Liberal Democrat leader, Vince Cable, accused the government of treating major employers with “complete contempt” by failing to listen to their concerns. Cable said he knew JLR boss Ralf Speth from his tenure as business secretary and that the German boss of the carmaker was “not bluffing” when he said on Wednesday that the firm’s place in the UK would be untenable in the event of a hard Brexit.

The shadow business secretary, Rebecca Long-Bailey, warned that Tory infighting over the nature of the UK’s departure from the European Union was putting jobs and investment at risk.

“They cannot continue to spar with each other and play ideological games whilst British jobs and industries are being pushed off the edge of a cliff,” she said.

The cabinet is due to meet at Chequers on Friday in an effort to thrash out disagreements among ministers about the right Brexit plan to pursue.

Just 24 hours before the summit, representatives of German firms employing 400,000 people in the UK joined JLR in issuing a dire warning about the impact of ongoing uncertainty. GIUK, whose members also include the train and bus operator Arriva – owned by the Germany’s state-owned rail company – and the steel producer ThyssenKrupp, said it needed “certainty and clarity about the way forward sooner rather than later”.

Bernd Atenstaedt, the chairman and chief executive of GIUK, said: “There is some reluctance from German business to invest in the UK with projects on hold because of the uncertainty about the future and, with only nine months left before the UK leaves the EU, time is running out.”

GIUK said German business would like continued free access without tariff and non-tariff barriers – such as customs checks – for exports to the UK, plus continued free access to the EU for exports from the UK, which is one of Germany’s most important export markets.

Atenstaedt told the Guardian that many GIUK members would not go as far as aerospace company Airbus, which has threatened to cut back their operations in the UK in the event of a hard Brexit.

JLR, the UK’s largest automotive business, this week became the latest manufacturing powerhouse to say it could be forced to withdraw investment from Britain in the event of a hard Brexit.

The warning sparked renewed criticism of the government’s attitude to industry, just days after the foreign secretary, Boris Johnson, was reported to have said “fuck business” when asked about employers’ Brexit concerns.

Cable said: “I got to know Ralf Speth well enough to know that he’s not bluffing when he says JLR’s position is that a hard Brexit would make the company’s position in the UK untenable.

“The Conservatives should listen. But there’s no evidence that they are willing to treat major employers with anything other than complete contempt.”

A spokesperson for the prime minister said the government took the views of the business community seriously. The spokesperson added: “We also know the importance of providing certainty as we leave the EU. We’re looking forward to providing further details in the white paper. But I would also make the point that we have already successfully negotiated an implementation period, so firms will be able to trade on the same terms as now until the end of 2020.”

Conservative MP Owen Paterson attracted criticism after brushing off JLR’s concerns in an appearance on the Radio 4 Today programme, claiming the company would be in a “wonderful position” and could buy car parts more cheaply.

Labour MP Alison McGovern, whose Wirral South constituency includes Vauxhall’s Ellesmere Port plant, said Paterson did not understand the automotive industry, particularly its use of “just-in-time” supply chains that require precision timing.

“It is quite stunning that Owen Paterson thinks himself better placed to comment on Jaguar Land Rover’s future than their own CEO. Perhaps even more striking is his obvious total ignorance of the just-in-time supply chains which make the car industry profitable and the fact that it is not tariffs but non-tariff barriers which would be the major obstacle to manufacturers in a no-deal Brexit.

“People in manufacturing towns across Merseyside, the north and the Midlands know all too well what it feels like when Tories show they just don’t care about our communities and our families’ livelihoods and they will not stand for it.”

A senior figure at one manufacturing trade body with strong ties to the automotive sector said: “I don’t think we’d dignify Owen Paterson’s remarks with a response because they’re not worth anything.”

Maria Eagle, whose Garston and Halewood constituency includes JLR’s Halewood plant, said the company was rightly concerned about the “appalling effects of the extreme Tory hard Brexit supported by half the cabinet and a hard-line cabal of Brexit extremists”.

She said: “It’s about time this appalling government put the interests of the people of this country above their own manoeuvring to stay in office. Otherwise, our manufacturing industry faces total destruction.”

The EEF manufacturers’ trade body said: “This is not just an issue for big companies, however, but those SMEs who are also heavily exposed in the major supply chains and, as yet, are unable to know what scenario they are planning for. Time is now running out to secure the frictionless and tariff-free relationship we need with the EU if there are not to be serious consequences right across UK industry.”

Meanwhile, a survey by Scottish Engineering has found that just 1% of its members were positive about Brexit. Its chief executive, Paul Sheerin, said the organisation was worried about “a deeply concerning stance to business coming from parts of the UK government”.

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Deutsche Bank moves half of euro clearing business from UK to Germany

Deutsche Bank has moved almost half of its euro clearing business from London to Frankfurt because of Brexit, with all new business set to be cleared via Frankfurt.

Euro clearing is the system through which euro-based financial transactions are settled, and London is known as a leader in the clearing business. Clearing house LCH, owned by the London Stock Exchange, previously dominated the market, processing almost £900bn in deals per day.

