Chris Kuehl, Ph.D.
The whole issue of Britain’s role in Europe has been fraught with confusion and concern for many years and that chaos has intensified in the last year. There has always been a sense of distance between the U.K. and Europe, and there has long been reluctance to fully integrate into what would be described as European culture.
The U.K. was slow to join the Common Market in the beginning and never did become a member of the eurozone. The “euroskeptic” has been present in both the Labor Party and the Conservative Party along with those who supported the EU. There is a widespread resistance to doing things the “European way” and that has always created tension within the business community as well as with the voter.
Despite this traditional enmity, it was assumed the British would continue to support the EU, albeit with reluctance. Few really expected the voters to opt out the EU. Of course, this assumption was incorrect. Nobody really expected the Tories to lose a 25-point lead and end up having to form a weak coalition government, but here we are. What does this mean for the Brexit talks now? There are those who now expect a hard Brexit and those who retain some optimism that a soft Brexit may still be possible.
The hardest version of the withdrawal would be a total divorce without any sort of agreement—Britain just tumbles out of Europe and retains virtually nothing from the relationship. This is considered an unmitigated disaster for the U.K. as well as Europe, and most assert that economic growth would tumble in the whole region—perhaps enough to trigger a real recession in both the U.K. and Europe.
The slightly less drastic version of a hard exit would be one that would involve some protection of citizen rights for both those in the U.K. and Europe but would have little impact on trade. This might preserve the right to work in other states and perhaps protect the ability to live in Europe if one is British. The next step up would be an agreement on free trade in goods but not in services. Right now, this is the most likely option, as there are many in Europe who want access to the British market and certainly many in the U.K. who want access to the Europeans. The practicality of allowing trade in goods will prevail over some of the political objections, but this will not protect the role of London as far as being a financial center.
The other options start to trend toward a softer exit. At the moment these seem less likely given the current political positions taken by the British as well as those in Europe. There could be some sort of customs union that would harken back to the days of the Common Market, but this means that the British would lose some control over their tariff system and that would mean it would be harder to block imports from Europe. There were those who supported Brexit simply due to a desire to limit these imports into the U.K. At the same time this makes the European market more accessible to the British, and some in Europe now oppose this. The next step toward a soft exit would be a whole new trade agreement that would allow almost unfettered trade between the U.K. and Europe, but that would mean Britain following European rules and being subject to the European Court of Justice when there are business disputes. That would be a step too far for the majority of the Brexit supporters and this option seems rather remote. A “true” soft exit would not be an exit at all, as the U.K. would essentially capitulate and agree to all the rules of the EU—including the free movement of people, and it was the immigration issue that really galvanized opposition to the EU in the first place.
Corporate respondents of a recent payments survey identified ACH as their most preferred and efficient method for business-to-business payments, compared with checks (which were their least-favorite method), cards (accounts payable, purchasing, etc.) and wire.
“At this time point in time, more than half of corporates are making 50% or more of their B2B payments electronically via ACH or card,” according to the B2B Payments + WCM Strategies 2017 Survey Report. Strategic Treasurer and Bottomline Technologies published the report, which Bank of America Merrill Lynch sponsored.
The survey, however, notes regional differences in the payment preferences. Respondents in Europe were “far more dissatisfied with the use of checks, with 78% ranking it as their least-preferred method compared to 47% of North American respondents. … Europe is widely considered to be ahead of North America with their adoption of electronic payments, especially given the prominence of networks such as SWIFT, SEPA and Bacs.”
The survey includes responses from 335 corporate and bank practitioners regarding new payments technology, payment security, working capital management and the current regulatory environment.
The survey finds that nearly a quarter of participants were operating in each of the 10 major world regions highlighted in the survey—with the majority in North America (89%). About 67% were operating in more than one country, while 33% were operating in more than 20 countries.
About two-thirds of the respondents originate payments using three or more banks, close to a quarter with 11 or more banks, and 13% with more than 21. The survey also notes that 63% originated payments in more than three currencies and 40% in six or more.
Automation and efficiency were noted as “incredibly important corporate drivers for payables,” the report says. Regarding automation, “61% of corporates indicated that invoice delivery/capture was the most important component, along with 57% for invoice approval and 49% for payment approval.”
Going forward, “banks, financial technology providers and their corporate clients must work together to reduce the complexity that is bogging down the payments landscape,” the report concludes.
