Uncertainty over Brexit makes it difficult to advise local companies, panel told

Local companies with business ties to the UK are finding it difficult to plan ahead given the limited progress of negotiations with the EU, according to Malta Enterprise chairman William Wait.

Wait was speaking during a panel discussion at the EY Malta’s Attractiveness Event, along with former Polish Prime Minister Jan Krzysztof, Raesch Quartz (Malta) managing director Marisa Xuereb, EY director Simon Barberi and parliamentary secretary for EU funds Aaron Farrugia.,

Wait said that it was becoming clear that the UK’s Leave campaign had no plan for how Brexit would  work. He said that two years after the vote, there were still doubts on how, when and indeed if, Britain would leave the EU.

He said that while there did not appear to be much panic over Brexit in Malta, some operators, especially in the manufacturing industry were concerned.

Given that there weren’t many companies that exported to the UK, wait said Malta Enterprise was dealing with these cases on an individual basis, though this was complicated by the uncertainty which currently exists.

This was echoed by Xuereb who pointed out how perceptions about Brexit had changed over the past three years.

She said initially, fears were rooted in what would happen if the UK were to vote to leave and whether this could lead to other countries taking similar decisions. After the vote, and once it became clear that both the EU and UK had no plan for Brexit, concerns shifted to whether an agreement could be reached.

In this regard, she said the EU was quicker in formulating a strategy and finding consensus among member states. On the other hand, she said that it appeared that the closer the deadline got, the less consensus there was on the UK’s side.

“This has resulted in fewer nerves on the EU’s side,” she said, adding that uncertainty meant that it was difficult for operators to judge the possible outcomes and the possibility of those outcomes occurring

On the other hand, she said there were industries that stood to gain from Brexit, given Malta and the UK’s similar legislative framework.

While the positive and negative effects on different Maltese industries were important to consider, perhaps more significant, Xuereb said, would be the threat of tax harmonisation to Malta’s financial services sector.

“The biggest risk for Malta will come later when Malta sits at the EU negotiating table without Britain,” she said. “This is the part we have no sensitized ourselves to.”

In this regard, Farrugia said Malta needed to join forces with other countries in the EU in order to protect its interests.  

He said that a no deal would be a big risk for the aviation, pharmaceutical and maritime industries, but said he was also optimistic that a deal would be reached by March.

Beyond this, he said one would also have to consider the fact without the UK, there will be a significant reduction to the EU budget, necessitating changes in spending on the part of member states.

Asked about Malta’s fund allocation, Farrugia said that talks were currently ongoing with the European Commission and the Austrian presidency and that Malta was making a good case for a fair deal that will allow it to consolidate and maintain its current GDP growth.

Krzysztof said he believes the biggest problem with Brexit was the issues related to the Irish border, which it appeared was proving to be a major stumbling block.

“They have put at stake [the Good Friday agreement] that people have invested years of effort and much energy into,” he said.

He added that he hoped that there was some still some sense of responsibility and that a hard border would not be re-introduced.

“The Hard-Brexit idea is now over, and we have this theatre of British politics,” he said, insisting that a country that was once meant to offer world leadership was today struggling for to find leadership within its own political system.

It was at this point that the British High Commissioner to Malta Stuart Gill who was sitting in the audience intervened to “clarify” that the UK was not in “panic mode” as had been suggested by some of the panellists.

He said that beyond the headlines, the EU and UK were actually quite close to an agreement, with the only remaining issue being that of the Irish border. This, he said, was the subject of very high-level and highly sensitive political talks.

He said that the UK government was also working on a possible no-deal scenario since it would be irresponsible not to do so.

Gill acknowledged that time was running out and that both sides needed to act quickly and return to serious negotiations. He said however that he too was confident that a deal would be reached by March.