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With a ‘no-deal’ Brexit still a distinct possibility, experts in six key industry sectors weigh in on what the UK's solo project could mean for the global business
By IQ on 12 Oct 2018
There are two vitally important points.
The first is that the UK remains a member of the European Aviation Safety Agency. Although the UK government has stated they want to, currently nothing has been agreed on the mechanism and how much we will contribute.
Without this, UK aircraft and operators would be isolated and unable to continue flying – they would move wholesale to other EU states, as many are already making plans to do. UK-issued EASA pilot licences would no longer be valid outside the UK.
The second point is flight permissions. Without agreements in place, UK operators will no longer be able to fly domestically within EU states nor fly internationally from one EU state to another, as they currently have automatic rights to do. Likewise, EU operators will no longer be able to fly domestically within the UK nor, for example, would an Austrian operator be able to fly from Germany to the UK.
Time is running out to agree these complex rules and, again, the result will likely be aircraft moving off the UK register to operations set up by their owners in other EU states – eg as EasyJet has already done.
This latter point has great implications for the chartering of aircraft on European tours. Already, we are quoting flights for next summer and having to advise clients that operators may not have the necessary permissions.
“We are quoting flights for next summer and having to advise clients that operators may not have the necessary permissions”
There has been so much said and written about Brexit – but much less about what it will mean to the British music industry, an industry we know and love, and one that does so much to drive the British economy.
In August, I attended a pre-Brexit meeting at the Department for Transport (DfT), with the secretary of state, Chris Grayling, and his team, to discuss the implications of a ‘no deal’. Our intention was to establish the best possible outcome for our members and the haulage industry after March 2019.
Frustratingly, we left with very little – apart from a strong indication that neither the DfT nor the rest of government understands even the most basic needs of road-freight operators. Even now, with under six months to go until the UK leaves the EU, there is not even a contingency plan – standard practice for any business, surely?
So far, all we have is the proposal of a lorry park at Dover to prevent tailbacks on the M20 – a proposal that we have already spurned as unworkable. The response of one RHA member was, “We would be sat there for days and days, costing a fortune. […] The truck park would be full in half a day.” These comments were widely picked up by broadcast, online and printed media.
We have got to have a clear government commitment, that in the event of a no deal it will seek an agreement that doesn’t impose new permits, quotas or limits on UK international operators, particularly those for whom the ability to plan far ahead is critical.
For the movers of music, time is the critical element. Forward planning is essential. But with such long lead times, how can a logistics supplier accurately plan, when any date post-29 March is such a grey area? Yes, there will be a transition period but that too remains shrouded in mystery.
Right now, all we have is words. But words alone are not enough. We need clarity, we need a workable no-deal contingency plan in place and we need it now. Without clarity, the industry that employs 2.4 million people, including the operators and employers of the 600,000 HGV drivers that keep the UK’s HGV fleet of nearly half a million trucks on the road, contributing £2.54 billion to the UK economy, will just have to hope for the best.
But for the industry responsible for moving 98% of the UK economy, hope just isn’t good enough.
“Right now, all we have is words. But words alone are not enough”
With regard to our specialist area of insurance for the entertainment industry, there have been no indications of change, at this stage, from the insurance markets once Brexit kicks in. Due to the specialist nature of our policies, we generally use UK insurers regardless of whether for EU or overseas policyholders.
There are certain countries, both within and outside of the EU, that have always had their own internal rulings and restrictions on how insurance can be placed and where. Sometimes this has to be placed locally or in the local language, and for these reasons we tend not to work with music industry clients in those countries – any barriers related to insurance never really came down when the UK joined the EU, so leaving it probably won’t make too much difference either!
Perhaps on other types of insurance, such as large, industrial commercial policies involving international insurers, it may have a greater effect.
“Any barriers related to insurance never really came down when the UK joined the EU, so leaving it probably won’t make too much difference either”
At the moment, only non-EEA acts need work permission to come here for tours, one-off shows, film shoots, etc. The UK government has not yet indicated whether EEA nationals might need some form of work permission post-Brexit.
