Expat Essentials

Domino Effect (updated): How a no-deal Brexit could affect all expats across Europe

(Editor’s note: At 39 days out, the United Kingdom’s richest man and a big Brexit supporter has read the writing on the wall and is now an expat. Billionaire industrialist Richard Ratcliffe has fled to Monaco to evade taxes. Ironically, Monaco – basically a protectorate of France  – follows the European Union’s customs and border regulations. Also, see our running account of Brexit developments here. Laura Kaye in Berlin contributed to this post.)

In June 2016, Britain voted to leave the European Union after a small group of nationalists sold British voters a simple message: Brexit will be a quick and easy return to greatness.

In July 2018, the Sunday Times, which supported leaving the EU, reported a plan to use the British Army to distribute food, medicine and fuel should the country collapse next month in the event of a no-deal Brexit.

On 21 January 2019, Prime Minister Theresa May presented Plan B after parliament rejected Plan A by the largest margin in modern British history. As of late February, she continues to try to reopen negotiations with an intransigent EU.

So with 39 days till Brexit, there are still three possible outcomes.

  1. Some kind of deal. The British Parliament voted in favor of Plan B, and the PM returns to Brussels for further negotiations … even though EU officials say negotiations are finished.
  2. No deal
  3. A second referendum

After more than two and a half years, we’re still at Square One.

If there’s a lesson here for all nations, it’s the power of simple populist messaging combined with the appeal of demagoguery.

In this case, former United Kingdom Independence Party leader Nigel Farage, former Foreign Secretary Boris Johnson and Michael Gove, now UK’s agriculture secretary, made promises no one could keep, from Brexit diverting 350 million pounds per week to the National Health Service instead of the EU to new and better trade agreements negotiated with individual EU countries via the World Trade Organization.

Quotes such as “easiest negotiations in human history,” “Britain holds all the cards” and “take back our country” tripped off the tongues of Eurosceptics, who described a brave new world of rainbows and unicorns.

Unfortunately, May’s Conservative government has proven to be incompetent at bargaining from a position of weakness, the interests of one country against those of a union of 27.

Instead of improving its relationship with the EU,  after two and a half years, multiple rounds of negotiations and finally a deal that never had a chance of making it through Parliament, May is warning a no-deal Brexit will mean catastrophe but appears powerless to stop it.

And that, as our Nina Avramovic put it all those months ago in her prescient post “Dear Brits; This is what it’s like to be a non-EU citizen,” means living in a whole new world of uncertainty, with limitations on travel, work and education.

Last October, labor and conservative leaders vowed to stop a no-deal Brexit, agreeing that leaving the EU with no relationship would be the worst-case scenario. Now, with less than 40 days from B-Day, alarms are going up.

Philip Hammond, the UK’s Chancellor of the Exchequer, released a report that a no-deal Brexit will knock about as much as 11 percent off the country’s gross domestic product over the next 15 years. That doesn’t mean the economy will grow more slowly. It means that it will contract, which is the definition of a prolonged economic depression.

Bank of England Gov. Mark Carney, whose hair has been on fire for two years over Brexit, predicts the UK’s economy will shrink by 8 percent within a year of Brexit. Bloomberg has the best summary here.

The panic really began last year when Transport Secretary Chris Grayling noted parliament would “have no mechanism” to keep the UK in the EU for longer than 30 March 2019. That’s when Britain’s EU membership automatically expires if no deal is reached.

In late October 2018, EU officials agreed to hold a series of no-deal planning seminars covering citizens’ rights, aviation, ground transport, customs, border controls and financial services for a chaotic Brexit. If there is any agreement between EU and British officials, it’s that customs arrangements, airline flight permissions and arrangements for financial transactions will end suddenly without any new plans being put in place.

And when that happens, everything changes. The bottom line, and there’s always a bottom line: A third country cannot have the same rights and benefits as an EU member.