However, since the Brexit vote, European rivals, including Deutsche Borse-owned Eurex, have been making moves to steal London’s crown. France’s finance minister Bruno Le Maire said last year that Brexit could be an opportunity for Eurozone states to take control of clearing and a 2016 report by consultancy firm EY suggested that a departure of euro clearing could cost 83,000 jobs in the City.

Deutsche’s decision to relocate clearing activities has not had an impact on UK jobs. Effectively, the move means the bank will push a different button to route the clearing to Eurex.

A spokeswoman for Eurex said that it now has a market share of 8 per cent of euro clearing, up from virtually zero a year ago.

The group said in 2017 that it was committed to the UK, as it signed the lease on a new London headquarters, taking on space at new City site 21 Moorfields for 25 years.

However, the lender said earlier this year that it planned to cut more than 7,000 roles in an effort to reduce costs, putting City jobs at risk – the bank employs 8,000 people in London.

The job cuts followed the ousting of John Cryan as CEO in April, which came after three years of losses at the bank. Mr Cryan was replaced by Christian Sewing, who said Deutsche needed to focus on what it does best, with the result that the total number of staff at the group would fall from 97,000 to “well below” 90,000.

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Foreign businesses to UK: solve Brexit or risk £100bn in trade

Business leaders from the US, Canada, Japan and India have told the British government to solve the Brexit issue urgently or put more than £100bn worth of trade at risk.

Lobby groups representing business interests from the four countries took the unusual step of issuing a joint statement on Brexit before the European council summit this week. It came days after Airbus said its investment in the UK would be at risk from a hard Brexit, prompting the health secretary, Jeremy Hunt, to say the Franco-German aircraft maker’s intervention was “completely inappropriate”.

Groups representing corporate giants including Nissan, Bombardier and Facebook expressed their concerns on Monday that Britain was heading towards a disorderly departure from the EU, potentially affecting more than £100bn in trade and putting investment in the UK at risk.

“International businesses who are heavily invested in both the EU and the UK are calling for urgent progress on the key outstanding issues remaining in the talks,” they said in the statement. “Resolving as many of the remaining concerns as possible is becoming more urgent by the day – with the clock ticking towards the October deadline for a final withdrawal agreement.”

The statement was signed by the American Chamber of Commerce to the EU, representing companies including Boeing, Exxon Mobile, Facebook, Dell, Coca-Cola and FedEx. It was also signed by the Canada Europe Roundtable for Business, Europe India Chamber of Commerce and the Japan Business Council in Europe.

The statement said they recognised the complexity of finding a solution for the Irish border, but urged both the EU and the UK to continue to try to find agreement on the issue.

In the meantime, they urged policymakers to “dedicate time and thought at the upcoming summit” to address the remaining issues, including the role of the European court of justice, the future UK-EU regulatory regime and post-Brexit preparedness.

“Reaching agreement on these issues will provide businesses with more confidence that a withdrawal agreement can be agreed and ratified, thereby providing legal certainty for the proposed transition period and avoiding the worst-case ‘cliff-edge’ scenario in March 2019 ,” the statement said.

It reflects a growing frustration in business over the lack of a clear Brexit strategy two years after the referendum.

In the wake of the Airbus comments, BMW said it needed clarity on Brexit negotiations “in the next couple of months”. Car manufacturers are expected to issue a fresh and strong warning over Brexit at a Society of Motor Manufacturing and Traders (SMMT) meeting on Tuesday.

The car industry employs more than 800,000 people in the UK and the Japanese ambassador has warned Theresa May that his country’s firms will quit Britain if a botched Brexit makes it unprofitable to stay.

Koji Tsuruoka told the prime minister earlier this year that if “there is no profitability of continuing operation in [the] UK … no private company can continue operations”.

Both he and the outgoing boss of BMW will speak at the SMMT conference.

Japan’s business interests in the UK include Nissan, Mitsubishi, Panasonic and Honda, with trade with the UK worth £46bn. Nissan, Toyota and Honda began their UK operations in Britain in the 1980s and now build nearly half of all of the 1.7m cars produced in the UK last year.

The car industry is concerned that if the UK does not stay in the single market, it will be hit by costly delays in delivering components from the EU.

America’s import and export trade with the UK is worth around £43bn but it is also a heavy investor in business with a large presence in the UK in tech, pharmaceuticals and transport.

Canada’s business interests in the UK include the Bombardier aircraft wing factory in Belfast, which was recently saved from making thousands of redundancies after winning a legal challenge in a trade dispute with US rival Boeing and the Trump administration.

The UK ranks as Canada’s second most important trading partner after the US with bilateral trade worth CN$27.1bn (£15bn). India’s exports to the UK are valued at around $9bn (£6.79bn) with machinery and clothing among the highest value products.

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London business confidence rises to highest since EU referendum

The balance of firms in the capital reporting they are optimistic about the prospects for their firm rose to zero per cent in the second quarter – a 10-point quarterly increase – the London Chamber of Commerce and Industry will say.

