Good morning, ladies and gentlemen.
I want to start by sincerely thanking the organisers for inviting me to participate in this conference. I enjoyed getting to know a number of you at last night’s dinner, and I’m really honoured by the invitation to speak this morning.
I’m also pleased that our chairman didn’t ask for a show of hands at the beginning of this session to find out how many people support Britain’s decision to leave the European Union, because I’m fairly sure that I’d be in a small minority; but I take your invitation as a sign of your openness as an organisation and I commend your support for the free exchange of ideas.
Last week saw Prime Minister Theresa May take the historic step of triggering Article 50 of the Lisbon Treaty, initiating the process of a country leaving the European Union for the first time.
While the UK’s withdrawal from the EU has been welcomed by many in Britain, it has doubtless caused concern and anxiety for others, both in Britain and the rest of Europe.
And there is no doubt that Brexit will entail some of the most substantive changes ever to how trade and business operates in the UK and Europe.
But while there will be changes, there is also likely to be much more continuity than many people expect.
Many of you will have seen Theresa May’s statement on the triggering of Article 50 last week, or her speech in Lancaster House back in January, and I wanted to start by re-emphasising the key message of both speeches, namely that Britain may be leaving the European Union, but we are not leaving Europe.
Britain has decided to chart a new course outside of the European Union. But our resolve to remain one of the closest friends and allies of Germany and the other countries of the EU has not changed.
We are determined to achieve a Brexit that is successful for the United Kingdom, but also a Brexit that is successful for the European Union - one that maintains the closest possible links between us, even as we take a new path politically.
So in my 15 minutes on the stage, I want to explain to you why there are good grounds to view the Brexit process with a great deal more confidence and certainty than you might have had before.
1. EU citizens’ rights
Article 50 sets out a two year timetable for the UK and the EU to agree a deal. The EU’s chief negotiator Michel Barnier has said he expects talks to last for 18 months, allowing for 6 months to secure approval from national Parliaments.
Many issues will be discussed in this time, but first and foremost, I want to talk about the issue of the rights of EU citizens already living in the UK, and similarly UK citizens living in the EU.
Theresa May and the chief EU negotiator Michel Barnier have both made it clear that their first priority in the negotiations ahead is securing the rights of all UK and EU citizens who are already legally resident abroad.
Both sides have been clear that people should not be used as bargaining chips in the negotiation, and I am extremely confident that this is something that will be resolved in the opening few months of the negotiations, ending any uncertainty that these people living overseas might feel.
And a draft paper published by the British Government on the rights of EU citizens has already recommended maintaining EU citizens’ existing level of access to benefits and other forms of social security, adding a further degree of certainty and continuity for those European citizens who have chosen to make Britain their home.
It is easy to look at a few newspaper headlines from the UK and come to the conclusion that the Brexit vote was an anti-immigration vote aimed at closing Britain off from the world, but I would like to reassure you that this is certainly not the case.
If you look at polling done immediately after the referendum, it shows that for a majority of Leave voters, their main reason for voting Leave was not immigration, but their desire to see UK laws made in the United Kingdom. Hence our slogan - ‘Vote Leave - Take Control’.
The British people’s wishes to control immigration was not borne out of any desire to reverse immigration or stop it altogether, but simply to introduce a system where the British Government has the final say and politicians can be held accountable.
In Britain, we hugely value the way that immigration has enhanced and improved our country over many decades, if not centuries. Brits are rightly proud of our cosmopolitan culture, while our economy has benefitted enormously from highly-skilled migration of some of the finest minds in the world to our universities and places like the City of London.
Brexit will not change any of that.
So I urge you to look beyond the newspaper headlines - Britain is not turning in on itself or “pulling up the drawbridge”. We will continue to welcome Europeans to Britain as the UK Government puts a new immigration system in place after Brexit.
2. Trade after Brexit
Of course, the issue which is likely to dominate the negotiations above all else is the shape of Britain’s future trading relationship with the EU.
Theresa May has made it clear that Britain will be leaving the single market. We respect the four pillars of the single market, and we will not try to “cherry-pick” aspects of the single market by demanding to remain a member at the same time as ending the free movement of people.
What we do want to see is the closest possible economic ties between the EU’s internal market and Britain as a third party nation.
Senior figures from the UK and the EU have made it clear that this is the outcome they would most like to see, and while I am not underestimating the complexity of the upcoming negotiations, I believe this is eminently achievable.
My optimism is not founded on the sort of “tit-for-tat” arguments you might have heard, where people argue that because of Britain’s trade deficit with the EU, the EU will have to give Britain a deal.
This mercantilist approach is missing the point of free trade.
Those of us who believe in free trade, should believe in free trade in its own right, for the benefits it brings, not because of any perceived advantage it will give to one country over another.
Free trade is a powerful tool for lifting people out of poverty, boosting economic growth and making businesses more competitive.
The closeness of the UK and EU economies means that the mutual benefits of free trade between us are particularly strong, and this is certainly something that all the key figures on both sides have acknowledged.
The EU has recently signed its most comprehensive and ambitious trade deal - the CETA deal with Canada.
The Canada deal is often talked about as a potential model for a future UK-EU relationship, but there is every reason to expect an even more far-reaching deal to be possible after Brexit.
For a start, the UK and the EU are in the unique situation of conducting a trade negotiation from the starting position of having no tariffs and identical regulations.
Major disagreements in trade negotiations often arise because countries are concerned that lowering certain tariffs will hurt particular areas of their own industries.
With the EU-UK negotiations, there need be no disagreements of this sort because there are already no tariff barriers between us, and hence neither side would be exposing any industries by agreeing to continue the no-tariff regime.
