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Boris Johnson moves to mend relationship with UK business

Prime Minister Boris Johnson has moved to rebuild his relationship with the business community by hiring Sky executive Andrew Griffiths as part of his Number 10 team.

A source close to Griffiths said Johnson’s appointment of the Sky veteran – who most recently served as the broadcasting giant’s chief operating officer – was “a clear sign of intent” that the former mayor of London wants to build fresh links with the City and businesses across the UK.

Advisory Excellence understands that Griffiths, who joins the new government as Johnson’s top business adviser, first discussed the position with the incoming PM to weeks ago and felt that the new Tory leader “was the real deal.”

One source said Griffiths is “an operator, not a policy wonk” and he “will want to get things done.” Sources in Johnson’s camp have told Advisory Excellence that there will be a “beefing-up” of the Downing Street business team but it’s understood that Theresa May’s business adviser, Jimmy McLoughlin, will be staying on to assist with the transition.

Johnson ruptured his business-friendly reputation following the EU referendum when he was caught saying “f*** business” in reaction to corporate groups lobbying for a softer Brexit.

However, the relationship may already be thawing with most business groups giving a cautious welcome to the incoming resident of Number 10 yesterday.

TheCityUK congratulated Johnson on his convincing win but warned against a no-deal outcome with Brussels.“He becomes Prime Minister at a pivotal time in our country’s history.

He must now move swiftly to set out his plans for the road ahead. Ongoing Brexit uncertainty is depressing business activity, but the financial and related professional services industry remains very clear that a no-deal Brexit is still the worst of all outcomes,” it said..

The British Chamber of Commerce was also quick to send its regards, but again warned about the consequences of crashing out of the bloc. The message to Boris Johnson from business communities around the UK couldn’t be simpler: the time for campaigning is over — and we need you to get down to business.

Companies need to know, in concrete terms, what your government will do to avoid a messy, disorderly Brexit on 31 October – which would bring pain to communities across the UK and disruption to our trade around the world.

Business lobby group the CBI echoed other calls for a pro-business Brexit deal, but also on support for infrastructure projects to boost businesses across the country.

Johnson has previously voiced opposition two of the country’s most ambitious infrastructure projects: Heathrow airport expansion and the High Speed 2 (HS2) rail project.

An HS2 Ltd Spokesperson said: “We look forward to working with the new Prime Minister to ensure that HS2 will transform the British economy and is value for money for the taxpayer”.

Meanwhile, Heathrow boss John Holland-Kaye said the airport’s third runway, which Johnson opposed, will be “a critical part of any new prime minister’s agenda”.

“As we leave the EU we’re going to need to have the trading links that only Heathrow can bring and that is why we are cracking on with it.”

The pound dropped to $1.247, after the membership ballot result naming Johnson as leader was announced. As Michael Brown, senior analyst at Caxton FX explains, this was largely due to the fact that the likelihood of Johnson victory had already been priced in.

“With such an outcome having been largely expected, sterling’s immediate reaction has been muted as the news was already priced in,” he said. “However, focus will quickly switch to the next steps – namely, Cabinet appointments and the Brexit plan. The latter will be of more importance for markets, with sterling set to remain under pressure should Boris continue his ‘do or die’ Halloween Brexit stance.”

In the run-up to the announcement a number of businesses had been nervous about the prospect of a Johnson premiership, due to the former London mayor’s insistence that he would take the UK out of the EU with or without a deal by the 31 October.

EU and Mercosur reach agreement on trade

The EU is the first major partner to strike a trade pact with Mercosur, a bloc comprising Argentina, Brazil, Paraguay and Uruguay. The agreement concluded today will cover a population of 780 million and cement the close political and economic relations between the EU and Mercosur countries. It represents a clear commitment from both regions to rules based international trade and will give European companies an important head start into a market with an enormous economic potential. It will anchor important economic reforms and modernisation undergoing in Mercosur countries. The agreement upholds the highest standards of food safety and consumer protection, as well as the precautionary principle for food safety and environmental rules and contains specific commitments on labour rights and environmental protection, including the implementation of the Paris climate agreement and related enforcement rules.

