The Mishcon Academy Digital Sessions.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Hello everyone and welcome to the latest in Mishcon’s Academy Digital presentations. This one on the impact of Brexit on Asian business. I am delighted to be joined by my guests this morning, my guest panellists: Tim Skeet who is the Senior Advisor at the Bank of China, UK Branch; Matthew Rous who is the CEO of the CBBC; Sebastian Remoy who is the Executive VP of KREAB; my partner Tahirah Ara who is Head of our Singapore office; and Sarah Houghton who is the Head of Mishcon’s Competition Group based here in London. So, firstly, Sebastian, may I ask you, what are the political hot potatoes that are bouncing back and forward between Number 10 and EU and, if you could also add to what extent they are relevant to Asia business generally.
Sebastian Remoy, Executive Vice President
KREAB Worldwide
Yes, thanks Gary. Look, political hot potatoes which are bouncing back and forth between London and Brussels are four key ones. One is fisheries and that is the amount of fish that EU fishers will be able to take, primarily from UK waters. I am not sure that’s going to have a massive impact on Asia investors unless they’re investing in the industry. The second one, which is the level playing field discussions, is the key issue which basically means that there’s been a discussion about how the UK can manage not to upset the EU by subsidising its industry to an extent that it distorts competition. If Asian investors invest in the UK with the thought to export to the EU from the UK, then it’ll very much be an issue for them. The third one is governance which is how the relationship between the EU and the UK will be managed. Will it be a single overarching undertaking or will it be lots of different agreements, and the fourth area that was entered, I think on the 9 September, was the Internal Market Bill which shocked the EU side quite considerably because it basically indicated an intention to breach the Northern Ireland protocol on the Withdrawal Agreement and that to a certain extent threw into question the whole idea that there would be a future relationship or an agreement between the EU and the UK on the future relationship.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
I’m going to move to Sarah and ask her, as we sit here today, where are we with things like brand rights which I know are internationally important and certainly to Asian business?
Sarah Houghton, Head of Mishcon Competition Group
Mishcon de Reya
Brand rights are probably one of the areas with some reason to be optimistic. There has been a high degree of agreement already so, many of the IP protections remain as they are. What will happen going forward is that there will be parallel regimes in the EU and UK designs and trademarks so there will be a need to make dual applications.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
If at the stroke of midnight there is no trade agreement, does this mean everyone can do exactly what they want or has some set of default rules, do they come into play?
Sarah Houghton, Head of Mishcon Competition Group
Mishcon de Reya
The World Trade Organisation rules will apply by default. The main principle of that is there’s trade without discriminations so, each WTO member, one being the UK, has to grant the same terms to all other WTO members unless an exception applies such as a free trade agreement of a customs union.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
If there is no negotiated exit, what does that mean for the start-up arena in the UK?
Tim Skeet, Senior Advisor
Bank of China UK Branch
I mean, what happens immediately clearly is surrounded, misted in uncertainty but the interesting thing that we should look at is, what do we have to do to attract the right talent, get the right people, have the right ideas and then implement those ideas and attract investment? Those things are very readily achievable here in the UK. We have all sorts of specialist assistance and help, I am a non-exec on a couple of fintechs and it’s not easy in this environment but the UK is doing a lot to help them and we do have the availability of talent and we do have the availability of investment funds here.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Can I just take… I’m going to do a quick sort of optimistic/pessimistic temperature check. Matthew, optimistic, pessimistic, that things are going to be okay, if not better, after Brexit?
Matthew Rous, CEO
China Britain Business Council
Pretty optimistic because I don’t think Brexit is going to have a very direct impact on Asian businesses trading and investing with the UK and there is no EU-China free trade agreement to roll over.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
And Sarah, just to come back to you?
Sarah Houghton, Head of Mishcon Competition Group
Mishcon de Reya
I think there’s a short period of pain but I think the UK will rally.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Okay. And what are the areas, Matthew, that we are going to rally in? Where are our real strengths that will come to the fore?