Larger firms were more confident than smaller businesses, for whom the confidence reading remained negative on balance.

The poll of more than 500 firms showed that expectations for both the London and the UK economy remain negative on balance, as they have done for two years. The survey was carried out before the Cabinet’s recent agreement on a Brexit negotiating position or the subsequent resignations of two ministers.

Colin Stanbridge, LCCI chief executive, said: “Despite an improvement in many of these figures much still needs to be done to ensure London businesses continue to prosper, now and in the future.”

More firms reported that domestic demand fell than increased during the second quarter, although the fall-back was somewhat compensated by an increase in export demand.

Meanwhile, firms’ reported capital investments remained in negative territory, in spite of an improvement over the quarter.

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Effects Of Brexit On Business | Consult With Dechert

Dechert is ‘the go-to firm’ in this space offering ‘cutting-edge and innovative advice’ on Brexit issues – Ranked Tier 1 Risk Advisory: Brexit, The Legal 500 UK 2017.

Lawyers in Dechert’s International Trade and EU Law practice bring a unique perspective to the legal and commercial analysis surrounding Brexit, having significant background and knowledge of the EU and the UK’s engagement with it. Our team members’ experience includes working on legal and policy issues for the European Commission, negotiating on behalf of Member States in the Council, and serving in various roles within the UK Government, including HM Treasury and the Prime Minister’s Office.

We are working with a range of industry bodies and businesses to develop their positions, to translate their priorities into an advocacy strategy and to plan ahead for the different potential outcomes to be faced on 29 March 2019.

Exactly what effects could Brexit have?

Dechert’s sectoral experts work closely alongside our International Trade, EU Law and Government Regulation team to map out the impact the Brexit may have on any given sector and business and advise on the trade and regulatory consequences.

Our lawyers have also authored updates on:

– Asset Management
– Competition Law
– Data Protection
– Employment Law
– Financial Services
– Imports and Exports
– Intellectual Property
– International Arbitration and Litigation
– Legal Framework
– Trade Agreements

What should I be doing now?

The majority of businesses operating with or in the UK should have already begun:

Reviewing and identifying aspects of the business that rely on, or assume the applicability of, pan-EU arrangements such as EU rules of origin and customs procedures, passporting for financial services, EU-wide medicine licenses, etc.

Understanding the actual (or likely) position of the UK, the EU Governments and EU institutions on the contents of the exit agreement, as well as the ambitions for the future UK-EU trading relationship.

Establishing what the UK’s baseline obligations in the WTO and other international bodies means for your business.

Identifying EU laws which currently impact both your operations and that of your wider industry.

Identifying the nature and extent of interaction with pan-EU agencies.

Considering a government relations strategy (whether directly or through an industry group). Identify key proposals or considerations. Make these reasoned, evidence-based, granular and ambitious, while taking account of political realities. Respond to government consultations.

Considering the impact on your supply chains and customer base.

Looking at the nuts and bolts of your business including your data protection obligations; contractual terms; employment rights; intellectual property plans; and ongoing litigation.

How Dechert can help

We have already helped industry bodies, companies and governments to develop their positions; to define clear priorities, red lines and concrete bespoke proposals; to translate this into an advocacy strategy that best fits their needs; and to plan for the different potential outcomes to be faced on 30 March 2019.

Our team’s previous experience, not only in the UK government and European institutions, but in the products and advocacy we have undertaken since the Brexit vote, offers clear benefits for Dechert’s clients and has ensured that many are now in a strong position whatever shape the Brexit negotiations will take in the future. When necessary the team can also call upon both local and internationally-based sectoral experts across Dechert to identify potential steps during the forthcoming negotiations that may help to minimize any risks associated with Brexit while also maximizing opportunities for clients. Three particular areas we recommend:

Conduct rigorous gap-analysis: based on an understanding of the likely Brexit options, identifying in detail the issues that businesses will face, where further research is required and where the key risks and opportunities lie.

Define priorities and red lines: the objectives should be ambitious while taking account of political realities, based on rigorous analysis and hard data that will stand up to scrutiny.

Design and implement an effective engagement strategy: development policy papers and detailed draft treaty language for use with decision-makers in the UK and EU governments and institutions.

Dechert has a team ideally placed to help, with offices in London, Brussels, Dublin, Frankfurt, Munich, Luxembourg and Paris. In addition to deep UK and EU legal expertise, our team has practical and policy experience – including of trade negotiations – developed at the European Commission, the Council and a range of UK bodies including the Prime Minister’s Office, the Cabinet Office, the Bank of England, HM Treasury, the Foreign Office, and the Attorney-General’s Office.

In addition to the deep expertise offered by our lawyers, Dechert also collaborates closely with leading firms of accountants, providing you with an evaluation not only of the legal implications for you and your sector, but also the economic implications. This combined approach can often assist with understanding the relative importance of risks identified. We would be pleased to arrange such a collaborative approach for you, and to recommend accountancy firms who with whom we have successfully collaborated previously.