Just like most people, you may have read in the press about the transition period that could grant businesses 21 more months to prepare for the impacts of Brexit, but you will also be aware of the mantra used on both sides of the channel: “Nothing is agreed until everything is agreed”.

     

    Where are we now?

     

    In October 2018, a draft Brexit withdrawal agreement must be agreed between the UK and the European Union (EU) and submitted to the European and UK Parliaments and the European Council for approval. At this stage, the terms of a future trade deal between the UK and the EU will be mostly unknown. A range of outcomes are still possible. Detailed trade negotiations will start after Brexit (29 March 2019). The intention is that a new trading arrangement should be in place from 1 January 2021, after the 21-month transition period ends.

     

    What if there is no agreement by March 2019?

     

    If the Brexit withdrawal agreement is not agreed or ratified, the UK will cease to be a member of the EU and therefore also stop being a member of the Single Market and the Customs Union on 29 March 2019; this is often called a ‘hard’ Brexit without any transition period.

    According to the terms of their World Trade Organization membership, both the EU and the UK would have to impose tariffs on trade and it is likely that all other related expected Brexit impacts (i.e. supply chain, cross-border trade, human resources, legal and tax) will immediately start affecting businesses.

    In the financial services area, the EU's chief Brexit Negotiator Michel Barnier recently reiterated that the City will no longer possess the comprehensive ‘passport’ that it currently enjoys. This would mean the ability for UK banks to service European Economic Area (EEA) clients would be limited and could be severely disrupted in a no-deal scenario.

     

    How can you mitigate the financial services risks?

     

    Financial services regulators are expecting banks to prepare themselves and their clients for a range of scenarios, including a hard Brexit at the end of March 2019. Banks have therefore initiated client contact and communication. At HSBC, we have assessed which financial services and products would be affected by a hard Brexit and built solutions to ensure continuity of service. In Europe, we support customers across 34 markets, with a physical presence in 19 countries. Onboarding your EEA entities with one of our main EEA affiliates before the end of 2018 will ensure you can continue to benefit from the same or new services after that date, regardless of the outcome of the Brexit negotiations.

     

    What about the impacts outside of the financial services area?

     

     

     

    Whatever transpires, contingency planning is vital for every company because many elements of their business models, from strategy to logistics, will be impacted

    How can you mitigate these risks?

     

    As part of the planning process, businesses need to undertake a thorough macroeconomic impact analysis. This will reveal the extent of the effect of Brexit on key issues which will impact your business.

    Ultimately every industry will have to adjust to accommodate the new rules. The support companies receive from their banks may prove the defining factor for success. We can help analyse the financial impacts of Brexit and propose solutions to ensure continuity of service to help you manage your financial and treasury risks. We are already supporting many clients with Brexit contingency planning, finding the best solutions for their financial products and services.

    Contact your HSBC relationship manager and let us start planning for Brexit together.

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