This Week’s New Postings
News & Updates from Credit Risk Insurers & Banks
Atradius: Market Monitor on Steel and Metals 2017
Euler Hermes: Weekly Export Risk Outlook
Wells Fargo: Weekly Economic & Financial Commentary
Strategic Global Intelligence Briefs
NACM’s 121st Credit Congress in Grapevine, Texas, helped introduce a new FCIB member benefit last week. The Academy of Global Credit is comprised of 27 hour-long streaming webinars free to members 24 hours per day, seven days per week.
These webinars previously were sold for $95 each to members. FCIB will regularly swap out some of the webinars with new ones to keep the material fresh while retaining ones that cover credit management basics.
Subjects in the online library range from basic to advanced subjects that are available immediately to members and can be used as a valuable training resource. Included are a four-part series on export regulations and compliance, basic and advanced letters of credit webinars, the FCIB Going Global series and much more.
To access the Academy, all members need to do is visit FCIB’s home page, click on the Knowledge & Learning Center box near the bottom of the page and then click on the box for the Academy of Global Credit. Log in using your membership username and password.
Members can peruse the webinars one of two ways. They can scroll through the web page and view all of the offerings at once, or use the tabs near the top of the page to organize them by subjects.
June 26 – Mongolia, President
July 2 – Senegal, Senegalese National Assembly
Aug. 4 – Rwanda, President
Sep. 11 – Norway, Norwegian Parliament
Sep. 23 – New Zealand, New Zealand House of Representatives
Sep. 24 – Germany, German Federal Diet
Macron on track to claim majority in parliament. French voters resoundingly embraced the still-untested party of the newly elected president, Emmanuel Macron, in Sunday’s first round of parliamentary elections, dealing another humiliating blow to France’s traditional parties. Based on 97% of returns, it appeared likely that candidates for Macron’s party, La République en Marche, would receive 28% of the votes for the National Assembly, meaning that it appears on track to win a majority of seats. (Business Mirror)
Germany criticizes U.S. for unilateral Russia sanctions. German Chancellor Angela Merkel is concerned that proposed new U.S. sanctions against Russia could lead to European companies being fined, a government spokesman said on Friday, and the economy minister warned of possible countermeasures. (Reuters Africa)
Trump's Cuba Policy Reversal. President Trump announced Friday a drastic change in the U.S.-Cuba relationship, swapping a policy of cultural exchange to bring about democratic ideals for something closer to the embargo-style policies from past decades. White House officials said Trump plans to cut off income to the Castro regime, with the hopes of bringing about free elections, by once again limiting tourism and trade to the island. (Washington Post)
China’s debt situation: The next possible financial crisis? China’s debt situation is not only growing in size but also at a rate that economists and policy analysts feel is difficult to sustain. Adding to the problem is that China’s public and private debt are intertwined and not helping the economic growth the nation needs to thrive. (Global Risk Insights)
Will blockchain make trade finance banks redundant? With every new technological development, it is claimed that banks will become redundant. Yet, in 2017—in the age of internet and information—there are more banks than ever before. The debate over bank disintermediation has stepped up a notch in the past couple of years, however, in light of the strides made in blockchain and its possible use in trade. (Global Trade Review)
U.K. imports and exports will suffer from Brexit isolation. The United Kingdom is a net importer of goods, both from the EU and the rest of the world. While post-Brexit Britain will remain an important export market for the EU-27, its isolation in Europe and loss of preferential access to the bloc’s trading partners could have dramatic consequences. (EurActiv)
Debt sale brings a new dimension to Venezuela’s growing crisis. Venezuela is in the final stages of a total financial, economic and social collapse. The ability of the economy to consistently provide the population with basic goods like food or medicine has disappeared. Venezuela’s finances have been thrown into the fray. (Globe and Mail)
Greece Wins 8.5 Billion Euro Payout as Debt Clarity Deferred. Greece’s creditors agreed to release 8.5 billion euros ($9.5 billion) in new loans for Athens, capping a key chapter of the country’s bailout and ending months of uncertainty over whether it could meet large bond payments due in July. The decision came after euro-area finance ministers sought to offer more clarity on Greece’s future debt path and outline possible measures they could take to ease its burden in the future. (HSN)
Week in Review Editorial Team:
Diana Mota, Associate Editor and David Anderson, Member Relations