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How Brexit Could Herald A New Era Of India-UK Ties

There are fresh opportunities for India, but blockers too.

06/04/2017 4:32 PM IST | Updated 11/04/2017 8:34 AM IST
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The British Prime Minister Theresa May took the biggest peacetime decision by any modern postwar government in the world as she invoked Article 50 of the Lisbon Treaty on 29 March 2017 to formally initiate the UK's exit proceedings from the European Union. This has been done about nine months after the result of the referendum in June 2016, where by 2% the majority of the British population voted for the UK to leave the European Union.

Over the run-up to this very moment, the Prime Minster had been clear of her priorities—to have immigration control over the access to the single market, termed as Hard Brexit. This is against the wishes of the financial services industry and business, which want access to the single market and retain the free movement of European citizen's rights to enable them to continue operations in Britain. Apart from providing a free trade market base, the EU also offers a source of skilled and unskilled labour which vitally fills the shortfall in the UK and keeps its economic engines running. Already, the number of EU citizens looking for work in Britain has collapsed by nearly 18% since the beginning of 2017—an indication that Britain is up for a shortfall in the skilled business market.

Britain will now once again seek to establish a cross-country partnership with its Commonwealth ally for filling the market void.

Whilst this does sound gloomy for Europe, such a scenario also provides an interesting opportunity for India. As part of one of the most valued and skilled workforces in the world, Indians have been undertaking vital roles in professions such as medicine, science, research, information technology, law and academia. Britain will now once again seek to establish a cross-country partnership with its Commonwealth ally for filling the market void. Prime Minister May, however, is expected to put in place a very high quality threshold for those who want to work in the United Kingdom.

Back in the days of campaigning, proponents of Brexit had already hinted at enabling a point-based immigration system which seeks to prioritise Commonwealth citizens, especially countries such as India which had been receiving setback over the last decade with regards to immigration, especially vis-à-vis the highly debated post-study work permits. A point-based system will stand to change the current system, and bring about a Canadian or an Australian-style immigration system.

Secondly, with Brexit likely to alter the UK's trade with the EU, Prime Minister Theresa May and the UK Foreign & Commonwealth Office have been seeking to expand on trading partners beyond the European continent in preparation of a post Brexit scenario. Having already embarked on a charm offensive with countries including India, Australia and the Middle East, Britain is keen to utilise the historical relationship card to establish bilateral trading partnerships. For Britain, India is probably the single-most important country, with its market of over a billion people, and churning out the fastest growth rate in the world. The UK would like to encourage an increase in India Inc's existing investments through companies such as the Tata Group, Bharati Airtel and HCL among many others—which is something that would also be in India's interests. Already, Indian companies invest more in the UK than they do in the rest of the EU combined, and employ over 110,000 people. India and the UK certainly have an interesting period ahead.

Under this continued period of uncertainty, Indian businesses and organisations operating out of the UK will have to stall their plans until more clarity emerges.

However, from the other side of Europe, Donald Tusk, the president of the European Council had on 31 March, in response to Theresa May triggering Article 50, affirmed the EU27's stance over the process of Brexit. While the UK's Prime Minister Theresa May had outlined parallel proposals and affirmations to retain its relationship with the European Union, especially with regards to maintaining the status quo on free trade for the benefit of both parties, Donald Tusk has made it clear that any future relationship between the UK and EU will be forged only after sufficient progress has been made with the withdrawal phases that the EU will be defining. He has also closed the door for the UK to attempt reaching out to individual member states by stating that the EU will act as one and will not allow for parallel negotiations with individual countries. Markets and businesses were especially hoping that parallel talks would cover the different aspects of the UK-EU exit processes, but following the comments by Donald Tusk, it's clear that the existing period of uncertainty will continue to hover over businesses on the future of the UK's trading relationship with the EU.

While Britain has been clear in its notice to the EU that it wants access to the single market in efforts to maintain the status quo, the EU is tasked with not only balancing its financial sheets to protect the union, but it would also be keen to send a message to other EU countries (especially with EU sceptics growing in popularity across mainland Europe) that leaving the EU can never be the superior option.

Under this continued period of uncertainty, Indian businesses and organisations operating out of the UK will also have to stall their plans until more clarity emerges. The UK has been a prime destination for Indian companies to base their overseas operations, not only because of the langue familiarity and for acting as the bridge between Asia and the Americas, but because it operates as the gateway to Europe with the free market movement. Now that everything will change, without a clear directional indication, the two years of negotiations might be a period of limbo, where Indian businesses will be reluctant to expand their operations in the UK as they would not know how their markets would regroup.

We now need the EU and the UK to settle aside their political and ideological differences quickly and move towards achieving clear resolution as per the target timeline set. This is in the best interests of EU and the UK both, and the countless citizens and business that depend on them.

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