I welcome you to today’s conference, the third event for Brexit the Ministry of Foreign Affairs is organising along with our country’s business, professional and trade institutions.
I’m very pleased we will have the chance to talk about the situation taking shape in the commercial economic sector due to Brexit, and to present to you the preparations we have made for the eventuality of a no deal Brexit. We have the competent people here from the ministries and state agencies, who will present the actions their ministries have undertaken in preparation.
I have the honour of heading the economic diplomacy of the Ministry of Foreign Affairs. We are in the process of creating a substantial mechanism for supporting and enhancing the openness of Greek enterprises and promoting Greek products throughout the world. Our goal is to take steady and bold steps to open up all of the world’s markets to Greek enterprises and Greek products preserving what has been achieved so far, but also expanding our market share in every corner of the world.
One of the markets where we need to preserve our achievements after Brexit is that of the United Kingdom. As the Alternate Minister said, our main priority, beyond preparing Greece for the possibility of a no deal Brexit, is to maintain and strengthen the level of our bilateral relations with the UK in all sectors after its exit from the EU.
I agree completely: Brexit is indeed an unfortunate development for the European Union and for Greece, and we would prefer it not to happen.
But life is often more imaginative than we are; and opportunity may lie even in such an unfortunate development. We only need to seize it.
In any event, we are working with our partners in the EU to safeguard the interests of our citizens and enterprises. At the same time, we are preparing for every scenario, without overlooking the potential lying before us, whether or not a Brexit deal is reached. The Ministry of Foreign Affairs and the Greek public administration have been working in this direction for some time, intensively and in collaboration.
In order to turn the challenge into an opportunity, state agencies and enterprises need to work together and more closely. We want you to tell us what you need; what the concerns and requirements of Greek enterprises are in the new economic and trade environment that will take shape following the United Kingdom’s withdrawal from the EU. We need your experience and views if our plans are to be useful and beneficial.
Allow me to now say a few introductory words about what we expect in the economic and trade sectors in the event of a no deal Brexit. Our guest speakers will tell you the rest.
I will focus on the repercussions of a no deal Brexit for the EU economy, the repercussions for the Greek economy and the prospects for further strengthening our bilateral trade with the United Kingdom, regardless of the Brexit scenarios.
1. Repercussions of a no deal Brexit for the EU economy
The UK’s economy is the fifth largest in the world in terms of GDP (3.3% of global GDP) and the second largest in Europe. It accounts for 13% of the EU’s trade in goods and services and 16% of the EU’s GDP (in other words, as much as 19 smaller EU countries taken together).
As the Alternate Minister noted, a no deal Brexit will have direct repercussions for trade transactions, freight transport and supply chains, cross border provision of services and the financial sector. There will be indirect impacts in the more general economic activities of the member states, due to the interruption of free movement of persons, differences in the regulatory framework, increased bureaucracy and requirements, etc.
The impact of a no deal Brexit on individual member states will vary according to the extent of their economic ties with the UK. Nevertheless, all of the member states will make adaptations to national rules and there will be a need for guidance of interested parties, as well as for investments in personnel, equipment and infrastructure (e.g., for increased customs, health and plant health controls at borders).
As an example of the coming changes, the government of the UK recently announced a temporary British tariff (with a maximum duration of 12 months) in the case of a no deal Brexit. This tariff will be in effect for imports from all of the countries in the world (including the EU countries), and will provide selective protection for certain sectors and moderate liberalisation in others. Most imports will not be subject to tariffs (aluminium, steel, machinery, weapons and ammunition, etc.). However, tariffs will be imposed on 18% of European exports (mainly mutton, certain dairy products, fertilisers and fuels).
One of the biggest challenges in a no deal Brexit process is the expected delays in freight shipping. The temporary procedures that will be followed at UK EU borders (France, Belgium, Netherland, Germany) in the event of a no deal Brexit have already been announced on both sides of the English Channel.
