Brexit and the future of Europe 

1st May 2017 – Jo Caruana

Brexit negotiations have begun but no one really knows what their outcome will be. Stefano Mallia, one of three rapporteurs on the Brexit Advisory Group appointed by the Employers Group within the EESC, discusses how things may turn out.

Brexit is posing big questions for the European Union. What will leaving the EU mean for the UK in the short term? How will it fare longer term once it leaves? Will trade deals continue between the UK and the EU? Will businesses be affected or will they simply ride the wave? The truth is that it’s still far too early to know the answers, but one man who has his finger on the pulse of many of the ongoing discussions is Stefano Mallia – Vice-President of the Employers’ Group that forms part of the European Economic and Social Committee, and one of three recently-appointed rapporteurs of the Brexit Advisory Group.

“The simple reality is that no one knows exactly what’s going to happen,” he says. “Although a few things are clear – one of which is that the UK’s exit will have to be negotiated first. Only then can the UK’s future relationship be defined. It is also clear that, as a result of Brexit, the freedoms of the EU will remain intact and that the UK will be treated like any other country outside of the Union.”

Looking back on the lead-up to the EU referendum that drove the UK towards Brexit, Mr Mallia believes that the referendum was won on a campaign of misconceptions and even some ‘fake news’ – a term we have come to hear so often in the last 12 months. “I honestly believe that a number of people voted to leave without actually knowing what they were signing up for.

“Politically there have also had to be big changes. Before Brexit, Theresa May was in the ‘Remain’ camp, but she is now clearly committed to making Brexit happen. In her words, ‘Brexit is Brexit’ – so that stance has been made clear. She also set her marker at the very start of the process by saying that ‘no deal is better than a bad deal’. This has now put her in a vulnerable position subject to the hysterics of the tabloids which, at some point or another, are very likely going to call on May to leave the negotiations table. It’s this sort of approach, and pressure, that could leave the UK without the much-talked about potential ‘special relationship’ with the EU although I very much doubt that any UK politician is going to take such a leap in the dark.”

When it comes to the implications for Malta, Mr Mallia believes they will be both positive and negative – although the extent of just how negative depends on the deal that will be negotiated. And while the conceivable negatives for Malta are impossible to pin down in full, some are more obvious – such as for local companies currently exporting to the UK tariff-free, or providing a product or service that is automatically accepted. “Whether or not this type of business can still take place will be determined by whether or not a free trade agreement is enacted. One fact is certain, Malta has quite some exposure to the UK economy so any changes to the current relationship could have a considerable impact.”

As for the positives, Malta could benefit if international businesses decide to shift their base from the UK to Malta, and there are already potential moves in the pipeline. “There seems to be quite a bit of interest in Malta and not only from companies in the financial services but also from companies in other sectors such as manufacturing,” Mr Mallia continues.

Thus, it seems that Brexit will remain a ‘wait and see’ situation that will become clearer over the next 18 months. “A lot of work has already been done, is being done and will be done. The EESC will be monitoring developments as they take place, and then taking a proactive role by setting out our views on the outcomes from an employer perspective; there will be other views given by trade unions and civil society.

“Meanwhile, my recommendation would be that any company currently trading with the UK carries out a thorough assessment based on a worst case scenario. I have also recommended to the Chamber of Commerce that once the negotiations start and results begin emerging, that an exercise is undertaken to ‘scientifically’ understand what the economic impacts will be. Because, while it is impossible to foresee the outcome of Brexit, it is important to do as much as we can to ready ourselves for it,” Mr Mallia concludes.

This is a snippet. Read the full interview on the latest issue of the Commercial Courier.