With a “soft” Brexit, the trade agreements, customs agreements and rules regarding the right of free movement between the UK and the EU would have remained. With a “hard” Brexit, the United Kingdom starts at zero on the same level as North Korea.

If you’re an expat – especially a British expat – what does the UK’s inability to reach an agreement with the EU mean?

Here’s how we think a no-deal Brexit will affect expats in Europe:

• Russian entrepreneur Nickolay Storonsky has a warning for British officials … create fast-track visas for foreign tech talent, or risk falling behind the rest of the world in fintech. Storonsky is the founder of the digital bank Revolut.

“With all of the political uncertainty kicking off right now, lengthy immigration processes and bureaucracy will only slow down the UK fintech industry’s growth, and we risk losing out on the best talent to other EU countries such as Germany and France,” he’s quoted by City A.M. as saying.

That, of course, is counter to the core tenents of hardline Brexiteers, who want to block EU residents from moving to, and working in, the UK.

•  Oh, the ignominy.

British citizens are about to join expats from Syria and Libya at the back of the line. Switzerland is instituting a quota system that will limit the number of Brits coming to work to 3,500. At first, we thought this was The Onion.

But we found the Swiss official statement which says (emphasis ours):

As part of its ‘Mind the Gap’ strategy, the Federal Council decided at its meeting on 13 February to introduce a separate quota as a temporary measure, allowing 3,500 British citizens to work in Switzerland. This is intended to mitigate the consequences for the economy and the cantons of an abrupt change in the status of British citizens from persons benefiting from freedom of movement to third-country nationals; it will also prevent undesirable competition for jobs between British citizens and other third-country nationals.

You can read the full release here.

The good news is, the roughly 42,000 Brits already living in Switzerland get to stay. This just applies to new economic migrants wishing to come and work in the Alpine paradise. Switzerland isn’t an EU member but observes many of the EU rules and regulations. So if this is happening in Switzerland, then it could happen in other non-EU countries with large British expat populations.

• As we’ve posted earlier, the number of companies bailing on Britain is increasing. This weekend, Dutch officials acknowledged they have 250 companies in their sights.

About 42 companies representing 2,000 jobs already have moved to the Netherlands from the UK, according to this post in DW. Which is good news and bad if you’re an expat already living in, say, Amsterdam or Rotterdam. Yes, those companies are bringing new career opportunities. But housing prices and apartment rental rates in all the major Dutch cities already are through the roof, so you wonder where these people – mostly highly paid executives at HQs – are going to go.

If you use that same math, that’s an average of about 50 jobs per company, and let’s be honest … most are going to Amsterdam. So multiply that times 250 companies, and that’s 12,500 people. Which means basically adding the population of a small city to a large city. To a large, overcrowded city.

• That same DW post also has a section about Düsseldorf University Hospital running ads in Polish-language newspapers in London and other UK cities with the pitch, “Brexit worries; come to Germany.” Germany has a long-running acute shortage of nurses, and many Polish people already speak German and English

“Not only do we have the better pay, better social benefits and better working hours, we also have the better weather, the better food and the shorter way to Poland,” the ads read. This is getting cra-cra!

• As of 29 March, Brits will say goodbye to freedom of travel throughout Schnegnen. BUT, as a consolation prize, EU ambassadors are proposing short-term visaless travel.

UK citizens going to the Schengen Area would have the right to visa-free travel for 90 days in any 180 days, according to a news release from the European Council. And of course, our old friend Reciprocity comes into play on this. For this to happen, the UK would have to extend the same courtesy to EU citizens, which the May government has already offered to do. So don’t cancel that vacay to the Spanish beach just yet.

• This is from BuzzFeed, a “news site” that’s better at reporting on Zac Efron dying his hair than accurately reporting hard news. But BuzzFeed reporters claim to have the documents to back up their story.

