The UK´s decision to leave the European Union on June 23rd 2016 was unprecedented. It is most likely that the negotiations for Brexit will be concluded towards the end of 2018, at the earliest. This means that the next two years, at least, will be a period of great uncertainty. Spain’s Prime Minister Mariano Rajoy confirmed that for British investors, property owners and citizens working or living in Spain, current conditions will not change until the negotiations are finalised. Thus, `Brexit’ is certainly not effective immediately, and its true consequences will be seen only over time.
At this point, even the form of the negotiations remains unclear and difficult to predict. It is entirely dependent on the deal that British Prime Minister Theresa May and her government strike with the EU. At the moment, we can only draw from 4 examples: Norway, Iceland, Lichtenstein, (members of the EEA), and Switzerland, which have their own bilateral agreements with the EU. However, none of these countries have ever left the EU, and are all economically smaller than Britain, the world’s 5th largest economy prior to the referendum. The cost and outcome of the act of severing itself from the EU is very difficult to foresee at this point.
Many hope that `Brexit’ will be a nominal withdrawal but with only a small impact on Britain’s relationship with the EU and that the UK can get some sort of bilateral agreement along the same lines as Switzerland. After all, the vote was very close, and some countries, such as Scotland, overwhelmingly voted to remain part of the EU. However, the political situation in the UK at the moment indicates that a `hard Brexit’, a clean and complete break, is a definite possibility.
What would it mean for Britain to be out of the EU? For many, an important implication is the fate of London as Europe’s financial services capital. British banks and financial services entities would no longer have the free access to EU member states that they currently enjoy and would have to apply for licences to operate in EU member states as they do elsewhere in the world. This may, however, be opportune for Spain, or indeed Germany and France.
However, the question of the position of EU citizens settled in the UK, and UK citizens settled in Spain is a very important one. Current estimates put the number of UK citizens living in the EU at around 1.3 million, with the highest majority based in Spain. For the time being, conditions will not change, this has been assured, and there is no doubt that some sort of agreement will be pursued regarding these citizens. This depends wholly on whether Britain decides to subscribe to the European principles of free trade, which would also include freedom of movement. This would directly conflict with concerns over immigration, a fundamental aspect which won the `Brexit’ debate. However, over time it is possible that new British citizens wanting to come to Spain, or indeed any other member state, may face increasing obstacles when trying to permanently reside, buy a home or become involved in business.
The outcome of Brexit no doubt means there is considerable financial uncertainty ahead, as the pound fluctuates. However, there is no doubt that over the long run, the UK will continue to trade with Spain and other member states.
Lara Kotecha & Karl H. Lincke
This article is not considered as legal advice