In the short term, these temporary measures cannot ensure smooth customs procedures and secure market supply. The Greek and British enterprises that transact with the UK or the EU, respectively, or that transport goods from and to the UK will thus have to get used to the rules and procedures that will apply after Brexit, especially if they have little experience of commercial transactions with third countries.
This is why professionals, trade and economic associations, as well as regional and local authorities should immediately prepare themselves so as to avoid the worst. As I said, we need to closely cooperate on this.
2. Repercussions of a no deal Brexit for the Greek economy
Greek UK bilateral trade is characterized by reversed roles as compared to UK EU trade relations, in which the UK lags in goods but leads in services. It’s the opposite in Greece’s case: Greece enjoys a high surplus in the trade of services and a comparatively small deficit in its trade in goods with the UK, thanks to tourism and mercantile marine. The deficit in the trade of goods is fully offset by the surplus in the trade in services, with the result of an overall trade surplus for Greece.
The UK ranks 7th among our country’s customers and 11th among Greece’s EU trade partners. In 2018: Greece UK bilateral trade: 2.6 billion Euros. Greek exports: 1.21 billion Euros, and imports: 1.37 billion Euros. More specifically, Greek exports of services (mainly tourism and mercantile marine) amounted to 3.28 billion Euros, while Greek imports stood at 1.9 billion Euros a surplus in the balance of service transactions of 1.33 billion Euros. In contrast, the bilateral trade balance was negative for our country (a deficit of 300 million Euros).
With regard to Greek investments in the UK, the most significant ones are those of Viohalco Group (Bridgenorth Aluminium) and Thrace Group (Don and Low). Greece has also a strong presence in the retail sector a trend linked to the increased number of Greeks residing in the United Kingdom.
At the same time, a significant number of British companies in our country have invested in sectors such as telecommunications (Vodafone), retail (Dixon’s Kotsovolos), health (GlaxoSmithKline, BC Partners ?a? CVC Capital) tourism, financial services, primary production (Lamex/Alterra). Beyond the investments of British companies, there is also interest from private investors in the real estate sector holiday residencies, in particular. Moreover, London is a key source of capital for corporate bond issues and searches for investors, financial and otherwise. Some 44% of Greek bonds are traded through London.
In the tourism sector, our country is one of the most popular leisure destinations for Britons, who are traditionally among the top three most important customers for the Greek tourism products. Some 9 10% of tourist arrivals come from the UK (they are usually ranked second in terms of arrivals and receipts), and, according to BoG data, 2017 was a landmark year, with British tourists breaking the barrier of 3 million. In 2018, there was a slight fall (2%) in arrivals, which was attributed mainly to the fall in the pound euro exchange rate. The 2019 data will soon be available. The collapse of Thomas Cook was not good news, giving us an idea of what might happen in the case of a no deal Brexit. In the immediate future we will be identifying all of the corrective measures that need to be taken, in order to deal with the impact of Thomas Cook collapse on Greek tourism.
In the mercantile marine sector, some 60 Greek companies maintain branch offices in London that operate in both the British and global markets. In recent years, Greece achieved a partial repatriation of ship owning companies through incentives and due to the unfavourable changes in the British tax system (non doms). The sector is at the top of British interest, as the City offers a wide range of financial, insurance and legal services for mercantile marine services that it want to continue providing with as little disturbance as possible.
In the event of a no deal Brexit, sectors of Greek interest that will be impacted include:
Trade (imports/exports, tariffs, non tariff barriers, etc.) The tariffs the UK has announced it will be implementing so far will affect our main export categories (about 3.6% of the total Greek exports), such as petroleum products, aluminium sheet, clothing, food (cheese, rice, bananas, poultry) and household items, but not decisively.
Tourism and travel services. As I already mentioned, a reduction in the real income of UK households in combination with a rise in inflation, a weaker pound in relation to the euro and uncertainty about the outcome of Brexit, which we hope will not cause any further collapses like that of Thomas Cook will certainly impact on Britons’ arrivals (secondary impact).
