Illustration ITW Brexit BNPP Fortis

 

Karen Casteels, Head of Content at BNP Paribas Fortis, interviews William De Vijlder, Group Chief Economist at BNP Paribas and Simon Gates, Head of Business Corporate Clients at BNP Paribas UK

Transcription

KC

“Hi everyone. My name is Karen and I’m in the studio today with two experts of our bank to talk about Brexit and its economic aftermath. Live in the studio with me is William De Vijlder who is Group Chief Economist at BNP Paribas. Welcome william and joining us live from the UK is Simon Gates. Simon is the Head of Business Corporate Clients at BNP Paribas UK. Welcome Simon.

Now Gentlemen, the first quarter of 21 is behind us  and I think it’s fair to say it’s been quite hard for both people and companies with both Brexit and Covid still having a massive impact on the economy. Initially fears about Brexit mainly concerned supply chains, then the pandemic arrived in Europe as well. What are the combined effects of both these factors on international trade between the EU and the UK.”

WDV

“Things are going better now. It’s a big relief it comes after what has been, I would say, a nightmare for business both in the UK but also from an export perspective. Last year in the UK was a very tough year : 10 % contraction of GDP so you can imagine what that does in terms of imports from the trading partners including the European Union and Belgium and it was also of course related not only to Covid-19 but also to the Brexit uncertainty. What we’re seeing this year is kind of the mirror image. There has been a deal at long last. Admittedly supply chains have suffered initially because you have to get used to working in the new environment but importantly,  with the overwhelming performance in terms of the vaccination now gradually the economy is opening up and you already see that in high frequency data that things are improving and that inevitably leads to better prospects for exporting to the UK.”

KC

“Signs of improvement that’s good to hear. Simon, in terms of administration a lot has changed for Belgium companies. How are they dealing with those challenges? ”

SG

“You are right, Karen. Things have changed and things will continue to change. I think at the moment what we  saw at the start of the year was quite a few Belgian companies opening new accounts in the UK so the bank onboarded quite a lot of new accounts and that was to support VAT registration, here in particular. We know our colleagues at the Belgian Chamber of Commerce have been very busy again with VAT but also with duty deferment accounts. So clearly people have been adjusting to the new reality.”

EC

“Then in terms of the UK  government, What can you tell us about the measures and how are they handling the effects of Brexit and Covid?”

WDV

“The measures have been impressive. They even got applause from the International Monetary Fund (IMF) in 2020. They spent about 16% of GDP in terms of support. That can be income support for households, help for companies,  guarantee schemes. And what’s important as well is that as the year went by, everybody observed that actually this Covid 19 pandemic would last longer than expected,  they extended these support measures and have kept on doing so earlier on this year. And even this year there will be an additional support coming from the government: 3% of GDP. It’s a very important effort. Secondly,  the monetary support is also very important : fairly low interest rates from the Bank of England. What you observe, interestingly, based on business survey, is that there is now  oxygen that has arrived in the sense that companies start to benefit from a better economic environment in the services because of the opening of the economy and manufacturing of course has digested the issues in the trade with European union following Brexit. And what you see in the data for instance is that although companies acknowledge that there is more paperwork than before,  okay that’s life. But at the same time for instance their cash situation is clearly improving. That is a big relief for the government and for anybody who cares about the UK economy of course.”

EC

The vaccination campaign, you briefly mentioned it. About half the population has had its first job. What will be the effects on the UK economy, Simon?

SG

You’re right Karen. In fact it’s more than half now,  it’s over 60 percent so it’s going very well and that has brought down the death rates in the UK very strongly. As a result the UK economy will be fully opening again from the 21st of june on the current timetable and that clearly has massive upside for the UK economy. In fact, retail stores opened on the 12th of April and we’re already starting to see data which suggests some very strong trading. So it’s clearly very positive for any anyone who’s going to be operating in the UK environment. And while the paperwork will be there for people importing to the UK, there could be a big opportunity as well.

EC

Will Belgian companies need to take into account longer time implications for Brexit specifically?

SG

I think beyond the initial supply chain paperwork which I think is getting resolved now as William said, we’re thinking about more structural things so initially things like trademarks patents,  certification that’s required. We’re still seeing companies working on that now and probably will be for several months. But longer term, I think we’re talking about changing standards. So things like  food standards in the UK are already under discussion probably to tighten those up even further. And also, around financial security, we’re seeing the UK government taking some decisions on sanctions regimes which are different from the EU. And also, even in March, they’ve upgraded several countries to high risk from a financial security point of view. And clearly for a bank, we feel that, because we  manage the money that goes through our accounts  and it comes up in our discussions with our clients. So clearly, some changes in terms of the way the UK is going to behave going forward.

KC

Now you mentioned the role of the banks, it’s clear that all banks have played a massive role in supporting the economy. Some Belgian companies were well prepared for Brexit. Others are still navigating the maze so to speak. What kind of support can BNP Paribas offer our Belgian companies?

SG

BNP Paribas has been in the UK for over 150 years so we are a very local bank in many ways. We have almost 10 000 people in our banking leasing and real estate businesses here. So we can offer a full service for companies looking to work in the UK or already working here. And particularly as you think of the growth in the UK economy, some of the supply chain financing solutions are quite opportunistic. And potentially from M&A, we are seeing M&A growing in the UK. So if if companies are looking to buy in the UK again financing for that is another area we can see banks being quite helpful.

 EC

Thank you to both of you for being here today. That brings us to the end of our talk