Jean-Claude Juncker and a few other EU leaders have said that Britain must be given a worse deal than it currently has, in order to demonstrate to other EU countries that you cannot leave the EU and be better off.
But trade is not a zero-sum game. Increased trade gives mutual benefits to both sides, while decreased trade conversely harms both. Hence, any bad deal for Britain is also going to be a bad deal for the rest of the EU.
I believe the EU stands to gain far more support from people around Europe by showing that it is prepared to be flexible and put economic concerns above political ones.
As Theresa May has said, we want to see a strong European Union, not one in disarray.
Far from being a threat, I would argue that Brexit actually provides the EU with a great opportunity to restore its reputation and legitimacy in the eyes of its citizens - by showing that it can put pragmatism above politics.
3. Barriers to trade?
Alongside leaving the single market, the UK will almost certainly be leaving the EU Customs Union as well. But there is no reason why this would lead to the erection of costly barriers to trade in itself.
Thanks to digitisation and the advent of the internet, the days of goods being held up for days at customs houses whilst forms are filled in and shipments are checked is a thing of the past.
Currently, 99% of Britain’s non-EU imports have all of their customs paperwork completed online before they ever reach the UK, with only a small number of shipments needing to be physically checked by customs officials, and schemes like the Trusted Trader programme have greatly streamlined the logistics of cross-border trade.
So even in the unlikely event of no Brexit deal and Britain and the EU moving to a trading relationship under WTO rules, this is not going to lead to thousands of lorries parked up outside Dover and Calais.
4. “No deal is better than a bad deal”
One phrase which the Prime Minister used which I believe has caused some consternation in Europe is that “no deal is better than a bad deal”, so I wanted to devote a few minutes to clearing up any potential misunderstandings about this.
I should stress that it is certainly not intended as a hostile act, as some have suggested.
Of course, no-one can enter any negotiation with an absolutely guarantee of success. I’m sure no-one here negotiating the purchase of some real estate, would agree to pay three times your initial offer - you’d always maintain your right to walk away from the deal.
Neither side is going into the negotiations hoping for failure, but it would be negligent for either side not to have a Plan B should the negotiations stall, even if it is unlikely that Plan B will need to be used.
Indeed, last month a European Commissioner said that the EU was drawing up “very thorough” contingency plans should the negotiations break down.
It is simply part of a rational approach to the negotiations from both sides.
And even if there is ultimately no free trade agreement between the UK and the EU, readjusting to WTO Most-Favoured Nation schedules is not going to be the cataclysmic event that some are predicting.
The vast majority of the world trades very successfully under WTO rules, while export growth into the EU from major economies like America, Brazil and Australia has been faster than it has from the UK, despite none of these countries even having FTAs with the EU.
People have been investing in real estate in other countries for centuries - long before the advent of the European Union. Indeed, there are people at this conference from outside the EU who invest in real estate in the EU, and people from the EU who invest in real estate outside the EU, so there is no reason to believe that this won't continue post-Brexit.
5. Financial services
One area where the negotiations will be most complex is in financial services. The preferred option for most banks at the moment is some form of “enhanced equivalence" regime, which would allow banks to continue conducting most aspects of UK-EU business with minimal disruption.
Again, the mutual advantages of the current arrangements - along with the fact that any post-Brexit barriers are far more likely to drive banks towards America and the Far East, rather than to Frankfurt, Paris and Dublin - means that a high degree of continuity in arrangements for financial services is the most likely outcome from Brexit.
In other ways, Brexit can actually provide an opportunity for the EU to move ahead with the fundamental structural reforms to the Eurozone which help to make it work effectively - whether it is things like debt sharing or fiscal transfers, which would have been harder to achieve with Britain in the EU.
Post-Brexit reforms of the EU can help to protect it from future crises - providing greater stability and certainty to businesses all across the Eurozone, and to European citizens too. Brexit may be the cause of much uncertainty at the moment, but I believe it will lead to greater stability in Europe in the long term.
6. Mutual Cooperation
And even as Britain and the EU seek to find the best way to maintain their close economic and trading ties, it is well worth remembering that our friendship and cooperation runs much deeper than purely economic issues.
The close cooperation between us on security is of fundamental importance to keeping our citizens safe, whether from internal threats and acts of terrorism, or external threats in the form of aggressive neighbours.
Intelligence-sharing, cross-border crime prevention, unity in standing up to aggressive acts from other countries - these are hugely important to the stability of all of Europe, and of course, Britain and Europe will continue to cooperate as closely as possible on all of them.
And on a wide range of other areas, our close cooperation brings a huge number of mutual benefits - whether in education, with the Erasmus scheme, or science, with the Horizon programme, or working together to help protect the environment - Britain will be absolutely committed to continuing to work with Europe to ensure that these advantages continue.
In summary, we can expect roughly three phases of the Brexit negotiations.
The first should see the speedy resolution of the overriding human concern - the status of British citizens living in the EU, and EU citizens living in the UK.
The second part will arguably be the most difficult - the balancing of political concerns over big picture issues. While the advantages of comprehensive free trade between the UK and the EU are economically self-evident, there will inevitably need to be some compromises from both sides in political terms.
Once broad political agreement has been reached, this will then allow the negotiations to move onto the final phase of agreeing the exact details of a new arrangement.
If the technical details haven’t been finalised by the two year deadline, both sides have discussed the need for a “phased implementation” period to allow for a gradual move on to the new regime, minimising any commercial disruption.
Continuity and certainty are the key issues for all businesses going into the Brexit process, but even at this early stage in the negotiations, there is every reason to believe that both will be achieved.