President of the European Commission Jean-Claude Juncker said: “I measure my words carefully when I say that this is a historical moment. In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade. Through this trade pact, Mercosur countries have decided to open up their markets to the EU. This is obviously great news for companies, workers and the economy on both sides of the Atlantic, saving over €4 billion worth of duties per year. This makes it the largest trade agreement the EU has ever concluded. Thanks to the hard and patient work of our negotiators, this is matched with positive outcomes for the environment and consumers. And that’s what makes this agreement a win-win deal.”

Commissioner for Trade Cecilia Malmström added: “Today’s agreement brings Europe and South America closer together in a spirit of cooperation and openness. Once this deal is in place, it will create a market of 780 million people, providing enormous opportunities for EU businesses and workers in countries with whom we have strong historical links and whose markets have been relatively closed up to now. The agreement will save European companies over €4 billion in duties at the border – four times as much as our deal with Japan – whilst giving them a head start against competitors from elsewhere in the world. It also sets high standards and establishes a strong framework to jointly address issues like the environment and labour rights, as well as reinforcing sustainable development commitments we have already made, for example under the Paris Agreement. Over the past few years the EU has consolidated its position as the global leader in open and sustainable trade. Agreements with 15 countries have entered into force since 2014, notably with Canada and Japan. This agreement adds four more countries to our impressive roster of trade allies.”

Phil Hogan, Commissioner for Agriculture and Rural Development, said: “The EU-Mercosur agreement is a fair and balanced deal with opportunities and benefits on both sides, including for Europe’s farmers. Our distinctive, high quality EU agri-food products will now get the protection in Mercosur countries that they deserve, supporting our market position and growing our export opportunities. Today’s agreement also presents some challenges to European farmers and the European Commission will be available to help farmers meet these challenges. For this agreement to be a win-win, we will only open up to agricultural products from Mercosur with carefully managed quotas that will ensure that there is no risk that any product will flood the EU market and thereby threaten the livelihood of EU farmers.”

Main features of the EU-Mercosur trade agreement:

The EU-Mercosur region-to-region agreement will remove the majority of tariffs on EU exports to Mercosur, making EU companies more competitive by saving them €4 billion worth of duties per year.

  • As regards EU industrial sectors, this will help boost exports of EU products that have so far been facing high and sometimes prohibitive tariffs. Those include cars (tariff of 35%), car parts (14-18%), machinery (14-20%), chemicals (up to 18%), pharmaceuticals (up to 14%), clothing and footwear (35%) or knitted fabrics (26%).
  • The EU agri-food sector will benefit from slashing existing Mercosur high tariffs on EU export products, chocolates and confectionery (20%), wines (27%), spirits (20 to 35%), and soft drinks (20 to 35%). The agreement will also provide duty-free access subject to quotas for EU dairy products (currently 28% tariff), notably for cheeses.

Mercosur countries will also put in place legal guarantees protecting from imitation 357 high-quality European food and drink products recognised as Geographical Indications (GIs), such as Tiroler Speck (Austria), Fromage de Herve (Belgique), Münchener Bier (Germany), Comté (France), Prosciutto di Parma (Italy), Polska Wódka (Poland), Queijo S. Jorge (Portugal), Tokaji (Hungary) or Jabugo (Spain).

The agreement will open up new business opportunities in Mercosur for EU companies selling under government contracts, and to service suppliers in the information technology, telecommunications and transport sectors, among others. It will simplify border checks, cut red tape and limit the use of export taxes by Mercosur countries. Smaller companies on both sides will also benefit thanks to a new online platform providing easy access to all relevant information.

While delivering significant economic benefits, the agreement also promotes high standards. The EU and Mercosur commit to effectively implement the Paris Climate Agreement. A dedicated sustainable development chapter will cover issues such as sustainable management and conservation of forests, respect for labour rights and promotion of responsible business conduct. It also offers civil society organisations an active role to overview the implementation of the agreement, including any human rights, social or environmental concerns. The agreement will also provide for a new forum to work closely together on a more sustainable approach to agriculture and, as part of the political dialogue under the Association Agreement, address the rights of indigenous communities. The agreement also safeguards the EU and Mercosur’s right to regulate in the public interest and preserves the right to organise public services in the way they consider appropriate.