Matthew Rous, CEO
China Britain Business Council
Well, first of all there’s the City of London, as has already been mentioned, it’s an incredibly strong, magnetic pull for Asian businesses. The strengths are not going to change; the English language, the educated workforce, the historical and cultural ties if the dominant trading centre for M&B outside Asia, so that’s huge and that’s unchanging. The second big factor is the UK’s education system which is second to none, we have four of the world’s Top 10 Universities according to the QS ranking as we’ve got more Nobel Prize winners per head than any other major economy, you know, it’s a fantastic place to hire creative talent to do your design, to tap into our creative industries, our engineering sector, our project management skills are second to none. So, that’s all really, really strong.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Now China is the leading Asian trading partner at the moment. If you and I look back, or we all look back, in three years’ time, do you think that will still be the case?
Matthew Rous, CEO
China Britain Business Council
Undoubtedly because we already sell twice as much to China as we do to any other Asian country, it’s about 30 billion compared to 15 billion for Japan and that trend is accelerating on the back of the Covid pandemic.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
You can’t help but notice the rather unsettling, if I may use that word, bickering between, certainly on the political level with Huawei and with the BNO passport issue. Do you think that will have any impact on that trade relationship?
Matthew Rous, CEO
China Britain Business Council
We can’t take anything for granted and it’s really important that the politicians deal with this in a measured way but the focus now is very much on the wider regulatory system that may come in perhaps on the back of Brexit and I think it’s really important that the UK sends out the message that it remains an open and accessible place for foreign investors.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Let me, if I may, pass over to you Tahirah and say we’ve seen that a couple of the Japanese companies such as Panasonic and Hitachi some time ago decided to move their regional headquarters. Do you think it will be something that other companies will do in your… in the southeast Asian region?
Tahirah Ara, Managing Partner, Singapore and Head of Asia
Mishcon de Reya
No, I mean, unless they have a need to like in the case of Panasonic or Hitachi or for the Japanese in the automotive industry, I don’t think there is a rush for the southeast Asian companies which tend to do a lot of commodity-based trading. I don’t see a rush for them to set up headquarters in other parts of Europe.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
When people are…and Asian businesses are looking for capital, do you think England will become less attractive for that after Brexit?
Tahirah Ara, Managing Partner, Singapore and Head of Asia
Mishcon de Reya
No, I don’t think that Brexit has an impact on that, in fact I think London will still remain the centre, one of the financial… great financial centres of the world and certainly in Europe. Asian businesses seek capital from a variety of places. Chinese have, Chinese banks, Chinese sovereign funds, Chinese capital markets, the Shanghai Hong Kong Stock Exchange, these are all companies and areas that have increased their profile for fundraising in recent years but it doesn’t mean that the US funds do not have a big play in Asia, they do, there are US funds that are based here that have traditional, that have taken over lending that traditionally has been done by banks and European funds as well so I don’t think that will change.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
I’m going to pass to Tim and ask you because a little birdie tells me you are quite familiar with the German market. Do you think Asian companies are going now to be more attracted to set up businesses in Germany as opposed to the UK?
Tim Skeet, Senior Advisor
Bank of China UK Branch
I hope not, I think not. Germany does tend to be more bureaucratic than the UK and, again, I think what we are all firmly of the belief of is that the UK economy is pretty pragmatic and open economy. Germany, of course is tied into the EU and the EU is showing increasingly protectionist instincts. There are all sorts of regulations there, there’s the language, there’s the culture, there a bunch of things which are not going to be as easy as London where it’s English, the time zone, the legal system but that are much easier for people to navigate, quite frankly.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Okay. And a question for you, Sebastian. Certainly, I’ve heard, everyone’s heard, reference to the Norway Agreement, what on earth does that mean and why is everyone holding it up as the most advantageous kind of deal that England could negotiate?