And it’s quite a story: A government memo predicts that between 50,000 to 250,000 British expats living in the EU would return home in the event of a no-deal Brexit. And these aren’t just any expats … these are pensioners who – the memo states – would put a lot of pressure on the UK’s healthcare system and other public services.

A “worst-case scenario” is that 150,000 return the first year, followed by a wave of 50,000. Government officials have told BuzzFeed the memo is outdated and they’re projecting 50,000 to return in the first year.

• Those expat pensioners will be hightailing it back to Blighty because the British government just notified them the Queen will no longer pay for their healthcare should the UK leave the EU without a deal.

From the notice:

For residents who use the S1 certificate, this may no longer be valid after 29 March 2019. The advice is to check what the latest healthcare arrangements are between the UK and the country British nationals currently live in.

• At the 60-day mark, it appeared that Germany and other countries will give British expats transition periods … but with one serious stipulation: They can’t leave.

When they register for the new registry title, they get back a reply (at right) that states that while they can stay in Germany, they can’t travel to other European countries or reenter Germany.

• If there’s any good news that came out of the recent Plan B discussions, it’s the revelation that May intends to scrap her 65 pound Brexit tax for EU citizens who elect to stay in the UK.

• Yes, Theresa May was probably bummed after her historic defeat on 15 January. But Frankfurt’s commercial real estate brokers are giddy. Brexit is boosting Frankfurt’s commercial real estate market to record heights as every major global financial giant relocates from London including Goldman Sachs, Citi, JPMorgan Chase and Barclays.  The number of financial jobs at foreign-based banks in this city on the Main River is expected to increase to 8,000 from 2,000. Good news for our highly skilled internationals.

Paris, Frankfurt Luxembourg City and Amsterdam are threatening London’s position as Europe’s money magnet. An EY study finds the amount of foreign capital headed for France has soared, with Paris beating London out of its top spot in terms of attractiveness to investors for the first time since the report began in 2003.

Frankfurt saw a total of 10.4 billion euros in commercial real estate transactions last year, an all-time high, up 36 percent from 2017, according to BNP Paribas Real Estate data.

Dublin is getting Hermes Investment Management, a $30-plus billion fund run by a former Fidelity executive, and Amsterdam is getting Norinchukin Bank, one of Japan’s largest. So, Brexit is an engine driving a dramatic redistribution of wealth to Europe’s other financial capitals.

• You know that worst-case scenario that had British expats loaded up and shipped back to the UK in the event of a no-deal Brexit? Well, more and more EU countries are making sure that won’t happen.

The Dutch government just announced.that British nationals will get a 15-month transition period post-Brexit during which they can apply for a residence permit, according to media reports.

Berlin officials have issued a notification that clarity on Brexit is lacking. “Whatever happens, British citizens will in future require a residency title or some other proof of their right of residency in order to reside in the territory of Germany,” according to a news release posted on Berlin.de. Starting 30 March, British citizens in Germany will get an initial 3-month transition period through 30 June 2019 to get that German residency title.

So all British citizens have several months to apply for residency title at their local Foreigners Registration Office, and you can stay in Germany and keep working till you get a ruling on your application. But after 30 June, British expats will have to prove their right to stay, which we interpret as an employment contract or one of the visas for self-employed freelancers and entrepreneurs.

Several other countries have followed suit, so we have a full round-up post here.

For the record, we were right all along – we stated more than a year ago that British expats who’ve lived for years in Germany, Spain, France and other countries could be forced to return home. Unless … unless countries with significant British expat populations extend retroactive long-term residence visas effective 30 March 2019. Which is exactly what’s happening, thank goodness.

• The question is, what will UK officials do for EU citizens???

In a move toward a quid pro quo, May sent an email to 100,000 EU citizens in October 2017 assuring those in the UK legally that they will be allowed to stay after Brexit, according to the Guardian. UK officials then registered an estimated 4 million EU residents in the UK. Post-Brexit, they will be required to have official identification numbers that will be used by employers, landlords, banks and public services, including hospitals.

