Indian businesses in Britain welcome EU-UK trade and cooperation agreement

Domestic banks operating in Britain are among 5,500 with passport authorisations into Europe

A landmark Christmas Eve’s Trade and Cooperation Agreement (TCA) sealed between the 27-member states European Union and the United Kingdom (UK), which leaves the Union on Thursday, was cautiously welcomed by a cross-section of Indian businesses based in Britain.

Relief came from the largest Indian-owned entity Jaguar Land Rover, which is a part of the Tata conglomerate. Joan Chesney, spokesperson for the company, said: “Jaguar Land Rover (JLR) welcomes the news about the deal on the future UK-EU trading relationship. This provides businesses with much-needed certainty.”

According to the UK’s Guardian newspaper, carmakers like JLR will be exempt from paying tariffs for up to 40 per cent of foreign parts incorporated in their vehicles, which are then re-exported to the EU. This is an undoubted solace, but not at par with remaining in the single market or unfettered free trade. 

In anticipation of Britain quitting European common market after Brexit, JLR took out an insurance of opening a production plant in Slovakia, an EU member country, in 2018. It also has contract manufacturing in Austria, which is a part of the EU as well, and adjoins Slovakia. 

The Hinduja Group’s Ashok Leyland manufactures commuter buses, including full electric coaches, in the UK under the Optare brand. 

One of its export markets is Europe. Gopi Hinduja, co-chairman of the chain, indicated the 40 per cent ceiling is not an issue. He said, “Our operating style is think global, but act local.” In other words, most of Optare’s components are acquired from within Britain.  

Clause 2 in the introduction to the treaty released by the UK government said, “There will be no tariffs or quotas on the movement of goods we produce between the UK and the EU”. Separately, Clause 3 in the same document said, “The agreement also includes provisions to support trade in services (including financial services and legal services).” 

The House of Commons Library placed on record last month, “All passporting rights (enjoyed by banks and financial services) will be lost when the UK leaves the European single market on 31 December 2020.” It added: “These firms need to either stop operating in the countries they passport into, or gain separate authorisation there.”

Indian banks operating in Britain are among 5,500 with passport authorisations into Europe. They include the public sector State Bank of India, Bank of Baroda and Punjab National Bank and privately run ICICI Bank.

As of now, the passporting system enables firms authorised in any EU or European Economic Area (EEA) state to trade freely in any other with minimal additional authorisation. These passports are the foundation of the EU single market for financial services.

Passporting between the UK and EEA will remain unaffected. But between the UK and the EU, in the opinion of a law firm Burford, access in general would be “conditional on a determination by the European Commission that the UK has an equivalent financial regulator”. It will also be based on reciprocity. However, the aforementioned Clause 3 undertook to “support the mobility of the UK professionals who will continue to do business across the EU”. A source at ICICI Bank disclosed: “We are still not clear on the passport matter. But all banks have prepared back-ups for this.”  

Crossbench peer Lord Karan Bilimoria, the current president of the Confederation of British Industries, said, "While it is too late to avoid some disruption, business and government will put their shoulders to the wheel to minimise it. For both sides, urgent steps can now be taken to keep trade moving and services flowing while firms adjust."

Regarding his own business — Cobra Beer — he said: “The duty and tariff (free) deal is of huge benefit to us and we are looking forward to continuing to build our brands across Europe.”

Ruling Conservative party peer Lord Rami Ranger emphasised: “Britain can now negotiate trade deals with any country, especially with the Commonwealth members.” The UK has already signed a free trade agreement with Japan and is negotiating an enhanced trade partnership with India. He was also “relieved with the deal” as far as his export-import outfit Sun Mark is concerned.