As the UK finally bows out of the EU and negotiations move on to their next stage, the asset finance and leasing community will be asking what does the future hold for us?
When the clock struck midnight in Brussels on 31 January almost half a century of close union with mainland Europe came to an end and a bitterly divided United Kingdom formally left the EU.
But now the Brexit withdrawal agreement has been signed, sealed and delivered, the next stage begins with trade negotiations that will determine how closely linked the country remains with the EU bloc.
Casting a long shadow over 2020 is one clause in the Withdrawal Agreement Bill (WAB) that prevents any extension to the ‘transition period’ beyond 2020, even if a free trade agreement is not ready.
So, from tonight the UK is to abide by existing arrangements until the end of December. At the same time, negotiators will be trying to hammer out a lasting agreement about our future relationship, which needs to be completed by October if ratification is to be done by the deadline.
Key leasing domains – the automotive and financial services sectors – are likely to find themselves in the crosshairs for the entire negotiating period, if observers on both sides are to be believed.
David Davis MP told the BBC’s Newsnight this week that there are 20 to 30 different categories of negotiations that need to happen and the best way to achieve the deadline is for them all to take place in parallel.
Meaning, that UK concessions on fishing, for example, could be mixed up with EU concessions on financial services or access to the single market for the UK’s automotive sector.
UK banks (and their asset finance subsidiaries) and independent lessor companies will ideally want to enjoy a continuation of the existing ‘passporting’ arrangements, under which banks and financial services firms authorised in any EU (or EEA) country are free to do business with any other member country, with minimal red tape.
Is this likely to continue? That very much depends on how successfully the UK and EU negotiate their post-Brexit market access arrangements, or ‘equivalence’.
Boris Johnson has already committed his government to a, yet unspecified, degree of regulatory non-equivalence – meaning he wants to develop a regulatory regime for the City that breaks with the EU rules in some areas. But how much deregulation will Brussels find acceptable?
If the UK decides it wants to lure business to this country (and away from the EU) with lower corporation tax, few worker rights or environmental standards, Brussels is likely to take this as a declaration of (trade) war.
Mark Carney, the outgoing governor of the Bank of England, said earlier this month that there was no point in the UK seeking complete alignment with the EU rulebook, the suggestion being that the FCA and PRA must be the ultimate regulators if separation from the EU is the goal.
Meanwhile, the UK’s car manufacturing industry, which represents a huge workforce in the Midlands and The North and which recently turned Tory-blue from Labour-red, will need to be kept sweet by the PM if he is to hold on to his admittedly large (80-seat) Parliamentary majority.
Equally, few automotive manufacturers in the UK selling directly to the EU market will want anything less than fairly close regulatory alignment.
The PM will need to marry his goal of achieving zero-tariffs and zero-quotas with the kind of brinkmanship that risks another no-deal scenario for motor manufacturers and traders on which the leasing community relies.
One hopes that if sovereignty and control are at the heart of Brexit, that access to EU markets will not hinder what has been steady growth for the UK asset finance sector since the global economic crisis first reared its head.
Alejandro Gonzalez is the editor of Leasing Life