All we keep hearing in our heads is, “Brexit means Brexit.” Apparently not.

• If there is no agreement and UK officials decide to expel EU citizens, Romania, Bulgaria, Poland and other countries in Eastern Europe and the Balkans would staunch their brain drains.

The Guardian reported last year that the number of Romanians and Bulgarians in the UK rose 80 percent between 2014 and 2016: to 413,000 last year from 230,000, according to the Office for National Statistics. Now, Bulgaria, Romania, and Poland need those people back as their own economies expand at a pace far faster than the UK.

(We see you wondering, so we’ll tell you: There are a grand total of about 6,200 British citizens living in Romania and Bulgaria.)

Bloomberg has reported an increasing labor shortage in the UK as EU workers leave and wages rise as Romania and other countries want their skilled citizens back.

Romania, Poland and other countries in Emerging Europe have fast-growing economies, averaging above 4-percent GDP growth since 2015.

• Ironically, life for anyone going anywhere is about to get a lot more complicated. Republic of Ireland Prime Minister Leo Varadkar recently warned that at midnight on March 29 , planes leaving the UK could be prevented from using Irish airspace as the republic remains in the EU. The UK’s post-Brexit default trade status under the World Trade Organization does not include commercial travel rules.

Oh, and British officials suddenly figured out you also won’t be able to take the train between the UK and Europe after a no-deal Brexit because Eurostar would stop running between London and Paris, Brussels and Amsterdam. The British government advised passengers to take out travel insurance. Seriously …

• File this under, “Just when you thought it couldn’t get any worse.”

The Guardian has an in-depth look at how port authorities in Rotterdam –  Europe’s largest, busiest port – are preparing to deal with a no-deal Brexit. And “Rotterdam prepared for worst when Britain crashes out of EU” might be the scariest Brexit post we’ve read so far … and that’s saying something.

For instance, at the stroke of midnight on 29 March next year, Rotterdam port workers will have to run checks on 10,500 newly “foreign” boats, according to the post. Those would be ships coming in from the UK. For every container ship that moves between the UK and the EU, there would be a whole new layer of documents and requirements for businesses on both sides of The Channel.

To prepare, the Port of Rotterdam is hiring 928 extra customs officials and 145 veterinary inspectors. The UK depends on just-in-time shipments of fresh food from the Netherlands. That will all end ….

• If you’re an expat in, say, Frankfurt or other financial centers, get ready for housing costs to skyrocket. Or settle for living in villages, towns, and cities within driving/train distance such as Darmstadt, Griesheim and Wiesbaden outside Frankfurt.

Multinational banks and financial houses based in London, focused as they are on objective economic forecasting, were the first to figure out Brexit isn’t going to end well. Greed, for lack of a better word, is apolitical. Unswayed by nationalism or emotion, they started planning on the first day for a worst-case scenario that would end “passporting” rights for cross-border money transfers and the arcane market transactions to happen without regulatory “friction.”

Top execs at large corporations – including those at British-based multinationals – are starting to doubt the UK can get a deal. If they decide to wait it out, a no-deal Brexit could conceivably cut their access to the world’s largest trading bloc while forcing them to scramble to find a new home at the last minute and spend millions of extra dollars/pounds/euros to do it.

So you can look forward to an unending series of announcements about these companies heading for the Continent.

This scenario will be repeated around Europe from Amsterdam to Paris as multinationals leave the UK to protect access to 500 million customers in the EU as opposed to 60 million in the UK.

So far, Bank of America, Barclays, Morgan Stanley, Citigroup, Standard Chartered and Nomura banks/financial groups have announced they’re moving their EU headquarters – along with thousands of well-paid executives and employees – to Frankfurt from London. Global investment giant BlackRock is moving to Paris.

Goldman Sachs Group Inc. and UBS Group AG will likely follow suit. JP Morgan Chase and HSBC Holdings are headed for Paris.

