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Theresa May

The Economy

The key information on Brexit

14 March 2019

The Brexit deadline is approaching and Barclays is preparing for Brexit in whatever shape it comes. Read more about how we are supporting clients through this period of uncertainty.

Barclays Bank Ireland

Following the UK’s decision to withdraw from the EU, we have been takings steps to preserve market access for our clients.

We have expanded our existing subsidiary Barclays Bank Ireland (BBI), which will become the legal entity serving clients in the European Economic Area (EEA), should Brexit result in a loss of relevant market access for the UK financial services industry.

Clients affected by these changes are predominantly European clients – excluding the UK – and will have been contacted.

Detailed information about Barclays Bank Ireland and the legal mechanisms that will be used to preserve market access for our clients after Brexit are available on our group strategy website here.

When is Brexit?

The UK is due to leave the European Union at 11pm on 29 March 2019, but following the UK parliament’s rejection of the draft Withdrawal Agreement, it is possible this could be delayed.

Should that agreement be ratified, a proposed implementation period may see the UK remain subject to EU rules until at least 31 December 2020.

Image showing key upcoming dates.

Withdrawal Agreement

A favourite phrase of the European Union is that nothing is agreed until everything is agreed. Therefore, until a deal is ratified by both the UK and European Parliaments, no agreement is in place. Despite two defeats in parliament, the 585-page draft withdrawal agreement remains the only deal on the table.

The draft agreement is available to read in full here^ alongside a political declaration on the future relationship between the EU and the UK.

Included in the agreement is everything from an agreement on citizens’ rights, the financial settlement – estimated to be in the region of £35-39bn, data protection agreements and the length of the transition period.

Transition period

Under the terms of the draft agreement, a transition or implementation period would begin after the UK leaves the EU, and would end on 31 December 2020.

The original idea was that this would give the UK time to introduce a new immigration system and mean that businesses would only have to plan for one set of changes in the nature of the relationship between the UK and the EU. However, as the deadline has approached, the majority of businesses have now implemented contingency plans for a no-deal, according to the CBI^.

The implementation period would see trade continue on “current terms” – in other words the UK would not leave the Single Market or Customs Union until the end of this period. But, the UK will be able to sign and ratify its own trade deals – including the future trade agreement with the EU.

The EU explained^ PDF that the UK will have to continue to adhere to all existing EU regulations during this period, including the “four freedoms” of movement of goods, capital, services and people, but they will not have any representation in the European Parliament.

The length of the transition period could be extended, however, and such a move would need to be requested before 1 July 2020. The EU’s chief negotiator, Michel Barnier, was at pains in his press briefing on 14 November 2018 to underline that it would be their preference to extend the transition rather than to ever implement the backstop.

Irish border

The most debated issue facing negotiators has been the Irish border and the backstop solution in the draft agreement. The backstop is designed to come into force should the UK and EU fail to reach an agreement on their future relationship during the course of the implementation period.

It provides for limited checks on food and animal products, and some checks on industrial products carried out by UK authorities on the premises of a business – as opposed to at the ports. But it establishes what is being called “the single customs territory” between the EU and the UK.

In a technical note^ PDF explaining the backstop, the government explained: 

“Both parties therefore believe that the backstop protects both the EU single market and the UK internal market without prejudice to the future UK-EU relationship, as set out in the December Joint UK-EU Report, and respecting the overarching requirement to avoid a hard border.”

However, this has proved to be the biggest sticking point in the approval of the deal, as the Attorney General has explained that, legally, this could trap the UK in the backstop indefinitely.

What happens on Brexit day?

If the deal is approved, technically... not a lot. The UK will however cease to be members of the European Council and the European Commission. The UK’s 73 MEP’s will return home from Brussels and the UK will officially be allowed to negotiate new trade arrangements with both the EU and the rest of the world.

The transition period that was agreed between the UK and the EU means that trade with the EU, freedom of movement of people and goods will remain unaffected until at least January 2021.

However, should parliament fail to approve a deal, or fail to extend the Article 50-defined two-year negotiation period, then the UK would introduce a temporary tariffs regime^ that would eliminate tariffs on 87% of total imports to the UK.

Future relationship

Any future relationship between the UK and the EU cannot be formally agreed until the UK ceases to be a member of the Union, when it will become a third country.

The two sides have published a political declaration on the future relationship^ PDF which states, among other things:

  • The goal of creating a free trade area for goods;
  • A commitment to maintaining a high level of data protection;
  • A commitment of financial services equivalence in order to maintain market stability;
  • The goal of creating ‘ambitious’ arrangements for the trade in services and investment;
  • An intention to ensure ‘comparable’ market access for freight and passenger operators in the UK and the EU.

Supporting our clients through Brexit

Providing continued access to financial markets

Barclays currently makes use of passporting to serve clients across Europe, predominantly via Barclays Bank PLC and its subsidiary Barclays Capital Securities Ltd, both of which are incorporated in the UK. Should Brexit result in a loss of relevant passports for the UK financial services industry, we have expanded our existing subsidiary Barclays Bank Ireland (BBI), which will become the legal entity serving clients in the European Economic Area (EEA).

Enhancing product propositions

We continue to develop specific propositions for our corporate clients to meet their funding, cash management and risk management needs, and continue to add innovative solutions to help them navigate potential changes.

Investing in the European business

We continue to invest in our European business and are rolling out a consistent product suite across all major European geographies so that clients can enjoy the same level of service regardless of their location.

Helping our clients navigate uncertainty

While Brexit unfolds, we stand close to our clients in helping them understand the potential impacts on their underlying business – and corporate treasury – models, and will support them in delivering solutions to help them manage changes in their supply chain from our suite of trade and working capital financing, payments, and liquidity solutions.

Brexit deal
Insight

Brexit Deal

Read our analysis of how the proposed future relationship could impact your sector

If you have any questions on how Barclays is preparing for Brexit, please speak to your Relationship Manager