So what means “Brexit means Brexit”?

Ever since Theresa May stated that “Brexit means Brexit” during her first speech as Prime Minister, she has left her cabinet, her European counterparts, decision-makers in the world of business and finance, and, not to forget, her electorate wondering what “Brexit means Brexit” actually means. Up until now, it is – though ingeniously crafted – an empty formula that has left ample room for interpretation for Brexiteers as well as Bremainers. But, with the first major, though officially “informal” EU-meeting without the UK approaching, Theresa May now needs to fill the phrase with life and with meaning. And that’s where it’s getting pretty complicated. With both hard and soft Brexiteers in her cabinet, as well as Bremainers, May needs to find out quickly what the British position towards Brexit is.

A first step towards that will be taken on Wednesday, when May gathers her cabinet at Chequers. There, at the Prime Minister’s country retreat, senior ministers will reportedly have to come up with a so-called action plan to “make Brexit work”. As the Guardian explained on Sunday, each cabinet minister has to identify opportunities in their field of competence that could arise from the UK’s departure from the EU.

For that, May and her ministers first need to define what Brexit means. Does it mean continued access to the European Single Market? If so, for all sectors or just for some (e.g. only Financial Services)? Does Brexit mean continued unlimited freedom of labour movement? Or does it mean restrictions to this very freedom? What kind of model does the UK pursue in its negotiations with Brussels – the Norway model, a Swiss-type agreement or a Canadian free-trade solution? Or, would it prefer the “Continental Partnership” , a model that was first discussed on Tuesday after a group of policymakers and scholars published a paper calling for a new, looser organisation between the UK and the EU?

With advocates for both a soft and a hard Brexit in her cabinet, this will be a tough call for Theresa May. She will no doubt struggle to find an agreeable solution for the likes of Brexit minister David Davis or trade minister Liam Fox as well as for Philip Hammond, the Chancellor of the Exchequer. According to the Sunday Times, there is a split between different members of the cabinet, precisely over whether the UK should strive for continued access to the Single Market or not and, if so, whether it would accept continued unlimited European migration or not.

From a European perspective, there won’t be one without the other. Like many of his European counterparts before, Germany’s vice chancellor Sigmar Gabriel underlined this again during the weekend when he stated that the UK would have to “pay” for Brexit. “If we organise Brexit in the wrong way, then we’ll be in deep trouble, so now we need to make sure that we don’t allow Britain to keep the nice things, so to speak, related to Europe while taking no responsibility,” Gabriel said.

Not only the members of the British cabinet but also the members of the civil service seem to be split about what Brexit really means. The Brexit-side in particular gives the impression of fearing opposition from within the civil service. According to the Guardian, Steve Baker MP, who campaigned for Brexit, has suggested that officials should be “summarily fired” if they tried to block the Brexit process.

Unfortunately, the problem goes beyond cabinet and the civil service. MP’s are still shocked by May’s announcement to not consult the House of Commons before triggering Article 50. Should MP’s, most of whom were against Brexit before the referendum on June 23rd, not be questioned, given that the decision to trigger Article 50 will most likely be the gravest decision that the UK government is going to take for decades?

To many MPs as well as outside observers like me, that sounds odd, given that the vote for Brexit was presumably all about democracy and “taking back control”. In my home country Germany, it would be unheard of for our chancellor to go ahead without parliamentary consent (although, I admit, parliament was not questioned before Merkel allowed more than a million refugees in last year).

Then there is the Labour party, with its ongoing leadership contest. Corbyn’s challenger Will Owen has promised a second referendum, should he be elected Labour leader and should his party gain a majority in parliament. Both events are highly unlikely. In addition, the first endeavour is, as the FT’s Wolfgang Muenchau put it – also a waste of time and energy. According to him, the Remain-side should focus on securing a Brexit that is as soft as possible, not accidentally end up with one that is as hard as possible.

“Those who campaigned for the UK to stay in the EU are shaping up to be two-time losers. They lost the referendum vote on June 23; now they are losing the battle to keep the UK inside the single market. Both defeats are based on repeated misjudgements”, Muenchau stated. “After the referendum, they should have conceded defeat, and moved on to argue the case for the closest possible relationship between the UK and the EU. That would at least have kept open the possibility of a return to the EU in the future. Instead, they are calling for a second referendum.”