EU food safety standards will remain unchanged and all imports will have to comply with the EU’s rigorous standards, as is the case today. The agreed food safety, and animal and plant health provisions will reinforce cooperation with the authorities of the partner countries and speed up the flow of information about any potential risks through a more direct and efficient information and notification system. In this way, the agreement will increase our efficiency in ensuring the safety of the products traded between the EU and Mercosur countries.

The trade agreement reached today is part of a comprehensive new Association Agreement under negotiation between the EU and Mercosur countries. It is composed of a political and cooperation pillar – on which negotiators already reached a general agreement in June 2018 in Montevideo – and the trade pillar. Beyond trade, the agreement will enhance political dialogue and increase cooperation in areas such as migration, digital economy, research and education, human rights, including the rights of indigenous people, corporate and social responsibility, environment protection, ocean governance, as well as fight against terrorism, money laundering and cybercrime. It will also offer increased possibilities for cooperation at multilateral level. The Association Agreement will complete the network of Association Agreements in the Americas and consolidate the relations with the important partners in the region, supporting EU positions on many global issues.

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€2 billion to fast forward the creation of European Innovation Council

Ahead of the 21-22 March European Council discussion on innovation, industry and competitiveness, the Commission takes decisive steps to set up a European Innovation Council.

Global competition is intensifying and Europe needs to deepen its innovation and risk-taking capability to compete on a market increasingly defined by new technologies. That is why the Juncker Commission is introducing a European Innovation Council (EIC) to turn Europe’s scientific discoveries into businesses that can scale up faster. Currently in its pilot phase, the European Innovation Council will become a full-fledged reality from 2021 under the next EU research and innovation programme Horizon Europe.

Carlos Moedas, Commissioner for Research, Science and Innovation said: “With the European Innovation Council, we don’t simply put money on the table. We create a whole innovation system to place Europe at the forefront in strategic technologies and innovation that will shape our futures such as artificial intelligence, biotechnology and zero-emission energy. We must focus on the needs of the innovators, who are the ones who will generate jobs, strengthen our global competitiveness and improve our daily lives.”

The Commission launched in 2017 the pilot phase of the European Innovation Council, introducing open competitions and face-to-face interviews to identify and fund Europe’s most innovative start-ups and SMEs.Since then, 1276 highly innovative projects have already benefitted from an overall funding of over €730 million.

Today the Commission announces important steps that will ramp up the remaining two years of the pilot phase of the EIC:

Over €2 billion of funding in 2019-2020: covering the innovation chain: “pathfinder” projects to support advanced technologies from the research base (opens tomorrow); and “accelerator” funding to support startups and SMEs develop and scale up innovations to the stage where they can attract private investment (open in June). Under the “accelerator” funding companies will be able to access blended financing (grants and equity) of up to €15 million.

The Commission will appoint 15 to 20 innovation leaders to an EIC Advisory Board to oversee the EIC pilot, prepare the future EIC, and champion the EIC globally. Innovators from across the ecosystem are invited to come forward by 10 May.

The Commission will recruit a first set of “programme managers” with leading expertise in new technologies to provide full-time, hands-on support for projects. The call for recruitment will be published shortly.

Also today, the Commission announces 68 additional startups and SMEs selected for an overall funding of €120 million under the existing EIC pilot. The companies are for instance developing a blockchain-based online payment technology, new energy efficient screens and a solution to fight traffic noise (breakdown of beneficiaries per country and sector).

Given the growing economic importance of breakthrough and disruptive innovation, and based on the early success of the EIC pilot, the Commission has proposed to dedicate €10 billion to the EIC under Horizon Europe, the EU research and innovation funding programme for 2021-2027.

Background

With only 7% of the world’s population, Europe accounts for 20% of global R&D investment, produces one third of all high-quality scientific publications, and holds a world leading position in industrial sectors such as pharmaceuticals, chemicals, mechanical engineering and fashion. But Europe needs to do better at turning that excellence into success, and generating global champions in new markets based on innovation. This is particularly the case for innovations based on radically new technologies (breakthrough) or markets (disruptive).