Sebastian Remoy, Executive Vice President
KREAB Worldwide
Well, it’s very much off the table now but it really was, you are right Gary, it was held up as a possibility as a way for the UK to continue to participate in the Single Market because what it does is it ensures homogeneity in a dynamic way so that all the regulations between the EU and the UEAF states are aligned. It would have been strange for a UK that wanted to take back control to opt for the Norway option because it would have been the opposite of taking back control, however, the deal that’s on the table now is still going to require the UK to follow EU legislation and the UK has said in certain instances, it’s going to want to diverge but if UK manufacturers and traders want to trade into the EU, they are going to have to comply and for Chinese and Japanese and Asian investors who are thinking of using the UK as a launchpad for the EU market, they have to pay very close attention.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Can we just look to a different set of suppliers and ignore Europe in the future?
Sebastian Remoy, Executive Vice President
KREAB Worldwide
A lot of products, particularly food products, come from the EU that once the UK leave could be quite highly tariffed but also in the other direction, how easy it is to replace perishable products with imports from markets that are much further away is a question for people to ask themselves.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Do you think that the quality of food stuffs and the health and safety concerns that China has developed since the, one hopes the olden days of having some problems with that so that they would pass UK health and safety regs in the future?
Matthew Rous, CEO
China Britain Business Council
Oh, standards have gone up very significantly over the last ten years or so when it’s been an issue of great public concern, as you say Gary, but really the trade is the other way and we are selling from the UK into the Chinese food and drink and wider consumer markets and the E-commerce boom has greatly accelerated that process.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
What do you think are the UK’s biggest philosophical challenges in terms of moving forward and shedding the forty year history of Europe?
Tim Skeet, Senior Advisor
Bank of China UK Branch
We are a little bit still I think backward looking, we need to be pragmatic to look to the future. We need only look at the size of the Chinese economy that came from nowhere to somewhere in forty years. The Indian economy is going to be, after China, possibly the biggest economy in the next thirty/forty years so between China and India you have two enormous economies that we need to engage with, we have to do business with and we need to find a way.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
Just now, changing tack a little bit and looking at the attractiveness of the UK real estate market. The first six months of this year, apparently investment into London real estate from Asia increased by about 70-odd percent. What does this tell you, Tahirah?
Tahirah Ara, Managing Partner, Singapore and Head of Asia
Mishcon de Reya
As you know, Asians love real estate as a form of investment. They see it as a tangible asset and what I can see from my clients, they are not just investing in luxury, personal property but they are also interested, and I have seen this in the last few years, in investing in commercial properties, be it office buildings or be it in hospitality sector and so in that sense Brexit has been a plus, a positive to for them because with the fall in the pound, it has allowed them to snap up bargains and I see them continuing to invest in real estate in the UK.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
What advice do you give Boris as to how we can do as much as we possibly could for the UK out of this crisis?
Tim Skeet, Senior Advisor
Bank of China UK Branch
Face the facts and listen to business because business is going to have to sort out what really happens in the British economy and however the politicians feel that they’re creating the framework and driving this bus, this bus isn’t going anywhere without business being onboard.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
What would you do if President Xi Jinping called you and said, “How can you help us in China open our markets and make the most out of Brexit?”
Tim Skeet, Senior Advisor
Bank of China UK Branch
This is happening already. President Xi doesn’t need my help, China is already opening up. I would just like to see it happening in a much faster pace. I would urge both the Chinese and the UK leadership to engage, to pick up the phone to each other.
Gary Miller, Head of Mishcon Asia Desk
Mishcon de Reya
I’m going to interrupt you there because my little stopwatch tells me we are 17 seconds beyond our committed period and so, all that remains is for me to really a hearty thank you to each of you for joining us today and for your insight and thank you to the audience. Thank you all very much. Bye bye now.
The Mishcon Academy Digital Sessions. To access advice for businesses that is regularly updated, please visit mishcon.com.