The EU and the UK are fighting over Brexit. As Liechtenstein is not an EU member, it could benefit from a hard Brexit. On the other hand, Liechtenstein is also a member of the EEA and depends on the EU’s economic and political situation.

The Brexit negotiations between the UK and the European Union have not come to an end. Until the 31st, they have to find an agreement, or a “hard Brexit” would be the only choice left, meaning the UK and the EU would drift apart without a trade agreement in place.

Liechtenstein is not an EU member but a member of the European Economic Area (EEA). As such, the country is not a party in the Brexit negotiations and can make its own agreements with the UK. Nevertheless, the results of the negotiations between the UK and the EU will also affect the entire EEA, and thus also Liechtenstein.

Liechtenstein negotiates separate agreements with the UK

According to Liechtenstein’s Brexit coordinator, Esther Schindler, the Liechtenstein government has put agreements with the UK in place that will govern future relations. One of these agreements is an addition to the trade agreement between Liechtenstein, Switzerland, and the UK. It ensures that there will be tariff-free trade of industrial and agricultural products. “We could already create clarity in terms of bilateral trade early on,” says Schindler. “That puts us, together with Switzerland, into a privileged position.”

Liechtenstein also negotiates together with Norway and Iceland about a free trade agreement that focuses on the service sector and the financial sector. The latter is particularly crucial for Liechtenstein. But Peter Matt, who negotiates the agreement, also says, “We will not be able to finalize the negotiations in time for the 1st of January 2021.”

Brexit could give Liechtenstein an advantage over the EU

These negotiations are important for Liechtenstein-based businesses, particularly those that focus on the financial sector and those with a digital business model. While cross-border business with the UK has been relatively easy so far, that might change in the future.

“The [Brexit] process was very intransparent over the last four to five years,” says Esther Schindler. “That makes it practically impossible to make a reliable prediction. But of course, I hope the EU and the UK can come to an agreement.”

That said, both Liechtenstein and the UK are interested in keeping their bilateral relationship in good standing. It could even make it easier for businesses outside the EU to trade with the UK, as UK businesses will seek new partners. That, together with the close ties between financial industry businesses in both countries, could mean more cooperation, also in digital finance projects. Nevertheless, if Brexit negotiations fail, it will have a negative impact on the UK, and it would also negatively affect the European Union. As a small state in the heart of Europe, that could also have negative economic consequences for Liechtenstein.

Image: ©Shutterstock