Businesses need to prepare contingencies for all possible outcomes – MEA

Brexit

The Director General of the Malta Employers’ Association Joseph Farrugia (right) believes that, at this stage, businesses need to keep their ears to the ground and prepare contingencies for all possible outcomes, as the scenario is changing every day.

When asked by The Malta Independent on Sunday, how businesses should prepare for Brexit, Farrugia said British politicians are paying the price for having committed themselves to something which was not defined, and the consequences – both positive and negative – have yet to be fully determined.

“Currently all countries are scrambling to pick up the best pieces in the aftermath of Brexit, with France seeking to boost its financial services, for example. Malta has to do the same and capitalise on its historic relationship with the UK. The Prime Minister has proclaimed that Malta could act as the UK’s gateway to the EU, and there could be business opportunities in this strategy.” The UK’s exit from the EU will result in a shrinking EU budget to the tune of €12 billion. However, it is not all bad, Farrugia noted, as funding previously directed towards the UK in specific sectors, such as research, could be channelled to other countries like Malta. Farrugia said that “currently there is considerable confusion in what even The Economist recently described as ‘The Mother of all Messes’. There is still talk about the options of a hard versus a soft Brexit, and even a slim but growing chance that UK citizens will be asked to vote again to choose their country’s future.”

The options, at the moment, are a soft Brexit, a hard Brexit and possibly another referendum, the outcome of which would be uncertain. Farrugia explains that the basic difference between a soft and hard Brexit is that the former attempts to retain access to the European Single Market and observing the ‘Four Freedoms’.

On the other hand, a hard Brexit option will sever any ties between the UK and the EU through the current Customs Union, meaning that the UK can impose its own tariffs and barriers to trade. This could affect the prices of imports, exports as well as in terms of trade.

When questioned if there is any indication of what will change, from a business perspective, with the current withdrawal agreement, Farrugia replied: “The main change is that one of our major trading partners will no longer be a member of the EU trading block. The extent of the impact of this change will depend on the conditions under which the UK leaves the EU, assuming Brexit takes place.”

Farrugia continued that this uncertainty is also being felt in the UK itself, as the confusion that reigns at a political level is also filtering down to the reality that many enterprises are facing, with some sectors considering relocation outside the UK to EU countries.

Any changes that will affect small businesses are not likely to happen overnight, on Brexit day, on 29th March, but Farrugia explains that from the way things are heading, it appears that there will be a transition period.

When asked if employees from Britain would have any problem working in Malta, Farrugia answered that it depends on the terms of Brexit. A soft Brexit that retains the four freedoms, including the mobility of labour, might still allow UK citizens to work in the EU, and conversely, for EU citizens, he said.

As happened when there were crises in the past, such as the international recession, there are social dialogue structures that are of benefit to the stakeholders affected, Farrugia noted, when asked if the government was doing enough when it comes to Brexit. Through MEUSAC, MCESD and other committees set up to monitor Brexit, all social partners are doing their best to keep their public informed. However, the fluidity of the situation makes it challenging to predict a definite outcome, he said.