In June 2018, the Commission proposed the most ambitious Research and Innovation programme yet, Horizon Europe, with a proposed budget of €100 billion for 2021-2027. The proposal builds on the Commission’s contribution to the EU Leaders’ meeting on 16 May in Sofia “A renewed European Agenda for Research and Innovation – Europe’s chance to shape its future”, which highlighted the need to create a European Innovation Council and other steps to ensure Europe’s global competitiveness.

The conclusions of the European Council of 28 June 2018 endorsed the setting up of the EIC under the next long-term budget (2021-2027). EU leaders invited the Commission to launch a new pilot initiative on breakthrough innovation within the remaining period of Horizon 2020, in order to pave the way for a fully-fledged EIC in Horizon Europe.

The European Innovation Council is part of a wider ecosystem that the EU is putting in place to give Europe’s many entrepreneurs every opportunity to become world leading companies. Other initiatives include a Pan-European Venture Capital Funds-of-Funds programme (VentureEU), the Investment Plan for Europe (EFSI), the work of the European Institute for Innovation and Technology, the Capital Markets Union Action Plan to improve access to finance or the proposal for a Directive on business insolvency.

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When is the real Brexit deadline?

Less than 180 days to go and the pressure is on. Talks between the UK and the EU are at deadlock, with the intractable Irish border problem the biggest stumbling block. But here’s the catch: they must also set aside time for the deal to be reviewed and ratified by both sides.

In the United Kingdom, parliament must vote through the withdrawal agreement into law, while on the European side, it must receive the support from member states and the European parliament.

We all know that the clock is ticking. But political process on both sides means the real deadline is not 29 March itself. So just how much time is there?

On the EU’s side, Danuta Huebner, who chairs the European Parliament’s Brexit committee, has suggested that approval could be granted as late as the 11 March 2019. Meanwhile, the fact that the EU commission has continually updated EU capitals and institutions throughout the negotiations means that they would be unlikely to reject the agreement – even if it were presented to them as late as March.

But there are several reasons why delaying the vote until March would be politically problematic. First, although national parliaments in the EU will not be voting on the withdrawal agreement, some heads of governments may still be still required, in line with their own parliamentary traditions, to discuss the deal before and after the vote takes place. The Danish parliament’s European committee, for example, has a strong tradition of organising hearings ahead of EU votes and, in some cases, has even managed to influence the government’s position.

Second, the EU is conscious that the longer it discusses the terms of the UK’s exit, the less time it will have to discuss the future trade and security relationship. The way negotiations are organised means that discussions about the future can only take place once a withdrawal agreement has been reached. Many predict these discussions to be far more complex and question whether a future deal can be reached during the transition period which, providing it goes ahead, will end in December 2020.

Third, businesses on both sides are demanding greater clarity on the UK’s position after March 2019. For them, the longer the talks last, the less time they have to draw up new plans.

For all these reasons, the EU has provisionally set the date of 17 November to vote on the withdrawal agreement. But it is also in the UK’s interest to reach a deal by the end of the year.

For starters, there is actually a UK legal requirement that the government reach an agreement with the EU by 21 January 2019. In the absence of an exit deal, the UK parliament could put pressure on the government to change course – it is not clear how the prime minister would survive such a vote.

But even if the UK and the EU did reach an agreement by January 2019, there is no guarantee that the UK parliament would support it. Worse still, if it did reject the deal, it is hard to see how both sides could negotiate and ratify new exit terms by March 2019. Faced with such a dilemma, is it time to be thinking about extending talks beyond March 2019?

Legally speaking, this could be possible. According to Article 50, talks can be extended beyond the two-year negotiating framework, although this would require the approval of all 27 member states as well as the UK. But politically, this might prove complicated.

First, it is unclear how long talks would be extended for. The EU parliament elections are planned for May 2019, so a Brexit vote would need to take place either before the elections or after a new parliament is in place. The elections will also lead to the appointment of a new commission in the autumn, possibly even a new president. The EU may be reluctant to vote before the end of the year.

