“Brexit, what consequences for import-export”, Interview with Jean-François Faure, founder and CEO of AuCoffre
Brexit became effective on 1 January 2021, immediately impacting the world of business and international trade. Between a tense situation regarding the conditions of the United Kingdom’s exit from the European Union and the health crisis in full swing, the whole is not conducive to business either for European countries or for the British. To discuss the immediate consequences of Brexit and the more or less long-term strategic issues, BORDEAUX Business met with Jean-François FAURE. A Bordeaux entrepreneur, he is the founder and CEO of AuCoffre and its subsidiary VeraCash.
To understand your relationship to Brexit, tell us quickly about AuCoffre
I’m the founderAuCoffre, one of Bordeaux’s oldest fintechs. Founded at the end of 2008, AuCoffre is active in the purchase and resale of precious metals such as gold and silver. We keep them for our customers in one of the most secure places in the world.
In addition, AuCoffre has a subsidiary named Veracash. Its aim is to make precious metals usable on a daily basis. It is a neo-bank whose underlying currency are precious metals. To do this, our customers have a mobile app to check their account, as well as a payment card that can be used all over the world from shops that recognize mastercards.
On this second activity, we have European and even international ambitions. What makes Brexit a real issue…
What are the impacts and challenges of Brexit for French companies?
For French companies, we still missed the disaster. There will always be people who will not be satisfied with this agreement because their economic model makes them impacted. But overall, for products that come from the UK or if you send them, fortunately, tariffs do not apply. On the other hand, you have customs formalities,which require a little more time.
On the other hand, if you use the UK as a HUB for products that come from elsewhere, such as Hong Kong, they are now subject to customs duties and formalities. As a result, the situation is complicated because, in an age of globalization,each country does not necessarily produce and can only be a transit point. With Brexit, every company has to do what it takes to change its processes.
Even as an individual, you can feel the effects. So, even without customs duties, we’re going to pay the customs fees. They correspond to the carrier’s processing fee to cover customs declarations. These fees are also valid for businesses.
At present, Brexit is creating at least one big administrative bazaar that has an impact on price and deadlines. This has a direct impact on trade. The proof is with Marks and Spencer, whose stores have run out of stock on many fresh produce from the UK.
As far as VeraCash is concerned, what are the consequences already?
For our business, this is a rather special case. Indeed, we are part of a model on which an agreement would have been required. Except that, in the financial field,the deal has not been found. The problem is the European passport. The one that allows a financial institution, registered in its country, to offer its services in all European countries.
To work, Veracash must issue a payment card. It is a financial instrument issued by financial authorities: the ACPR in France, the FCA in England… Veracash operated through an English partner, registered with the FCA. Until 31 December, we could deliver our services anywhere in Europe.
With Brexit, our partner preferred to wait and see before making decisions. As a result, we were directly impacted because we had no visibility. Except that it is the most important in finance. So we made the decision to changethe payment facility. To avoid the ban on operating our service, we were forced to secure our activities by changing our long gun. From now on, the change is expected to be effective by June. We will work with a reputable French payment institution.
How can THE leaders of the SMEs adapt to the new situation?
In practical terms, business leaders are forced to make trade-offs. That is where it is going to be done essentially at the expense of the United Kingdom.
In France, especially in Bordeaux or Champagne, a lot of wine is exported, for example. This is good because wine does not fit into quotas or customs taxes that will be added. So we have only the administrative procedures that are added. Even if the carriers charge customs fees, on a pallet, the cost remains paltry. So in France, we will continue to export a lot of our products.
We already have a positive trade balance of around 12 billion euros. To this day, I believe that this gap will widen. For good reason, until then, the products that we will buy in the English come from theassembly industry,parts from elsewhere. Except that these parts are subject to the tariff, which affects the selling price. So, in a context where France wants to re-industrialize,we risk either choosing to buy the products elsewhere already done, or to assemble them ourselves in France. Given the situation, the British will lose some markets.
