Wednesday , May 31 2023

The most exposed sectors in the EU to a Brexit without agreement


Automotive, agriculture, financial services. Several sectors of the European Union (EU) would be particularly affected in the event of divorce between the United Kingdom and the 27 partners, without agreement.

An "understanding" would not result in the introduction of barriers to trade with the reimposition of customs duties and the mutual recognition of environmental or health standards, for example.

The automotive industry is where the damage could be more important. Professionals have warned on many occasions about possible disastrous effects in a sector that has nearly 12.2 million people on the continent.

Approximately 10% of European automotive exports are destined for the United Kingdom, recalls Vincent Vicard, economist at the Center for Prospective and International Information Studies (CEPII).

In addition, the UK and EU car industries are highly integrated. "Sometimes some car parts cross the border between the UK and the continent five or six times," explains Carsten Brzeski of ING Diba. Any malfunctioning in the supply chain, such as customs clearance, would hurt them.

A brutal divorce would particularly affect the German automobile industry, which is well established in the United Kingdom. "If our supply chain should stop at the border, then we will not be able to continue to produce in the UK," said Stephan Freismuth of BMW.

Meanwhile, the chemical sector would also be affected. "Many German, French, Dutch or Belgian companies have production sites" in the UK, says Brzeski. Therefore, the production chain would also be particularly affected.

In addition, multinationals such as Shell's Anglo-Dutch petrochemical group or Anglo-American Dutchman LyondellBasell are also facing specific issues related to their governance.

Agriculture and fishing would not be left behind either. At present, only 60% of British food needs are covered by their own production, the rest being imported mainly from France, Belgium, the Netherlands and Ireland.
If the customs duties are reintroduced, the goods will be more expensive and their entry into the UK may be postponed. "We can imagine that there are trucks stuck in Calais and that, by waiting, the milk he transports sour before arriving in Dover," suggests Brzeski.

The introduction of many goods and animals could be prohibited, unless it is registered in the United Kingdom on the list of authorized third countries. This registration could be done quickly, with conditions, for a former EU member.

Fisheries could also be a problem for France, Spain, Portugal, Denmark or the Netherlands, whose fleets usually operate in British waters.

The aerospace industry would be among those affected. Airbus, which manufactures airplanes in various EU production locations, has already called Brexit without permission.

The European group, which directly employs nearly 15,000 people in the UK where it manufactures the wings of its devices, has already warned that a steep take-off in the block will be "catastrophic" and will force it to question its investments in the country.

In July, German Air Force CEO Tom Enders voiced concern over the departure of the European Aviation Safety Agency (EASA) from the United Kingdom. "Beginning with April, the certifications of thousands of parts of our aircraft will no longer be valid, which could mean an interruption of our production," he said.

The fear of sudden air traffic braking between the UK and the continent makes it a particularly sensitive sector.
The European Commission wants to ensure that companies can fly across Europe and that safety certificates remain valid for a limited period of time. This needs an agreement in the United Kingdom.

On the other hand, financial services also look cautiously at the events behind Brexit. Operators installed in the UK will lose the right ("financial passport") to provide their services in the 27 countries of the bloc without being present.

The Commission has already celebrated that many operators have done what is necessary to "adjust their contracts and relocate" the activities on the continent.

The Governor of the Bank of France on Friday demanded that vigilance in the compensation sector be maintained, as a divorce without consent could "represent a risk" to the stability of the financial system.

British companies have almost a monopoly in this activity, namely keeping accounting for exchanges between financial agents on world markets and ensuring fair execution of transactions between all operators.

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