Brexit Bulletin: Can Britain Split the Difference?

The U.K. may need to drive a wedge between EU states in Brexit talks. So far the Continent is singing with one voice.

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It now looks like Theresa May was a little naive.

Back in October, the U.K. prime minister said she hoped her commitment to start the Brexit process by the end of March would prove enough for the European Union to engage in some “preparatory work” beforehand.

“This is important,” she told the BBC. “It’s not just important for the U.K.; it’s important for Europe as a whole.”

Instead, European officials held their line that there would be “no negotiation without notification” that Britain was definitely leaving.

Theresa May, U.K. prime minister and leader of the Conservative Party, speaks during the first day of the party's annual conference in Birmingham, U.K., on Sunday, Oct. 2, 2016. May said she'll begin the U.K.'s withdrawal from the European Union in the first quarter of 2017 in her clearest announcement yet about her government's Brexit strategy. Photographer: Chris Ratcliffe/Bloomberg

Theresa May speaks during the first day of the party's annual conference in Birmingham, U.K.

Chris Ratcliffe/Bloomberg

As May’s March 31 deadline nears, it’s worth asking whether the EU’s 27 states will remain so united. Much of the U.K.’s ultimate success might depend on it drawing individual countries to its side, perhaps by offering financial incentives or security commitments.

One person who is concerned the bloc will fracture is European Commission President Jean-Claude Juncker.

Having already told a weekend newspaper that he thinks the U.K. can aggravate divisions “without great effort,” he said on Monday the U.K. will also make promises to certain industries to undermine EU unity.

As Ian Wishart reported recently, there are strategies the U.K. can adopt to split the EU. 

“It’s in our common interest that there are no special arrangements,” Juncker said.

Singing from the same hymn sheet, Austrian Chancellor Christian Kern said on Monday that the EU must ensure the U.K. is in a worse situation outside than inside the bloc, otherwise it would mark a “capitulation.” And French presidential candidate Emmanuel Macron told Channel 4 News he would be “pretty tough” on the U.K. in the Brexit talks.

For more details, Bloomberg Briefs has a newly updated special report on Brexit available now.

Dublin’s Weakness

Commuters pass over the Samuel Beckett Bridge against a backdrop of a commercial construction site in Dublin, Ireland, on Thursday, Nov. 24, 2016. Irish ministers and executives are closely monitoring economic and market developments in the U.K. because the country is Ireland’s largest trading partner along with the U.S. Photographer: Chris Ratcliffe/Bloomberg

Commuters pass over the Samuel Beckett Bridge in Dublin, Ireland.

Photographer: Chris Ratcliffe/Bloomberg

For banks looking to rehouse staff in the EU, Dublin ticks a lot of boxes: Similar laws and regulations as the U.K., for example, as well as the same language.

But it suffers from a shortage of talent, as Gavin Finch, John Detrixhe and Peter Flanagan report today. All told, there are 35,000 people working in finance in Ireland, compared with more than 60,000 in Frankfurt, 180,000 in Paris and 360,000 in London.

The lack of skills still may not scare off banks that see Brexit as an opportunity to reduce costs. A few large banks have held discussions about moving managers to their new EU hubs to train cheaper local hires while London jobs are cut, according to two recruiters.

Separately, Lloyds is close to selecting Berlin as its base in the EU, while the new U.K. head of Societe Generale said the bank remains committed to London despite Brexit. 

‘Clever Financiers’ Still Needed

Talented bankers will still be welcome to move to the U.K after it leaves the EU, Brexit Secretary David Davis said, promising it will take “a long time” to tighten migration rules.

On a diplomatic mission to Finland, Davis said it would not be in the U.K’s interests to cut off the supply of skilled foreign workers. 

“Our economy depends on attracting bright, capable people to our universities, clever financiers,” Davis said. “We will change the policies slowly, but it will take a long time -- it will not be a sudden change.”

The U.K. might need the foreign finance workers. Morgan McKinley Financial Services reported on Monday that there was a 29 percent drop in professionals job hunting in the City in January.

Tech Stress

British technology startups are beginning to worry over Brexit.

Once, they were confident their borderless industry wouldn’t be adversely affected by Britain’s break from the EU. Now, a poll of 940 startup executives in the U.K. and other nations has found that Brexit is sowing anxiety about fundraising, hiring non-British employees and accessing the European market.

Less than half the executives believed 2017 will be a better year than 2016, according to the survey by the London arm of Silicon Valley Bank, a Santa Clara, Calif.-based investment bank.

More than a fifth of fledgling U.K. tech ventures expect to open offices in continental Europe, and one out of 10 are are considering moving their headquarters across the English Channel.

Brexit Bullets

  • European Commission raises U.K. growth forecast for 2017 to 1.5 percent from 1 percent, yet warns Brexit poses risk to euro area
  • Britain’s contribution to the EU budget is to soar by almost a third, to £10.2 billion in 2018/19, the Daily Mail reports
  • A House of Lords committee warned against “worrying complacency” over environmental regulations after Brexit and said Britain could link up with China or California on climate policy
  • Clifford Chance warned some EU exporters may have to cut ties to U.K. suppliers after Brexit because current free trade agreements require a certain percentage of products to come from within EU
  • Ruth Davidson, Conservative Party leader in Scotland, said the risk of another independence push was real and not to be underestimated
  • A free trade deal with the EU “is not a make-or-break,” said Tom Crotty, director of the company which now makes Land Rover Defenders
  • EasyJet picked Portugal and the Czech Republic to operate as its EU licensing bases after Brexit, Politico reported
  • Britons living in the EU will face a backlash, according to a leaked European Parliament document seen by the Guardian
  • Bank of France Governor Francois Villeroy de Galhau cautioned French voters about the costs of withdrawing from the euro
  • Wireless-speaker maker Sonos said it will raise its prices across its home-audio systems due to the lower pound

On the Markets

Export prices in sterling terms jumped more than 12 percent over the past year as the pound slid, according to data from the Office for National Statistics. That suggested many companies are using their exchange-rate windfall to lift profits rather than try to increase their market share.

And Finally…

Plastic surgery is sagging in Brexit Britain.

According to the British Association of Aesthetic Plastic Surgeons, the number of Britons undergoing cosmetic surgery in 2016 was the lowest in almost a decade, with the number of operations falling 40 percent from 2015. The group suggested Brexit and a “climate of global fragility” was behind the declines because it fanned an environment of uncertainty.

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