Study finds Malta to be more negatively impacted by a no-deal Brexit than many EU countries

A study has found that Malta will be more negatively impacted by a no-deal Brexit than many EU member states such as Italy, Spain, Cyprus and at least 13 other countries.

There are 13 other countries, including Ireland, France and Germany where a no-deal Brexit will have a more deleterious impact than it will have on Malta.

The study was carried out by the Financial Times and details were published last week.

Mehreen Khan, Jim Pickard and Janina Conboye wrote that the biggest impact from a no-deal Brexit would be in the sector of data flows – vast volumes of personal digital data from EU and UK citizens are transferred by businesses and public sector bodies across the English Channel every day.

Under no-deal, the legality of these data flows will be under question, having an impact on businesses including tech groups, healthcare companies or services that deal with EU customers.

Disruption would be a significant barrier to trade and in the worst case could force British companies to halt their European operations.

A system of contractual clauses offered by Brussels, allowing nonEU companies to carry out data transfers in compliance with European law, could offer a fallback.

Large businesses with big legal departments may well have already signed up to such alternative measures. But the CBI, the UK employers’ group, has warned that small and medium-sized enterprises have little awareness of what a hard Brexit means for them and the contingencies available.

In the longer term, the UK says it wants an agreement under which it would be treated, in effect, as a member state. Brussels has warned it could take ‘years’ to conclude.

As regards financial services, after a no-deal Brexit, the UK’s financial services sector would lose ‘passporting’ rights that allow British-based groups to operate in the EU’s single market.

The prospects of mass disruption means financial services is one of the few areas where regulators have been co-operating on risk. While companies have been left with most of the burden of preparing for no-deal, Brussels has taken important contingency steps.

They include access to clearing houses in the EU that will end in March 2020, 18 months for central securities depositories that settle trades, and six months to allow contractual changes to over-thecounter derivatives.

Financial services groups also face thornier logistical issues on October 31, a Thursday, which means switching the systems they use to report transactions midweek.

In the longer term, with or without a divorce deal, the City will be striving to gain limited market access rights under an EU system known as ‘equivalence’ after Brexit. This is granted to non-EU companies if the European Commission decides that the country’s financial regulations are just as tough as Brussels’.

But even if agreed, the financial sector will not enjoy the depth of market access it had while the UK was a member state.

As regards customs, Britain would fall out of the EU’s customs union under a no-deal Brexit. UK companies would have to fill in customs declarations, change labels on food products and obtain health checks for exports containing animal products.

A UK campaign has been launched to inform companies about what they need to do to prepare.

But British businesses have accused the government of failing to provide sufficient information on how to prepare, for example, for matters such as dealing with new tariff changes or how customs checks would function on the Irish border. There is an ‘invisible’ frontier between north and south, but a no-deal exit would be likely to mean the return of border infrastructure to the island.

Earlier this year, the UK government wrote to 145,000 companies that trade with the EU to get them to sign up to a system that would allow them to simplify customs declarations and delay import duty payments. According to Robert Hardy, a customs expert from Oakland Invicta, a logistics operator, only about 10,000 have applied.

On the EU side, Brussels has kept its customs contingency measures deliberately sparse. The commission has passed legislation allowing time adjustments on customs declarations, but provides no special waivers for Britain’s busy roll-on roll-off ports, which are among the most widelyused and offer the cheapest means of transporting goods between the UK and EU.

Finally, as regards transport, the report says that while the transport sector has always been hopeful of a deal, businesses such as airlines and the Eurotunnel operator have prepared for a no-deal scenario to minimize disruption.

Airlines will be able to continue operations but it will not be business as usual. The commission has passed two legal acts allowing airlines to fly point-to-point between UK and European cities. These basic flying rights, which will be matched by the UK, last until March 2020. But the operators will not be able to fly on to other EU destinations, or take new passengers to a non-UK destination.

The six-month measures provide a short window for the EU and UK to negotiate a future air deal but new arrangements are unclear.

Airlines, such as Ryanair and EasyJet and IAG, British Airways’ parent, need to meet Brussels regulations that require majority ownership by EU nationals.

UK truckers, the lifeblood of goods trade with the EU, will be granted temporary haulage rights to ensure ‘basic connectivity’ to help minimize disruption and queues at ports such as Calais. The measures will stay in place until the end of 2019 but restrict deliveries by UK lorries in the EU.

There is also a short section on fisheries.