This, Muenchau argues, leaves the definition of what “Brexit means Brexit” really means mostly to the hard Brexit camp, to the disadvantage of Remainers and soft Brexiteers. There is some truth to this and I will be watching the Chequers meeting quite closely. However, “Bremain vs. Brexit” as a blog will end today, as I will move to a new post with the Wall Street Journal. I hope you enjoyed reading.

Should we stay or should we go?

It has only been a week since we learned the results of the British EU-Referendum. Voters, politicians and business people are slowly coming to terms with the decision to leave the European Union. Although we can’t foresee all of the implications yet, it is quite obvious that the amount of change will be tremendous.

That’s especially true for firms that rely on accessing the European Single Market (e.g. Vodafone, the telecommunications company, or EasyJet, the low budget airline). Both Vodafone and Easyjet are headquartered in the UK, for now. Given that the UK might lose its access to the single market, these firms have, among others, announced that they could be forced to relocate their headquarters, should it be necessary for their businesses.

This news also got my editors interested. Ideally, they want me to find a company that will not wait whether and when Article 50 – the official start of the British divorce from Europe – is triggered, but that will be moving to Continental Europe any time soon. So far, I haven’t managed to find such a company.

According to what a German lawyer told me on Thursday, the reason for this is simple. Relocating your headquarters is a complex, time consuming and expensive business, not something you would do just in case, as a precautionary measure. “The starting shot will only be fired once we have clarity over the progress of the negotiations”, Marcel Hagemann, a partner at CMS Legal, told me.

Assuming that Article 50 will be triggered towards the end of the year, the UK has two years, until the end of 2018, to come to an agreement with the EU. His expectation is that by the end of 2017, we should see companies starting to relocate to the EU.

“You need some notice for this”, Hagemann said. From the legal side of things, it takes about a year to move a company from the UK to Europe, depending on what kind of legal process you want to undergo. According to the lawyer, there are two core solutions to this issue.

Firstly, there is the merger between the UK entity and a Continental European entity. For this, you can either establish a new company in Europe or buy an existing one. The only important thing is to merge this one with your British entity, making sure that the headquarter of the new entity is based outside of Britain. This is, Hagemann said, a relatively simple process, assuming that your company is not listed in Britain. If it is, it will lose its listing here in the UK (as it is not longer headquartered here).

The second solution to the problem is the creation of a European public company, a Societas Europaea (abbreviated SE). So far, the UK only has 34 of these whereas Germany has 350 SE-style companies. According to the lawyer, an SE is functioning similarly to a PLC. Whereas the founding of an SE is a bit complicated, moving the headquarters from the UK to Continental Europe should be relatively straight forward – as long as you finish the process before the UK officially leaves the EU.

When asked how expensive the whole process might be, Hagemann shrugged. Obviously, he did not want to be nailed down to a specific number. “It varies a lot, depending on the size of the company and the amount of people that will have to move”, he stated. Whereas he does not think that anyone will officially move their headquarters before the end of 2017, many firms have started searching for alternative locations.

Duesseldorf, where Hagemann is based, has already rolled out the red carpet to British telecommunication firms such as Vodafone. “They already have their German office there, so maybe this would be a good choice for the group headquarters as well”, Hagemann said.

Although the outcome of the referendum did surprise him, the German is still hopeful. “In the past, the British have been very good at negotiating in their favour”, he said. Plus: “Don’t forget that Germany has an interest in keeping them in the Single Market. We do have a strong voice here.”

Firms however will have to prepare for the worst. If they only learned one thing since the British referendum, it is that politicians don’t tend to stick to what they said before. Thus, they’d better be prepared if Britain’s EU negotiations break down in late 2018, leaving them with the prospect of a hard Brexit.

Some firms have already reacted. Siemens for example, the German industrials company, will not make further investments here in the UK before they have clarity over where the country might be heading. Two days ago, Virgin cancelled a deal that would have seen them take over 3000 staff. UOB, the Singaporean bank, stopped providing financing for British real estate projects.

According to Hagemann, we will see much more of this – but only once it is clear whether Britain remains part of the Single Market or not. “German companies will not start closing their factories straight away”, the lawyer said.

What a great relief. So watch out for 2017.