Jersey’s position with the EU following the Brexit decision

Volaw’s Managing Director, Robert Christensen, reflects on how the UK’s Brexit decision might affect Jersey.

Harold Wilson, the former UK Prime Minister, is famously quoted as saying “A week is a long time in politics”. Well, the past few weeks following the Brexit decision of the UK electorate will have seemed like an eternity to some in Britain. The unexpected outcome has wrought profound changes in British politics: Prime Minister Cameron resigned; Theresa May appointed as his successor, rather than the expected Vote Leave supporters; and the Labour party left in turmoil.

But how will all of this affect the people and businesses of Jersey, who of course played no part in the referendum but may be impacted by the outcome? It is too early to be certain, but the UK government has promised to consult Jersey’s government and the other Crown Dependencies about how to represent them in the UK’s negotiations to exit the EU. It is probably worth remembering what Jersey’s current relationship is with the EU, summarised as follows on the website of the Channel Islands office in Brussels:

“The formal relationship between the Channel Islands and the EU is enshrined in Protocol 3 of the UK’s 1972 Accession Treaty, and confirmed in what is now Article 355 (5) (c) of the EU Treaties. Under Protocol 3, the Islands are part of the Customs Union and are essentially within the Single Market for the purposes of trade in goods, but are third countries (ie outside the EU) in all other respects. However the Channel Islands have a close relationship with the EU in many different fields, not simply those covered by the formal relationship under Protocol 3, as this note explains. Both Jersey and Guernsey voluntarily implement appropriate EU legislation or apply the international standards on which they are based.”

Much of the discussion in the UK around the referendum centred on immigration, seeking to “bring back control over the UK’s borders”. Jersey and the other Crown Dependencies are within the Common Travel Area with the UK and it is unlikely that this will change through the course of the Brexit negotiations. In the event that the UK was to introduce some restrictions on the rights of EU citizens to come to the UK to live and work, it is probable that similar restrictions will have to be introduced in Jersey, for otherwise the CTA arrangements will break down. This might have quite an impact upon businesses in Jersey that depend upon EU nationals, especially in the hospitality, agricultural and construction sectors.

Jersey’s finance sector is unlikely to be directly impacted by the Brexit vote, as Protocol 3 does not cover the provision of financial services to EU member states. There are a number of bilateral agreements in place between Jersey and EU member states, governing the provision of financial services, but there is no obvious reason why these would be changed by the outcome of the Brexit negotiations. It seems likely, however, that the City of London’s financial services sector will be adversely impacted because London will no longer qualify for the EU’s “passporting” arrangements for financial services and this may have a consequential impact upon financial services conducted from Jersey.

It seems likely that Brexit will deliver a mixed impact to the agricultural and fisheries sectors. They may benefit from Jersey remaining in customs union with the UK, so that Jersey produce may in the UK have a competitive advantage over EU produce; but exports to EU member states may face tariff and other barriers.

During the coming months and years, Jersey’s government will be no doubt seek to preserve to the fullest extent possible the arrangements that are currently in place regarding:  the free movement of goods with the UK and EU member states;  the Common Travel Area that allows free movement of people between Jersey and all other parts of the British Isles and Republic of Ireland;  the Island’s self-government status, including fiscal autonomy;  Jersey’s “third country” equivalence rules and treatment, which allows access to EU markets for financial services;  Similar “third country” status for trade in other services.

There is a long way to go in these negotiations with many twists and unexpected turns, but it is important that Jersey’s businesses keep a close watch on developments in these discussions and provide guidance to the Island’s government on what they need to ensure that the Island’s economy does not suffer as a result of Brexit.