A bit of a different tack this week. With all the focus on COVID19 and the lockdown, it has been easy to forget about the other topic…. Brexit. Most of us are tired of the issue and have been quite happy to forget about this for a while. However, at the start of the month, the deadline finalised that the UK could not automatically extend the transition period. As a result, it is increasingly now looking like the game of brinkmanship has returned and we are now definitely looking at deal/no-deal scenario, with a no-deal outcome looking more likely.

This transition period is of course why things have not changed much on the ground in the UK so far. However, with no deal now looking more likely both the UK government and EU are starting to get people ready.

This, of course, has implications for UK businesses, which will then flow-through to the economy and have consequences in financial services and of course collections.

Some of the documentation released this week has been really helpful in starting to lay some of this out. It can help us think about key areas of impact and preparation focus in terms of a no-deal scenario*.

• Data access – UK will become a third country restricting the flow of data from the UK to and from the EU. This could significantly impact software, esp cloud software and storage of data/data access
• UK will now manufacture Non EU parts. UK manufacturing will no longer qualify as EU sourced, meaning parts and components are non-EU. They will now require safety checks for export. This could be significant. With EU sourced parts requirements this could mean that, for example UK manufactured cars, there will be significant barriers to export. Adds pressure to UK manufacturing businesses and loss of competitiveness in major markets
• Delays and costs at border to EU. Goods and people which do go to the EU will be subject to additional customers and immigration checks. (no more blue lane). VAT and duties will also be due on export of goods into the EU impacting cashflow and of course prices and pricing. Puts pressure and additional cost burden on UK businesses.
• Restrictions on Services and right to work in EU. Restrictions on UK firms offering services to the EU, and of course the removal of the right to work for UK nationals in EU countries. Reduces market opportunity for UK businesses
• Non-recognition of UK professional qualifications. UK qualifications and certificates will no longer be automatically recognized in the EU. Restricts market access for businesses from the UK
• Mobile phone data roaming charges. The removal of roam like home guarantees in the EU. Increased expense for data roaming in the EU (and on holiday)
• Media and TV content restrictions. The UK will no longer meet EU origin requirements and have restrictions on broadcast of UK content in the EU. Revenue pressure for media sector
• Outsourcing your business. UK registered businesses will no longer be automatically recognised in the EU and be able to operate without an EU subsidiary. Could impact outsourcing or remote operations processing and processes
• Other. UK driving licences and pet passports no longer automatically valid for travel to EU. Bad news for pet holidays to France and Spain

All of this makes for pretty grim reading and will happen at the end of 2020. Any deal will only nibble at the edges of specific elements and it is unlikely deals will be found globally to replace this volume.

This is likely to provide a further significant shock for many businesses and the UK economy, with flow through to loan performance and implications for the processes servicing them. With 3 in 4 companies reportedly not prepared for the end of the transition period, this needs to be flashing on the radar for preparedness. It is important we are not too distracted by the pandemic to prepare for this.

In other news this week.

• The cut in stamp duty seems to be having the desired effect (in the short term at least), with estate agents now very busy
• Stamp duty also seems to be incentivizing higher LTV mortgages too
• The FCA formalised its extension of the motor finance payment support measures
• The pandemic and subsequent lockdown could result in a 15% jobless rate, with a significant economic impact in the UK and across the EU
• With an increasing focus on local lockdowns, national support measures will also likely be curtailed. This could make the impact, for those impacted, harder too
• Interestingly credit card spending has also declined by 50% during lockdown too. With credit cards and credit being such a large element of revenue in many banks and lenders you wonder what impact this is going to have. This could result in changes to business models, with fintech likely under pressure. (You wonder if this is behind, for example, some of the changes at Monzo and the relaunch of their premium card)

Lastly,

• The move to online continues and increasingly looking like a permanent thing
• Also, has COVID19 been a defining moment for 3D printing? One to watch!

Have a good week everyone…. @chris_w_tweet

* this does not represent formal advice – suitable legal and professional advice is recommended if required

A key theme for me this week has been the announcement of more financial assistance to get people back to work. In the UK chancellor’s summer statement £30bn of measures were announced; from VAT relief for the hospitality industry, a stamp duty cut, to funding for younger workers and those on furlough returning to work. It was about getting the economy moving again.

And this is needed with the economy across Europe and the UK starting to struggle. Both in the numbers and on the ground.

One benefit of lockdown has been the environment. We have reduced the amount of travelling, commuting and related fossil fuels use as a result. However, energy use at home has increased, with homes being generally less fuel efficeint than the office. All of this could take us away from net zero, and the funding announced to assist with insulating homes was nice to finally see. It has the added benefit of extra employment too.

In financial services news, a couple of other key announcements this week

• The extension of the payment holiday scheme for credit cards came into effect.
• New guidance for motor loans was also announced, with a 3 month extension for the scheme

Interestingly in Australia; the initial 6months (which we have in the UK) has just been extended by another 4months. Is this the sign of things to come here too?

We will need to watch all this carefully on how this plays out, especially with local lockdowns coming more into play. It could all get very complex.

Finally, other interesting news to monitor

• The pandemic is changing the way we eat. A return to home cooking and comfort food of our younger selves?
• Businesses continue to look at efficiencies in the new way of working. Yet more announcement of permanent home working and how this may change the structure of retail forever.
• With the much discussed on the (maybe too early) demise of cash, EU banks are working on their own payment infrastructure as an alternative to the likes of VISA and Mastercard.
• Lastly, an interesting article on AI and its acceleration. Digital underpins a lot of the changes we are seeing, so we should expect more (or is that ‘Moore’) in this space

Have a good weekend everyone… @chris_w_tweet