Speaking with contacts of the APM, we realize that the French have not forgotten agility. So if the UK disappears from the map, we will find solutions to do without it. The reverse, on the other hand, seems less obvious to me.
More generally, what are the consequences of Brexit on European markets?
For the UK and the rest of Europe, the problem is the same for everyone: Italy, Spain, Germany… Except that as it is not valid only for France, it has a multiplier effect. If France can do without the United Kingdom, this is also true for other countries.
Therefore, if the UK does not cross the line, in particular to enhance its millennia-old expertise in finance, it is a country that will find itself very isolated. Or, in any case, in a difficulty of having to treat Europeans as difficult as non-EU countries.
They will probably bet on the commonwealth but for me it is a fantasy. Trade between these different countries is still relatively limited.
Brexit has a very strong impact on the British. It is a pity because in the short and medium term, those who voted for Brexit will be the most penalised. Workers, fishermen exporting seafood…
In a country completely built on an import-export model, the new borders will inevitably create a shortage.
Moreover, Brexit for the English came at the worst possible time. They find themselves with a scissor effect between the foreseeable consequences of Brexit and the economic consequences of the health crisis.
Why could the UK become the Singapore of Europe?
For me, it’s their only lifeline. It is a country that is no longer in the EU, just like Switzerland or even Andorra. Also, European rules no longer apply to them and the financial passport no longer exists. In terms of modeling banking and financial services, they can now do whatever they want. And for me, they have no choice.
The UK is a thousand years of know-how in finance. By reviewing legislation and taxation, it can become a tax-adopted country for complex stock market products.
London could be the capital of shadow banking,finance that is not the classic banking. All fintech, all financial services a little ancillary are likely to develop in the UK because they will be able to propose a simplified and tax-legged legal framework.
The United Kingdom could plan to facilitate business start-ups on its territory. Including for non-English nationals, who may very well not pay tax on it, as do other tax havens. A “Singapore on Thames” as some say.
They don’t have much of a choice. When you’re back to the wall, you need to find solutions to keep living. However, the transition period is going to be very difficult. I do not think they will go too far on facilitation, at the risk of being blacklisted. But we could see a pattern that may be borderline.
What protection of consumers’ rights for e-commerce purchases across the Channel?
We will probably go through different stages and the European authorities will be vigilant. All products imported and manufactured in the UK until 31 December were up to European standards. So these have no reason to change and will be able to continue to be marketed in Europe.
On the other hand, there is going to be a lot of work on the part of the English to maintain equivalent CE quality standards for new products. It makes sense, since an import into the European Union involves controls. The products must therefore be up to standard.
If mischief under European regulations becomes a problem, the agreement may be called into question. Especially if the UK doesn’t play the game. I am thinking in particular of cheaper products because of the loss of the value of the pound sterling, wages that will fall, working time increasing to more than 48 hours maximum of weekly work… And lower quality products.
We could end up with a low-cost country 40 km from the European borders. Perhaps, in a few years’ time, the UK could compete with some low-cost Eastern countries. Except that these are subject to EC standards.
However, if product quality declines, the UK may have problems continuing to export. Businesses could be subject to quotas and taxes.
What will change for British nationals following Brexit?
A French company may be affected by the products but also by the nationals. I worked with a British national. Today, he has until October to apply to the prefecture for a residence permit. Generally speaking, if an English national has been in France for less than 5 years, his residence permit grants him an additional 5 years in France. If he has been there for more than 5 years, he has the right to stay another 10 years.
Concretely, to stay in France after this deadline, it will be necessary to be naturalized. Otherwise, they will be considered tourism and will only have a three-month authorization.
On the other hand, a Frenchman in the UK, after a period of 6 months, must find a solution. He needs to earn points with, for example, an employment contract, knowing how to speak English… In practical terms, he has to prove that he deserves to stay.