Tours currently fall into three categories of immigration complexity:
Simple: EU/EEA nationals, who don’t need permission to travel to the UK and perform there. No costs incurred; no paperwork needed. This might change after Brexit.
Medium: Non-visa nationals, from countries such as the US, Canada, Brazil and Australia. They need permission to perform in the UK but just need to present it as an entry document upon arrival. This is very cheap (as low as £21 per act).
Complex: Visa nationals, which include China, Russia, Jamaica, South Africa and more. They need permission to perform in the UK, plus a visa. These are often a nightmare and expensive (several hundred pounds per person).
It’s possible that non-British EU/EEA nationals might be pushed from category one to category two after Brexit. This will mean slightly more paperwork but it’s not too onerous. If any EU/EEA country were to be pushed into category three that would make their lives more difficult, but it seems unlikely at this point.
However, for the last two summers, queues at UK airports have been hellish. It has become almost par for the course to wait two hours or more in order to clear immigration. If they add millions of EU passengers to the lines whose paperwork and intentions have to be checked, then it’s clear they need to hire a lot more immigration officers.
“It has become almost par for the course to wait two hours or more in order to clear immigration”
There will be mixed taxation and social security consequences post-Brexit as follows.
Artist taxation: this is based on the bilateral tax treaties and not on the EU treaty. This means that taxation in the performance state and tax credit in the residence state stays the same.
But the Gerritse and Scorpio decisions of the European Court of Justice have given non-residents within the EU the right to deduct expenses and file tax returns. After Brexit, UK artists cannot use this any more and will be paying more tax than now in, for example, Germany.
US artists are better off in the EU than UK artists because the US tax treaties have a minimum threshold of $20,000 per artist per year and allow an exemption for independent production companies. EU artists performing in the UK can keep using the same FEU system because that is a UK unilateral tax measure.
VAT: there will be no reverse charge system any more but goods and services will go in and out of the EU. Administratively, this will be more complicated but will not lead to higher taxes.
Social security: No A1s possible any more for France and other states. If the UK does not create an alternative, this will lead to higher social security contributions without any rights.
The ECJ has given non-EU residents the right to deduct expenses and file tax returns. After Brexit, UK artists cannot use this”
Big Ben may have stopped chiming but time has not stood still in Westminster. On the contrary, it is quickly slipping away: there are now under 170 days before Britain leaves the European Union, and there is still much to iron out.
While the terms of a transition period have been agreed, negotiations are ongoing on the more contentious matters of the size of the divorce bill and the future status of Northern Ireland. Meanwhile, discussions over how the UK and EU will relate in the future have not even begun.
The biggest unknown remains the true cost to Britain of leaving the EU without a trade deal in place. Once thought remote, the chances of a no-deal Brexit are increasing and that’s already weighing on the pound, which has fallen to its weakest level in a year against both the dollar and the euro. A weaker pound is not good for musicians or labels that have to pay overseas whether for touring or recording. For promoters paying US artists in dollars, the cost per show will have increased by more than 10% over the past few months. Conversely, UK artists touring the US and Europe that are paid in those currencies will benefit.
But what will happen next? A ‘hard’ Brexit is likely to push sterling to parity against the euro and a multi-decade low of £1.18 against the dollar, while a good Brexit deal for Britain would boost the pound to £1.40 against the dollar and £1.20 against the euro.
Artist, managers, agents and promoters can escape the uncertainty of currency movements, though. Fintech companies like Centtrip, which specialise in international payments, foreign exchange and treasury management services, enable you to lock in a rate today for up to two years and mitigate any adverse currency fluctuations. Whichever side of the fence you are on today, you can still have control of your money.
“A ‘hard’ Brexit is likely to push sterling to parity against the euro and a multi-decade low of £1.18 against the dollar”
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