Nine months after its historic vote to leave the European Union, Britain made the breakup official this week.
British Prime Minister Theresa May sent a letter to the president of the European Union that invoked Article 50 of the Lisbon Treaty – the first step toward Britain’s ultimate withdrawal.
What follows this event is up to two years of negotiations regarding how newly single Britain will interact with the rest of the world.
After the referendum vote, PaymentFacilitator.com talked about Brexit and its potential impact on payment facilitators. With the process officially begun, has anything changed for businesses interested in doing business in the U.K.?
At that time, the issue of passporting was front and center. Passporting refers to the ability of a business with authorization to sell financial services – including payments – in one European country to do so across the European market.
How this ability will be handled going forward is one of the many, many details that remains up in the air.
Tim Buckingham, director at London-based Payments Services Ltd., acknowledges the issue of passporting is still on the minds of many industry watchers.
“Until the negotiation process is concluded, no one really knows quite what will happen, and the non-U.K. commentators promoting their territories as the best place to set up new businesses are preying upon this uncertainty, which is probably fair game,” Buckingham told PaymentFacilitator.com in an email.
However, he cautions, there are reasons to doubt that the status quo will change much. After all, there are significant existing business interests in both the U.K. and Europe.
“The U.K. is very unlikely in the extreme to jeopardise one of the few areas where it is a market leader, and major financial institutions based in the U.K. all have significant lending portfolios across Europe,” Buckingham said.
At the same time, he notes, there are already thousands of businesses in both the U.K. and Europe that have passports to do business across borders, “so there will be pressure from both sides of the English Channel to reach an accommodation that will preserve the status quo.”
Fred Tyler, vice president of strategic partnerships at Credorax Bank, argues that it will take quite some time for any changes to take effect.
“Theresa May’s formal Brexit notice letter emphasized the close regulatory framework existing between the U.K. and E.U., and the phased approach to the negotiations looks like it will take at least three to five years for existing passporting rights to be wound down,” Tyler said.
“However, it does look likely that the existing passporting concept may not endure for U.K. PFs at the end of negotiations. But the U.K. may keep equivalence in regulation that will satisfy E.U. regulators and in addition, the mooted £50 billion ‘divorce’ bill may ensure that compliant U.K. payments providers and entities have access to the single market for the foreseeable future,” he continued.
While we wait for certainty, Buckingham advises a little perspective – and a contingency plan.
“However,” he said, “it makes little commercial sense to act upon that contingency plan until the position becomes clearer, and financial organisations are going to have plenty of time to safeguard their position over the next 24 months, which seems to be the timeline for the negotiations.”
“If you are planning to open a new business, it is perhaps a little too early to be writing off the U.K. as a place to do business.”