The decision to postpone Brexit until the 31st of October 2019, brings a lot of uncertainty in terms of the relationship between Great Britain and the European Union and French businesses. There are going to be serious consequences to Brexit. The British market is very important to France, it is their 8th economic partner and even more, one of the rare cases in which we have a positive trade balance (+12 billion euros in 2018). Compare that to a negative trade balance with our first economic partner, Germany, of 18 billion euros or with China, our second partner, with a negative balance of 30 billion euros.
Trade with Great Britain concerns 60,000 businesses that export their products and services, and also 3,300 French expats who live in Great Britain. There are 300,000 French residents currently living in Great Britain, compared to 200,000 British citizens in France.
Great Britain also account for 12,000,000 tourists, which makes them one of France’s primary tourist populations.
Finally, Great Britain also accounts for €165 billion in stock investments: France has invested 100 billion in Great Britain which makes France its 3rd direct investor. For its part, Great Britain has invested €65 million in France, making Great Britain its 4th investor.
How will Brexit affect the French markets?
Reintroducing custom duties
Countries in the European Union do not have to pay custom duties. The principle of free movement applies here. With Brexit, the end to this free movement means that all custom duties must be paid by French businesses, as well as British, and can reach up to 10%.
The return of customs formalities
The agro-food industry is one of the main sectors that deals in exportation to England. With these customs formalities being reinstated, the waiting time at customs will be longer and that will have a huge impact on the logistics of fresh products.
A more expensive currency
It is expected that the rate of the sterling pound will fall while Brexit is being implemented. The value of the Pound has already fallen from €1,42 to €1,12 today, which represents a decrease of 25%. This means that French products will be more expensive, therefore risking a decrease in British demand which will lead to a decrease in exportations.
How will Brexit affect the French citizens in Great Britain?
The end of free movement
With Brexit, comes the end to the freedom of movement between France and Great Britain. New statutory legislation concerning French nationals in Great Britain will need to be drawn up. For now, it remains undecided.
Business technology systems
All the companies that depends on the free circulation of data will be seriously impacted by Brexit. Updating business technology systems will be costly, as there will be additional charges for businesses that rely on the free circulation of data.
Another serious consequence of Brexit is the VAT charges
Nothing has been decided for now, but if Brexit negotiations were to take a turn for the worst, and negotiations do not lead to a general agreement concerning Britain’s exit from the EU, French businesses will have to declare and pay VAT to the British tax authorities. All of the terms and conditions to follow will be the responsibility of the British tax authority.
Brexit can also bring opportunities for French businesses. The Minister for Economic Affairs, Bruno Le Maire stated that it is “good news for the French economy, and good news for all French companies”
Brexit: an opportunity in disguise
Attract businesses and investors who are leaving Great Britain
One of the opportunities of Brexit is the businesses who are planning to leave Great Britain in the case of Brexit. France is developing a policy that will make France more appealing to these businesses, while also benefitting the economy. For example HSBC has already moved 1,000 jobs to France, in Paris. Other banks are likely to do the same, such as Goldmann Sachs.
In order for French businesses to get as much as they can from Brexit, they should think ahead. The MEDEF [the Movement of Enterprises of France] is therefore offering a 4-step plan for businesses to prepare for carrying out this task.
The main difficulty comes from the fact that at the moment, the terms and conditions that will be enforced from Brexit are far from being agreed upon. All options are on the table at the moment, including the option of calling it off. The conservatives in power are soon going to announce their new prime minister. It will then be clearer to see what type of Brexit we will be facing.
With or without Brexit, it will be very important to choose the right translation agency for your procedures.
ACSTraduction is the ideal partner for you and your exporting project in Great Britain, as well as all other countries.
Do not hesitate to come and talk to us about your projects, we would be happy to help.