Image: George HodanThe UK has received a number of warnings regarding the affects Brexit could have on trade deals at the G20 summit in Hangzhou, China.
It has been an eventful few days in terms of Brexit developments, and as Theresa May arrives at the summit, she is faced with multiple warnings about the consequences of leaving the European Union.
The prime minister was told by President Barack Obama that the UK would not be a priority for a trade deal and instead take a back seat whilst the US focus on trade negotiations with the EU.
Negotiations between the EU and the US on Transatlantic Trade and Investment Partnership, also known as TTIP, have seen little progress in recent years, and after multiple discussions over three years, Obama said in April that ‘important progress’ had been made, but the issue had been a lack of time ‘not on our side’.
President Obama said at the G20 summit: “The first task is figuring out what Brexit means with respect to Europe. And our first task is making sure we go forward on TTIP negotiations in which we have already invested a lot of time and effort.”
The UK has also hit a hurdle in agreeing trade deals with China, the world’s second largest economy. Earlier this year, the prime minister at that time David Cameron and Chancellor George Osbourne rolled out the red carpet for Chinese president XI Jinping in support of the Hinkley point deal, but this was always a controversial project, with many people arguing it was massively expensive, especially in view of the cost compared to the energy generated by renewables.
Theresa May, who was after all the Home Sectary, was worried about not only the cost of Hinkley point but also security aspects. China has reacted in fury of the suggestion that the UK may go back on the deal, and the UK will need to engage an extremely delicate negotiation in order to advance trade deals with China.
Aside from this, May received a harsh message from Japan’s government that the country could remove its firms out of Britain unless some of the privileges attached to the single market are maintained.
The report from Japan’s foreign ministry said the huge firms, including Nomura bank, manufacturer Hitachi and carmakers Honda, Nissan and Toyota, might want to move “if EU laws cease to be applicable in the UK”.
According to the BBC, the letter warns "Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to Continental Europe if EU laws cease to be applicable in the UK after its withdrawal."
Japan, the world’s third biggest economy, requested that the UK respond to the warning in “a responsible manner” and urged Britain and the EU to set out the details of Brexit earlier rather than later, to minimise any harmful effects to businesses.
Professor of International Business at Warwick Business School, Nigel Driffield said: "It is unlikely that even if the post-Brexit world were not to the liking of Japanese investors they would move over night. However, one should bear in mind that Japanese car firms invested some £260 million in the 4 years up to 2014 in the UK.
“It is important to recognise that well-known Japanese firms in the UK are in locations with high unemployment, where the firms themselves are at the centre of wider networks and supply chains.
Professor Driffield added: "Were those firms to relocate, or prioritise other production facilities elsewhere, then the number of jobs under threat greatly exceeds the number employed in just the inward investors themselves.”
In a string of worrying prospects, the Lloyd’s of London chairman John Nelson has also announced that some of their business may be forced to move to Continental Europe as a result of Brexit, meaning the UK’s position at the centre of the global insurance market is under threat.
A fifth of investment banking revenues in London will be affected by Brexit, as leaving the EU will leave the sector with restricted access to the single market, according to the Financial Times.
The FT were told by senior banking executives and advisers that “an early consensus was forming around a figure of about 20%, or £9 billion, for the amount of revenue that faces disruption in the most extreme scenario”.
