Breakfast Meeting Recap | Marika Tonna

I think that the 23rd of June 2016 will always be remembered as a landmark event in the history of both the EU and the UK. The result of the referendum came as a surprise to many.

Around the globe and especially in Europe, many people were amazed with the decision taken by the British to depart from the European Union.

Since then, the topic of Brexit has been a recurring one on a daily basis. I do not remember a day when I did not discuss or read about Brexit.

More than 3 years passed since then and unfortunately the situation is nearly as unclear as it was on the day that the referendum result was announced. I’m sure that even this morning before this business breakfast most of us were following the news to find out what has happened during the last few hours and we are all earnestly waiting the outcome of Saturday’s parliament.

As an organisation we have worked every day in this highly uncertain and blurred context. However, this does not mean that we adopted a passive approach. On the contrary, we understood that in reality there are three main scenarios being: 1) that the UK actually reconsiders its position and remains a full member of the EU, 2) Brexit under some form of deal takes place and 3) a no deal Brexit being probably the most penalising and risky scenario materialises. Unfortunately, until this morning there is still no clear indication as to which scenario will materialise.

As a country and as an organisation we had to prepare ourselves for a no deal Brexit as this would undoubtedly be the most disruptive scenario. In our opinion, Brexit gives rise both to challenges as well as opportunities. Let us remember that as a country we were always extremely adaptable in a short period of time. Over the years this has enabled us to be positioned at the forefront to capitalise better on opportunities resulting from specific international situations. To a certain extent, the challenges we might encounter can partially also be transformed in opportunities which we can benefit from.

Challenges

Through our interactions with the business community, we note that the extent to which companies rely on the UK as a destination to where they export and/or import their products and services varies significantly. On one hand we understand that uncertainty related to the change in trading regime with the UK has caused companies to look at alternative markets to export their products. In itself, this is something positive as dependency on a single market, whichever that market is, is never healthy for business.

However, for some companies it might actually turn out to be more challenging than others to tap into other markets. As Malta Enterprise the Corporation shall be launching a new scheme in coming days to assist companies who are heavily reliant on the UK market to encourage them to source business advisory services to address potential disruptions. Under this scheme each eligible company can receive up to €5,000 as a grant.

As an entity and in conjunction with Trade Malta we continue to assist companies to tap into international markets. Periodically, Trade Malta organises various business delegations beyond our shores with the objective of facilitating business leads for Malta based companies to export to new markets. Irrespective of Brexit, we will always seek to assist Malta based companies to internationalise. Our small domestic market does not leave us any other option than to internationalise to sustain our long term growth.

As a country and as Malta Enterprise we have identified various risks related to Brexit and enacted a number of mitigation measures. Yet, we must admit that irrespective of how much we prepare we still need to be ready to act instantly to any unpredicted implications that might arise from Brexit. It is interesting to note that a survey carried out in July 2019 by the UK’s Institute of Directors shows that 51% of the companies surveyed commented that they carried out as much as possible in preparations, yet, they believe that they cannot be fully prepared for this event.

One challenge which locally based companies that trade with the UK must not underestinmate is that following Brexit, whether in the short or long term, the UK will have its own regulatory framework.  So companies that trade with the EU and the UK post Brexit, might have to operate under two different regulatory regimes. The UK has already announced, for example, that under a no deal scenario rather than retain the CE Marking (and all the checks and balances that goes with it) it will eventually adopt its own UKCA mark which will regulate conformity with different health, safety and environment protection standards for products sold in the EU.

Our companies have to realise that even in a ‘deal’ scenario, in the long term the regulatory environment in the UK is going to change eventually – true in a deal environment this will happen in a phased approach and will take longer but it will happen - after all that is what Brexit is all about.

Opportunities

The fact that potentially the UK could crush out from the European Union without a deal has caused especially UK based companies to revisit their business strategies including supply chains. Thus, most of the companies were evaluating alternative solutions such as co-locating in other jurisdictions. As Malta Enterprise and the UK Business Promotion Taskforce, we have tried to capitalise on this time window when companies are actively reconsidering their strategy to introduce and position Malta as a competitive and business friendly jurisdiction in the EU. Concretely speaking, we have managed to attract a number of companies from the UK that now have actually co-located their business in Malta too.

However, our experience from the ground shows clearly that most companies in the UK although actively looking at other EU jurisdictions are predominantly still adopting a wait and see approach. Our mission will be to be at the right place when these companies actually decide to invest outside of the UK.

We are after all a development agency and since inception as MDC more than 50 years ago we were in a position to assist British companies looking for a business and ‘British’ friendly location where to expand their operations. Imperial evidence has shown us that there are two types of enterprises looking fora co-location, in addition to the one they have in the UK, in Europe; foreign (as in non UK) companies that have set up in the UK to tap the European market from there, and large manufacturing enterprises that have a reliance on the EU market.

The fact that English is one of the official languages and that legislation in Malta is also modelled on the British system is another important opportunity. Businesses considering other jurisdictions usually do give importance to such parameters. Let us remember that for businesses venturing outside the UK especially if this will be their first location beyond the UK represents a risk and we want to make sure to minimise this risk for them as much as possible. Offering a pro-business framework and environment that are coupled with the English language contribute to reduce investment risks.

The UK is one of the most multi-cultural places in the EU. Malta over the last years has edged up significantly in this respect. Today, Malta offers a truly multi-cultural and inclusive society. It is worth mentioning that today around a quarter of all employees in Malta are expats. This resemblance with the UK provides an important opportunity in our efforts to secure outward FDI from the UK.

Undeniably the challenges and opportunities associated with Brexit are changing at a very rapid pace. Due to the fact that we are a small and nimble jurisdiction ensures that we manage to thrive and to actually turn this uncertainty into an opportunity. Brexit should be of no exception and as a Government we are committed to capitalise on all opportunities arising from Brexit and to limit to a minimum the risks arising from this event.