So, Brexit pushing so many well-paid people into Frankfurt, Paris, Berlin, Amsterdam and Luxembourg will put pressure on housing markets in innovation centers, many of which already are seeing residential rents and sales skyrocket, not to mention the cost of office space.

• Conversely, finding a job in Europe could become much easier for non-EU talent from the United States, India, Mexico and other countries.

Britain has been, compared to Sweden, Germany and the Netherlands, a walled garden even though it has the No. 1 tech and startup scene in Europe. With banks, car manufacturers such as Ford and advanced manufacturing leaving the UK, expect an increase in opportunities in the EU, where highly skilled internationals are welcome. The downside is, this will put even more pressure on countries such as Sweden and Finland, where labor shortages are becoming critical.

• The British expats returning to the UK could look forward to empty shelves in stores.

Why? Because the UK imports twice as much food as it exports.

The irony, of course, is that you can almost swim from the coast of England to the Netherlands, which is the No. 2 food exporter in the world. How badly does the Netherlands need the UK? Try, not at all if that means tariffs. There are still 27 countries in the EU. And Britain still has to import food from somewhere.

• Brits are about to become poorer. Honda and other companies have long warned that if there’s a hard Brexit, they’re out of here. Several auto industry insiders warned the industry could go “extinct” after Brexit. Last April, British manufacturing had its worst month in five years while that most English of all car companies, Land Rover, announced plans to move some production to Slovakia. Worst of all, it appears EU rules dictate that when assembling vehicles, at least 55 percent of parts must come from inside the EU, which could mean suppliers in the UK would be cut out.

• To be fair, the United Kingdom has (had) the world’s fifth-largest economy, just behind Germany and one place ahead of France. The International Monetary Fund says that when the UK leaves the EU, there will be no winnersIMF analysts said that the EU could lose as much as 1.5 percent of gross domestic product from a “hard” Brexit while the UK would suffer an even bigger hit – a 4-percent loss of national income.

• Brexit was supposed to be about a more secure Britain. Turns out the opposite will happen. Leaving the EU means that British police will no longer have unrestricted access to the EU’s databases for crime fighting such as fingerprint or DNA archives. Nor will they have access to counter-terrorism data. Worse, E.U. law enforcement officials will scrub UK data and will require their British counterparts to scrub EU data, according to the Washington Post. Brexit also closes the door on some military cooperation and intelligence sharing. So it’s no surprise that Vladimir Putin is a huge Brexit fan.

Do we think all of this will happen? It depends.

Brexit is a divorce and divorces are always bitter. And despite what the Brexiteers claimed, the UK has very little leverage when it comes to competitive advantage. Other than finance and Rolls Royce jet engines, Britain doesn’t do anything – build cars like Germany, create ultra-high-tech like the Netherlands or excel in aircraft manufacturing like France – better than any other country.

If a new government came in, that might change the tenor of the talks with EU officials. Or it could even lead – best-case scenario – to the UK rethinking the wisdom of continuing down a road that leads straight over the White Cliffs of Dover.

But you have to wonder if the relationship between the UK and the EU can ever be repaired under any circumstances.

Also see:

So, poorer Brexiters voted to be worse off? There’s nothing wrong in that (Guardian)

Brexit: Britain’s atavistic revolution (Salon)

The IMF is right: hard Brexit is an international threat (Guardian)

Brexit: What would ‘no deal” look like (BBC)

Goldman Sachs chief Lloyd Blankfein hints at Frankfurt move (BBC)

Goldman Sachs and JPMorgan say they’re assuming a hard Brexit (Bloomberg)

What the grim reality of a ‘bad-tempered’ Brexit means (Guardian)

London is right to prepare for no deal on Brexit (Financial Times)

‘Bitter, table for one’ : What will it be like to be British after Brexit? (Dispatches Europe)

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