(Editor’s note: This post has been updated as both sides conclude a “hard” Brexit is increasingly likely. Meetings between Brexit Secretary Dominic Raab and EU officials went nowhere after Prime Minister Theresa May hinted earlier this month a deal was near. A major sticking point is the border between the UK and the Republic of Ireland. Ireland’s ambassador to the UK, Adrian O’Neill, said “Time is running out, there is no doubt about that. In all member states, preparation for all eventualities are ramping up quite significantly.” Also, see our running account of Brexit developments here.)
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 March in the event of a no-deal Brexit.
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, Prime Minister Theresa 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, two years and multiples rounds of negotiations, even May has conceded the UK might be headed for a no-deal Brexit.
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. However, the May government’s negotiations with the EU, over which parliament has no direct control, foundered. 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 mid-July, European Union officials just sent a communique to the remaining 27 member states advising them to prepare for a chaotic Brexit, noting that customs arrangements, airline agreements and arrangements for financial transactions could 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:
• Let’s start with a worst-case scenario for expats.
No deal could mean British expats who’ve lived for years in Spain, France and other countries would be forced to return home. Unless … unless countries with heavy expat populations such as France and Spain extend retroactive long-term residence visas effective 30 March 2019. The expats in France we consulted believe their financial and civic contributions, especially in rural France, make that highly likely.
In what appears to be a move toward a quid pro quo, May sent an email to 100,000 EU citizens last October assuring those in the UK legally that they will be allowed to stay after Brexit, according to the Guardian. UK officials are now implementing a plan to register 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.
EU officials had criticized May’s negotiators for not making progress on citizens’ rights. But no deal at all could return both the EU and the UK to hardline immigration positions and – worst-case scenario – theoretically lead to one of the larger forced migrations in European history.
• 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.)
• Ironically, life for anyone going anywhere is about to get a lot more complicated. Republic of Ireland Prime Minister Leo Varadkar recently warned that as of next March, 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 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 ….
• Paris, Frankfurt Luxembourg City and Amsterdam are threatening London’s position as Europe’s money magnet. A new 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.
• 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 term, 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 winners. IMF 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.
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.