Latest research has revealed that foreign firms’ appetite for wanting to do business in or with the UK has not waned since the decision to leave the European Union.
A survey by consultancy company FTI of nearly 1,000 business leaders from nine countries – including the USA, Singapore, India, China and Brazil – shows 73 per cent support the idea of their country striking a free trade deal with the UK.
At the same time 72 per cent say their firm would look for opportunities in the UK once it leaves the EU.
On a sector by sector basis, businessmen in telecoms, media and technology were most keen for a deal – at 81 per cent – while bankers and financiers came in second place with 79 per cent.
Positive: Countries that were particularly in favour of signing free trade agreements, included India and China – at 81 per cent and 82 per cent respectively
Analysts said the survey showed that global businessmen do not want the UK to be ‘punished’ for its decision to vote Leave and instead are actively encouraging their politicians to come to a swift and sensible solution.
Dan Healy, managing director and head of research at FTI Consulting, said: ‘This is a clear message to politicians across the globe that they should not burn bridges with the UK over the EU vote.’
He added: ‘When politics is stripped away the UK is simply too big a market for multinational corporations. Almost 3 in 4 ‘Global business leaders’ want their country political leaders to engage with the UK so they can consider all potential trade agreements before deciding whether to remain or leave the EU.’
Countries that were particularly in favour of signing free trade agreements, include India and China – at 81 per cent and 82 per cent respectively.
Analysts said the results show how intertwined our economies have become over the past fifteen years. India’s Tata Steel owns major UK steel and car manufacturing operations, including the Port Talbot plant in Wales and Jaguar Land Rover in Coventry.
China vowed last year to invest £30billion in deals and investment in the UK, which includes taking a 33.5 per cent stake in the nuclear plant at Hinkley Point.
Many foreign firms in Europe were also keen for a free trade deal, with the survey revealing that 69 per cent of French companies are in favour and 62 per cent of Germans.
Bullish: Firms across Asia and Europe were keen to sign free trade agreements, adding that the UK is simply too big a market for multinational corporations Source: FTI Consulting
And there are signs that politicians around the globe have calmed to the UK’s new position in the world.
This week Germany’s European Affairs minister called for Britain to win ‘a special status’ following Brexit, while calling for talks to begin early next year.
Michael Roth added that Britain should be granted a position distinct from that of Switzerland and Norway, which have both been cited as potential examples for the UK to follow.
Wharton was not surprised by the findings as the EU sells far more into UK than we sell into the single market
He said: ‘Given Britain’s size, significance and its long membership of the European Union, there will probably be a special status which only bears limited comparison to that of countries that have never belonged to the European Union.
‘I want relations between the European Union and Britain to be as close as possible.’
Meanwhile US House of Representatives Speaker Paul Ryan is calling for urgent talks on new trade agreements to ensure ‘a smooth’ relationship after Brexit, despite warnings from President Barack Obama that Britain would go the back of the queue in the event of a leave vote.
Ryan, the former Republican vice-presidential candidate and one of the party’s most senior politicians, said: ‘Obviously it takes time to do something like this but I think it is something we should be working on.
‘We should begin discussions with Great Britain to ease concerns so that we do have a smooth trade relationship with Great Britain, because they are our indispensable ally.’
James Wharton MP for Stockton South said about the survey: ‘It comes as no surprise. The EU sells far more to the UK than we sell into the single market.
‘Our trading partners know this matters to them just as it matters to us. Politicians in Europe need to ensure they recognise the democratic decision of the British people to leave and work with us to secure an agreement that works in all our interests.’
But experts say that despite the positive sentiments, some businessmen and politicians have perhaps underestimated the scale of the project ahead and the intricacies involved when it come to bargaining trade deals.
History has shown that any major free trade agreement has taken more than four years to negotiate – much longer than the two years it will take the UK to leave the European Union once Article 50 is triggered.
The recent deal between Australia and the United States saw talks begin in early 2001, but not conclude until 2005 after heavy lobbying by the American agricultural sector against the agreement.
Breakdown: On a sector by sector basis, businessmen in TMT were most keen for a deal – at 81 per cent – while bankers and financiers came in second place with 79 per cent Source: FTI Consulting
Analysts say the reason for the long time frames are the nitty-gritty horse trading which takes place behind closed doors between nations.
A good example of this is the EU/South Korea treaty that was signed in October 2009.
It is over 1000 pages and provides special rules for trade in some bizarre areas, including unrooted tree cuttings, artificial joints, wooden roots for pipe making purposes and leather balls used in manufacturing.
The UK has argued that it can avoid this sort of minutiae – which the EU has made itself famous for – by employing better negotiators, diplomats and legal minds.
However once Article 50 is triggered in January the immediate issue for UK/EU negotiations will be around freedom of movement, which if not solved could lead to the UK leaving the Single Market and financial services firms losing their passporting rights.
What is a trade deal and why do we need them?
Trade agreements are set up in order to boost business and economic activity by removing barriers to trade across international borders.
They do this by reducing – or even eliminating – tariffs, quotas and other trade restrictions on items traded between countries.
Once a country or bloc has made a deal they are required to notify the World Trade Organization (WTO).
Deals involve negotiating tariffs and taxes that are applied to imports.
They also reduce the cost to business of complying with multiple regulations.
This includes banning discrimination against foreign firms or limits on how much business they can do.
It also requires opening up government purchasing to bids by foreign business.
Some agreements also cover labour rights, for example requiring signatory countries to allow workers to organise and join unions and outlawing child and forced labour.
What about investment?
The host country may be required to treat the foreign investor as they would a local investor.
There are often restrictions on host governments ‘expropriating’ an investment. That means taking back government ownership without compensation.
Alasdair Douglas, chairman of City of London Law Society, said: ‘Freedom of movement is likely to be a key sticking point. All the EU members have a veto, so one might imagine some being sticky for reasons of self-interest and while Germany might be very keen to continue trading with the UK, other members don’t trade much and will so be less keen to agree matters.’
Martin Sorrell, chief executive at WPP, said: ‘It’s a colossal administrative task for the Troika and we have historically out-sourced our trade negotiation capability to Brussels. Not just for Boris Johnson, but for Liam Fox and David Davis too!’
One option for the UK would be to pull out of the European Union altogether, and fit in with standard Word Trade Organisation tariffs and rules instead.
According to Roderick Abbott, a former EU ambassador to the WTO, the tariffs set by the WTO are fairly straightforward and familiar for established UK exporters and importers.
For instance the standard WTO tariff on importing cars into Europe is 9.8 per cent, still much lower than the 20 per cent charge set by the US and Canada.
Business for Britain, which campaigned for exit, estimates that at worst tariffs would cost British exporters £7.4billion a year, adding that the UK would save enough on EU membership fees to be able to compensate exporters for that.