Mercantile marine. Greece is pushing for inclusion of a special chapter on mercantile marine in the future EU UK trade agreement or, in the case of a no deal Brexit, the conclusion of a Memorandum of Understanding on issues of purely national competence. On the other hand, the uncertainty caused by Brexit and, especially, the risk of a no deal Brexit, may be one of the opportunities I mentioned earlier for further repatriation of ship owning companies and attraction of maritime capital and services to Greece.
Agricultural products and PDO/PGI products. The protection of our geographical indications in the UK market in the case of a no deal Brexit is a top priority for us, and we will soon be announcing our strategy on this issue.
Financial sector. Despite the limited direct exposure of the Greek financial system in the UK, the indirect impacts of a hard Brexit could lead to a deterioration in the conditions of bank funding, to stricter financial conditions and to negative growth prospects. In any event, the European Central Bank, in collaboration with the European Commission and the Bank of England, has adopted temporary measures for a disorderly exit measures that cover central counterparties, derivatives and contracts, banking procedures and other related issues that will arise in this sector. From our side, we are submitting a new omnibus bill for a no deal Brexit that includes, inter allia, transitional legislative regulations for the financial services.
3. Prospects for further development of bilateral trade in goods and services between Greece and the UK following Brexit
The British market, irrespective of Brexit, is a very developed and competitive market and must be approached methodically. The traditional Greek products are well known. The consumers, customers and stores are there, but they lag behind similar products from our key competitors, especially in terms of promotion and sales techniques. It is vital that we support our products. To avert a fall in their market share due to Brexit, we must try to expand the product mix, use new innovative packaging and differentiate them focusing on their quality.
In the FDI sector, interest from the UK has thus far been expressed regarding: (a) the health sector, via the purchase of health units and pharmaceutical companies, (b) the real estate sector, especially tourism properties, and (g) financial services, especially the management of non performing loans.
The presentation of the investment opportunities and potential for our country’s public sector (State Asset Development programme) and for private investment schemes is of pivotal importance. In this context, we intend to provide more intensive support for the participation of Greek SMEs and startups in targeted sectoral exhibitions and in the immediate future, as soon as the political situation stabilises and conditions are right to host events and roadshows in the UK with the aim of presenting the privatisation programme and opportunities for investment to a select British audience.
The financial services sector, the insurance sector and the business support services sector also offer opportunities for synergies and FDI attraction, as many companies based in the UK will have to open subsidiaries in EU countries in order to be in a position to continue providing these services to their clients in the EU. So we have to work together more closely to plan a strategy.
Finally, the increased Greek presence in the UK is a positive factor, which contributes to the increase in bilateral trade ties. In total, as the Alternate Minister of Foreign Affairs said, some 115,000 Greek citizens have obtained UK social security cards, and from 2009 to 2017, there were about 38,000 companies (active or not) that have/had a manager with Greek citizenship or of Greek origin, while 10,135 Greek students studied at British universities in the 2017/2018 academic year, occupying the fourth position among the EU member states.
In this context, the drawing up of a comprehensive national plan for the promotion of our products in the UK market is an immediate priority, regardless of the exit scenario. But it requires a coordinated export effort and close cooperation between the state, the various institutions and the producers.
Finally, I would like to reiterate that a fresh wind is blowing at the Ministry of Foreign Affairs, bringing the government’s investor friendly policy to the centre of our foreign policy planning.
There is potential for us to expand our economic relationship with the UK. In spite of the expected difficulties, the changes in procedures, rules and the regulatory framework, and any delays that may arise, the consumers of our products will still be there. It’s up to us to win them over.
Our duty as the Ministry of Foreign Affairs is to move in that direction. And that’s what we are going to do.
Thank you very much.
Source: Ministry of Foreign Affairs of the Hellenic Republic