The UK is one of Sweden’s largest trade partners and if Britain were to leave the EU without a trade deal, Sweden would be badly hit. In the absence of a deal, the UK would be required to follow World Trade Organisation rules on tariffs, making future trade more expensive.
On Thursday the Swedish government therefore ordered the National Board of Trade (Kommerskollegium) to prepare Sweden’s priorities ahead of Brexit trade talks.
Both Brussels and London have been talking of a “no deal” Brexit recently but Social Democratic EU Affairs and Trade Minister Ann Linde says Sweden has not given up hope of an agreement.
There are no winners in the UK’s exit from the EU, according to Finance Minister Magdalena Andersson who wants British guarantees before negotiations can begin on a trade deal.
She also warns for emotional turmoil during the negotiations. “There will need to be adults in the room,” she says pointing out that both jobs and growth are at risk. The UK wants to negotiate a free trade deal alongside the exit negotiations but Magdalena Andersson is sceptical about how realistic this is.
“It is important that the UK meets its financial obligations towards the rest of the EU,” says Andersson, as the UK has obligations of between 50 and 60 billion euro to the EU (between 475 and 570 billion kronor).
The National Board of Trade in Sweden (Kommerskollegium) has calculated that Swedish companies are going to have to pay 2.1 billion kronor in duties when the Brits leave the EU if no new trade deal is in place.
A new report from Business Sweden states that action is needed to attract foreign investment to Sweden after Brexit. The report writes that Sweden is too small and too peripheral a country to automatically win foreign investment. Ann Linde, minister for EU and trade, says, “We need to work harder than other countries need to.”
The main proposal is to increase earmarked investment to sectors in which Sweden has a competitive edge, including the vehicle industry, IT and telecoms and the pharmaceutical industry.
Ann Linde says other countries have already started working aggressively to persuade companies to move there. “In order to be part of the game we need to know the areas in which we have a chance. The report specifies this so now we do not need to spend energy investing in other areas,” she says.
A number of EU agencies will have to relocate from the UK in the aftermath of Brexit, write ministers Mikael Damberg, Helene Hellmark Knutsson, Gabriel Wikström and Ann Linde in a DI debate article this morning.
Announcing that the government will decide today to go ahead with a campaign to relocate the European Medicines Agency (EMA) to the Stockholm-Uppsala region, the four cite a number of reasons as to why Sweden should host the EMA, including a long tradition of drugs development and production.
Finance Minister Magdalena Andersson believes the EU should seek a bilateral free trade agreement with the UK, similar to the one it has with Switzerland. This would provide an opportunity to find the right balance between Britain’s rights and obligations.
The minister believes too much importance has been given to the timeframe of Brexit, saying it is important the negotiations are successful. At the same time she sees no point in dragging out talks, since this would harm economic activity, particularly in the UK.
The government wants to utilise the British EU exit to attract companies to Sweden. Finance Minister Magdalena Andersson says, “This will be negative for economies in Europe and for Sweden. However there could be potential for a number of companies that otherwise would have made investments or have their head offices in the UK which now choose to move to Stockholm.”
On Monday Magdalena Andersson and Enterprise Minister Mikael Damberg met to discuss how Sweden could attract companies from London. Mikael Damberg has already been in touch with a number of Swedish companies and the government is considering increasing its presence in London to attract foreign investors to Sweden.
After meeting with around 50 representatives of Swedish enterprises, Magdalena Andersson said, “It has been important for us to listen to business about what they want to contribute to this process”.
A weekend has passed since the UK voted to leave the EU and the unexpected result has begun sinking in amongst investors. The USA stock exchanges fell 3-4%, London by 3.2% and around Europe the markets fell between 6 and 13%.
Sweden’s public holiday on Friday meant the Stockholm index avoided the immediate chaos on the stock market. However trade is expected to be intense today and the initial drop could be around 4%.
Nasdaq decided to call a state of emergency on the derivatives market before opening on Monday, a measure last taken after the Lehman crash in 2008, to facilitate trade continuing as usual during the current circumstances. Joakim Bornold, economist from Nordnet, says, “This sends a very strong signal from Nasdaq and shows concern about how the market will look on Monday.”
According to a fresh report from Swedbank, if Britain decides to leave the EU it will likely lead to short term volatility on the world’s financial markets, which would strengthen the dollar and euro against the krona.
In the longer term Swedbank writes, “A Brexit will probably weaken the EU politically and economically. In turn this will affect Sweden negatively.” In particular the service sector, of which the UK is the third largest export market, will be sensitive. In 2014-2015 alone Swedish service exports increased by 44% to the country. Negotiating a new trade deal with the EU is also likely to take a long time, in the case of an exit.
Swedbank also considers there to be a risk that Sweden’s political influence in Brussels would fall. Sweden often votes with the UK and the bank deems that more power will be transferred to the eurozone in the case of a Brexit.
Visiting Stockholm on Monday, Citigroup CEO Michael Corbat told business daily Dagens Industri he believes Greece will stay in the euro zone; a Greek exit would undermine confidence in the single currency.
And, commenting Britain’s planned EU referendum, Mr Corbat says he does not believe in an exit, pointing out that Britain is an important trading partner for the rest of Europe.