Economy

I am sure there will be a post-Brexit trade deal between India and the UK: Catherine McGuinness

Nandana James Mumbai | Updated on January 30, 2020

Catherine McGuinness

The long-drawn-out negotiations between Britain and the European Union on Brexit now has a new deadline of January 31, 2020, almost four years since Britons voted to leave the EU in a referendum.

Catherine McGuinness, Policy Chair of the City of London Corporation, who works closely with the UK’s financial services sector, and is the political leader of the City of London Corporation, spoke to BusinessLine on how Brexit will not dampen trade relations between India and the UK. “We are not just about the EU-facing business, there is a whole world besides,” she said.

In a wide-ranging interview, McGuinness also shed light on how the City is looking at increasing trade between India and the UK in financial services, and how both countries can work together on areas like cyber security, green finance, fintech and insurance. Excerpts:

How do you see the impending Brexit, as well as all the upheavals the process has been privy to, affecting the UK’s image as a global financial services sector?

Brexit and the uncertainty has dented our reputation worldwide. That's understandable. But, what I sense now that we are actually moving forward is, there is a real, renewed confidence and balance in our step. We are looking at the future issues. This next year will be challenging for us and our relationship with our EU businesses. You can expect a bit more political noise, but we are very confident about the long term. We are focusing more and more on that.

How long term are you talking about?

I am just very confident about London's long-term future because of its breadth, depth, and strength as a financial centre. Despite some problems, as people might perhaps iterate, we are seeing far less of a change than we anticipated ―we are dropping into the bottom range of the expected job losses. But, I am not expecting certainty on our EU-facing relationship, certainly not until the end of the year. We leave the EU next week, but we have a transition period until December 31, 2020 (The deadline to reach a deal on the post-Brexit relationship has been set for December 31, 2020).

In the backdrop of such uncertainties and troubles brewing around Brexit, how does the City plan on improving trade relations between India and the UK, particularly in the financial sector?

I don’t think Brexit changes things really. I think there are so many opportunities here in India. The ambitious program with reforms that was put through the last few years ― the insolvency and bankruptcy code, opportunities potentially for UK legal and insolvency professionals, legal firms and investors interested in distressed assets ― I think that puts India in a really exciting place. We hear over and over again, the potential from trade...whether it’s working with you and looking at financing, renewable projects, renewable energy or whatever...And that will enable India to have a good transition to a more sustainable future. We hear huge potential because of those changes in the insolvency regime, which is hugely appealing from the point of investors … and we are very keen to see what we can do to help encourage that trade.

Is the City taking any measures to reassure Indian financial firms that might be worried about Brexit?

London is a global financial centre and it will remain so long into the future. If anything, it will mean that there is more business to be done. We will lose a little bit of our EU-facing business. But we are looking to make that up.

What gives you the confidence that even after Brexit, there will be more business to be done?

I think, we were perhaps a little bit complacent before Brexit...The City was clearly the leading financial centre in the world, and we didn’t have to prove anything to anyone. I think, these last three years has made us focus on our core strengths and what could be areas for opportunity. I think, we are better placed actually. Indeed, just nationally in the UK itself. So, one thing Brexit has made us all focus on are those divides...bringing together financial centres across the UK so that we speak together with one voice.

What is the kind of response you have been getting from Indian corporates about Brexit in your meetings so far?

Last year, everybody was asking me about Brexit. This year so far, no, people haven't been so much. But, we are in a very different place. We both have governments at the start of their terms with strong majorities (and) oppositions to move forward. There is a lot more certainty now than there was.

What message would you like to convey to Indian banks and institutions that are possibly deterred by the current Brexit debate?

Really, London is open, London is thriving and come and work for us. Of course, some of the EU-facing business from London will change. But, for many of the Indian companies we speak to, that is not not particularly relevant. London is the great global connected capital. I would send a strong message of reassurance and confidence: We are not just about EU facing business. There is a whole world besides.

Is Brexit going to lead to stronger UK-India ties?

The UK and India already have strong ties. We have been the top G20 investor in India over the last 10 years, and bilateral trade stands at over £20 billion. Financial services account for a small but growing proportion of this ― £440 million ― but there is plenty of room to grow our relationship in this area, particularly in areas like cyber, green finance, fintech and insurance.

Government support on both sides remains strong, and work is already underway to strengthen ties through the ongoing UK-India Joint Trade Review, the only one of its kind the UK has with any other country, and one which will lay the framework for the future trade partnership.

But this isn’t the only partnership between our two nations. There’s also the Joint Economic and Trade Committee (JETCO) looking at strategic economic ties, and the Economic and Financial Dialogue (EFD), focussing on trade and investment relations. Add to this mix, the commitment by Prime Minister Boris Johnson to making India one of his first destinations for an overseas visit following his re-election, and the future looks rather rosy for us both. Based on the willingness of both sides, I am sure there will be a post-Brexit trade deal between India and the UK, but do remember these things take time. First and foremost, we need to get an agreement on the future of the highly complex UK-EU trading relationship.

There is lots we can do to improve trading relationships outside a trade deal, though, and we will be looking for opportunities.

Is there potential to increase trade between the UK and India, particularly in financial services?

Yes, we do think that there definitely is. And some of it will be around green financing, looking at the opportunities for investors through London to invest in green infrastructure projects here. And some of it, of course, will be around opening up. We are very interested to hear what comes out of the Budget. We have heard rumours around the increase in the ownership percentage for insurance firms ― increase in foreign ownership rule for foreign insurers from 49 per cent currently to 74 per cent or even 100 per cent, potentially in the Budget. So, we will be looking to see if there is a development there.

There are other areas where we believe there is a case to be made, which hasn’t yet been made. But we believe that there is a case to be made that more opening up actually (more access for international firms) might mean more business for Indian firms.

The Indian economy is in the midst of a prolonged slowdown, with most growth indicators being grim. Can this, combined with Brexit, possibly dampen UK-India trade relations?

I can't go into details on the economy. The ambitious program of reforms ― IBC, bank account opening, ease of business ranking, signals in insurance ― that have been brought through…I think, has put India in a place where it will be attractive to outside investors. I don't see that interacting with Brexit. I think there was a question simply of people understanding the potential here for investment. That was the message we got from the Indian banks that we spoke to ― to tell people about the great potential for investments in India, especially now that the reforms have happened.

We are very positive actually. I think, there are positive opportunities for trade between our countries. I don’t think Brexit can dampen anything in this story.

During our interaction last year, you had said that the City is working on making the immigration process easier. What is the update on that? Former PM Theresa May had also said that Brexit would mean an end to free movement.

So, we are yet to see the details, but the signals from the government have been promising. They understand our concerns about remaining open to international talent. And we have been very pleased to see the change in the post studying arrangement (Post study visa for international students in the UK, allowing them to work in the UK for two years after graduation - The UK government has said it wants to do this).

There is a difference between having control over one’s borders and between not letting people in. Just because the British people ask for control in the system doesn’t mean that we are closing (our borders) and we have very positive signals from the government...We will remain open to international talent.

Is there anything specific about India in this?

The number of Indian work visas is more than any other country. We see strong growth in the number of UK visas for Indian nationals. We are seeing significant increases in students again, which is great. As I said, I think, we missed out when we had more restrictive arrangements. We have seen significantly more work visas given to Indians in the last year than any other country ― we had more than 50,000 work visas last year. The next highest is the US with around 10,000. That's really staggering.

Published on January 30, 2020

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