Second, it is unclear what would happen to the transition period. Currently, the transition is due to end at the end of 2020, at the same time as the current EU budget. During this time, the UK would continue to be part of the single market and customs union – although it would have no formal say or vote over new EU legislation. As a consequence, the UK may be asked to contribute to the new EU budget if it wanted to continue accessing the single market and customs union beyond 2020. It is hard to see how UK politicians would accept this.

When voting takes place depends largely on how quickly the UK and the EU reach an agreement. If they fail to reach a deal by 21 January 2019, or if the UK parliament rejects it, then frankly, all bets are off.

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Assets worth $1tn to shift from UK to EU due to Brexit

Assets worth nearly £800 billion ($1 trillion) are being moved from Britain to new financial hubs in the European Union ahead of Brexit, consultancy EY said on Monday.

Britain, which is due to leave the bloc in March, has yet to approve a deal to avoid an abrupt severing of ties with the EU. Although the British parliament is due to vote on a proposed settlement next week, it is unclear if it will be approved.

“The closer we get to March 29th without a deal, the more assets will be transferred and headcount hired locally or relocated,” Omar Ali, UK financial services leader at EY, said.

EY has been tracking the Brexit plans of 222 financial firms since Britain voted in June 2016 to leave the EU. In its latest update to the end of November 2018, it said that 80 firms are considering or have confirmed relocating assets and staff.

The latest estimate from EY says that £800 billion in assets would move, a fraction of Britain’s £8 trillion banking sector.

Frankfurt Main Finance, which promotes the German financial centre, has said it expects €750 to 800 billion of assets to transfer there alone, largely during this quarter.

Around 2,000 new European roles have been created by financial services companies in response to Brexit, with Dublin, Luxembourg, Frankfurt and Paris the most popular locations, EY said.

Forecasts of hundreds of thousands of UK financial jobs moving to the EU have not materialised, and the Bank of England expects about 4,000 jobs to have moved by March 29.

“Whilst roles will no doubt move from the UK, many firms are only moving those employees deemed essential and are hiring locally given the expense of relocation,” Ali said.

Moves so far would be only the “tip of the iceberg” if there is a no-deal Brexit, EY said.

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Malta: Your future-proof manufacturing base

Manufacturing has been a vital sector for Malta since the 1950s and is still one of the main pillars of the local economy to this day.

In recent years, Malta’s economy was among the strongest performers among EU member states, with an average growth rate of around 6%.

A myriad of companies nowadays use Malta to produce goods with a high added value, constantly innovating their processes and products.

The advanced manufacturing sector consequently covers a remarkably wide range of areas, including automotive and aviation components, plastics, precision engineering, medical devices, pharmaceuticals and medical cannabis, among many others.

Some of the leading global players have set up their own facility in Malta to take advantage of the business-friendly environment, competitive cost structures, and highly skilled workforce.

With its strategic location, Malta can serve as a hub to target nearby markets within the EU and MENA region.

English is one of the country’s two official languages. Besides reflecting the longstanding relation between Malta and the UK, this simplifies the provision of training, as well as investors’ interactions with other stakeholders and suppliers, access to legislation, and ease of communication with the authorities.

An efficient and transparent tax system is undoubtedly another important factor in attracting investors to Malta. This is further complemented by a wide range of assistance provided by Malta Enterprise, the government’s economic development agency.

All this provides that essential factor so important to any investor: stability. Indeed, it is this economic, political and social stability which has provided the bedrock for existing operations to flourish and serves as an attraction to a steady stream of new investors, not only within manufacturing.

Through a very competitive institutional and legislative framework, Malta has also effectively established itself as the leading distributed ledger technology jurisdiction and has already attracted a number of blockchain companies. This transformational technology has a tangible potential of revolutionising a number of niches including manufacturing.

The role of blockchain for Industry 4.0 and the Internet of Things (IoT) is considerable and some companies are already combining blockchain solutions with 3D printing and other processes to enable new manufacturing methods.

Malta Enterprise will ensure that any investor will get the best possible benefits out of a Malta operation.

For more information about Malta Enterprise, please visit: https://www.maltaenterprise.com/