BusinessSabadell monitors the "escalation" of tension between the United Kingdom and the EU due to the Northern Ireland Protocol

Sabadell monitors the “escalation” of tension between the United Kingdom and the EU due to the Northern Ireland Protocol

Archive – Banco Sabadell corporate headquarters in Sant Cugat del Vallès (Barcelona) – BANK SABADELL – Archive

Banco Sabadell is monitoring the “escalation” of tension between the United Kingdom and the European Union that has occurred in recent months in the face of proposals by the Government of Boris Johnson to introduce changes to the Northern Ireland Protocol and the protests by the EU against this one-sided gesture.

This is reflected in its latest semi-annual report, which gives an account of its results obtained between January and June 2022, and in which it also details the risks it faces, both macroeconomic and those inherent to its banking activity. Regarding Brexit, Sabadell details that one of its focuses of attention is the difficulties that some sectors have had to continue their commercial relations between the United Kingdom and the EU, as well as the process of adaptation of companies to the new commercial arrangements.

It is within this commercial area that Sabadell includes its monitoring of the implementation of the Northern Ireland Protocol in light of the tensions that have arisen between the United Kingdom and the EU “despite the flexibility that has been introduced in the controls of goods crossing between Great Britain and Northern Ireland”.

These tensions have “escalated” in the last six months, denoting the “lack of a more stable and lasting solution” on the border between Northern Ireland and Ireland, according to the bank.

This Protocol is one of the key pillars of the divorce agreement between the United Kingdom and the European Union. Created to avoid a ‘hard border’ between Ireland and Northern Ireland, it requires the introduction of controls on the traffic of goods with the island of Great Britain, since otherwise the entire United Kingdom would continue to be part of the single market.

Its entry into force occurred on January 1, 2021 and was conceived as a “stable and lasting” solution, according to the European Commission. However, in June, the United Kingdom Government – a few weeks before Johnson announced his resignation as Prime Minister – began the process to modify the Protocol, despite warnings from the EU, which has been especially critical of any unilateral gesture on the part of London.

In fact, at the end of July, the European Commission announced the opening of four new disciplinary proceedings against the United Kingdom for failing to comply with the provisions of the Northern Ireland Protocol.

Continuing within the commercial field, Sabadell recognizes the difficulty in discerning between what are the impacts of Brexit and the disruptions in the supply chains that have occurred in the last year, first of all as a consequence of the restrictions due to the Covid-19 pandemic. 19 and, later, by the Russian invasion of Ukraine.

Regarding financial services, the bank chaired by Josep Oliu indicates that the United Kingdom continues with the publication of consultations on proposals regarding its regulation, “using the new regulatory freedoms that Brexit offers them.”

In this sense, it indicates that the Parliamentary Committee of the Treasury has created a subcommittee to expedite the review of said legislative proposals in order to use these “new freedoms” to reduce the bureaucratic burden and speed up the legislative processes.

Sabadell also points out that the “drip” of transfers of financial services activity from the United Kingdom to the EU and the US continues.

Finally, it states that there have been no significant variations in its exposure to Brexit compared to that existing as of December 31, 2021.

Until June, Sabadell recorded a net profit of 54 million euros from its banking business in the United Kingdom, where it has the subsidiary TSB, which is 39% more than in the first half of 2021. The bank explains that this improvement is based , mainly, in the growth of the basic margin and the recording of lower costs.

The interest margin was 551 million euros, 14.3% more than in 2021, due to the “strong” growth in mortgage volumes and the appreciation of the pound.

Net fees grew by 14.8% year-on-year, mainly due to higher service fees, notably those charged for cards.

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