The European Council finally approved guidelines for the negotiation of future relations with the UK after Brexit on 23 March. The text on trade, security and other issues was agreed in “less than half a minute”, clearing the way for the next phase of Brexit talks to get under way.
The UK is due to leave in March 2019 and negotiators have said they want a deal in place by the end of the year. The formal adoption of the guidelines, although widely expected, was seen as another key step as the Brexit process gathers momentum.
They give chief negotiator Michel Barnier the mandate to talk directly to the UK about the future relationship with a view to reaching a broad political agreement by October to allow the EU and UK parliaments time to consider it.
Mrs May, who was not present when her colleagues met to discuss Brexit, said she believed there was a “new dynamic” in the negotiations. The remaining 27 leaders also endorsed an agreement on a 21-month transition period between March 2019, when the UK officially leaves, and the end of 2020.
During that period, the UK will be able to negotiate, sign and ratify its own trade deals, while EU citizens arriving in the UK will enjoy the same rights and guarantees as those who arrive before Brexit.
So what is at stake? The EU is a political and economic union made up of 28 member states (for the time being) with an estimated population of 510 million. At the forefront of EU policies are the free movement of people, goods, services and capital within the internal market. If treated as a single country, the EU is the second largest economy in the world in both nominal terms and purchasing power parity (PPP). Its GDP was estimated to be €16.5 trillion in 2016 according to the International Monetary Fund, representing 22.8% of nominal global GDP. EU member states are estimated to have the largest net wealth in the world, equal to 30% of the $223 trillion global wealth.
Many firms will now be wondering whether they can continue to use the UK as the location for their EU headquarters, while for businesses currently without a base in the EU, the uncertainty effectively rules out the UK as a choice until matters are clearer. It is in this context that Cyprus could be a viable alternative as a foothold in the EU.
The sector most immediately affected is expected to be financial services. London has always been regarded as the EU’s principal financial centre, attracting a wide range of global financial institutions and service providers. This was not just to participate in the UK financial market but also to use the UK as a hub to access clients and markets across the EU.
No one yet knows what kind of access to the EU’s Single Market UK-based firms will have. But the assumption is that that things cannot remain the same, and UK-based financial services firms are reviewing their options. Indeed, they are obliged to do so by regulators asking how they will maintain continuity of service to their clients in the event of a ‘hard’ Brexit. To guarantee continuity of access to EU markets and clients, they should now be activating their Brexit contingency plans by establishing an alternative EU base in another EU Member State and obtaining regulatory authorisation there.
Cyprus is a full member of the EU and is also within the euro zone. It has all the requisite business structures, a robust regulatory regime and has adopted all the EU directives for investment businesses. It also has a highly competitive tax system. By incorporating a company in Cyprus, UK-based investment managers and financial service providers can maintain their current operations without having to re-locate staff. They would have a fully-EU compliant platform with a European passport to market their services in the EU.
But Cyprus also has close trading, historical and political ties with Britain. As a result it offers a legal and business environment that is based on common law and British procedures, a high quality of life and wide availability of English speaking staff, many educated at British universities. It has the benefit of a long-standing relationship with the UK through the Commonwealth and can work collaboratively with the UK to provide a mutually beneficial alternative to other EU locations.
The message is that Cyprus is keen to work with rather than against the UK. It offers a complementary EU base for UK-based businesses that will enable them to continue operating in the UK while having a foothold in the EU Single Market to passport their services. For UK firms seeking to establish an alternative post-Brexit base in the EU, these are some of the compelling reasons to choose Cyprus:
- EU member state within the euro zone
- Highly developed financial services sector
- Highly attractive corporate and individual tax system
- Legal system heavily based on English common law
- Highly skilled and educated workforce
- English widely spoken and the primary language of business
- Low costs – both professional and regulatory
- Comprehensive tax treaty network
- Similar time zone to the UK
- Excellent flight connections to London and major European cities
- High quality of life
- Residency and Citizenship available to non-EU citizens
Sovereign offers company formation and management services in Cyprus, together with the comprehensive advice and support to assist companies of all sizes to establish business operations successfully in these markets.
Sovereign’s corporate services include forming new corporate structures, reorganising existing structures and repatriating earnings. We also offer the necessary expertise in administering and managing companies, including company law, board procedures, director responsibilities and shareholder relations, and financial and corporate compliance requirements.
For more information on how to establish a presence in the European Single Market please contact George Ayiomamitis in Cyprus gayiomamitis@SovereignGroup.com.