Corporate Advisory Services & Brexit
How will Brexit affect the business transactions we work on?
Working with stakeholders to deliver transaction, financing and restructuring services, we encounter a huge range of businesses. Each is unique and our approach is tailored, but the economic impact of Brexit and the legal consequences of this highly political issue have similar high level effects for many.
Economically we know that the £ has weakened by about 15%. Politically we know that the government intends to trigger Article 50 in early 2017 and to introduce a “Great Repeal Bill” bringing all EU law at the time of Brexit into UK law. But will Brexit be absolute, with the UK no longer being a member of the EU, going its own way on freedom of movement and free trade? Or will it be Brexit-lite, preserving significant features of the relationship concerning capital flows and trading in goods and services, whilst limiting the movement of people across UK-EU borders? Or will we see the many potential influences on policy combine to change the realpolitik such that there is a non-Brexit? Some outcomes are more likely than others, but there is no certainty.
That the uncertainty currently being felt will continue is a foregone conclusion, but its impact is likely to diminish over time, both as plans become clearer and as uncertainty itself becomes the new normal. We can expect that some businesses will cut back on spending, investment and/or corporate transactions. Equally, businesses may look to seize opportunities. Our advice is to prepare for your next steps, whether you are defending against external influences or seizing opportunities. We can help you to plan ahead, run some “what if” scenarios, look at the financial impacts in the context of your appetite for risk, make your strategic decisions and be prepared to react to the unexpected!
So far we have seen no evidence of corporate transaction activity diminishing overall since the referendum. Business life continues, albeit with exporters gaining and importers losing from exchange rate movements, but the uncertainty needs to be managed. Even inward investment is showing no marked overall trend: UK assets are cheap for foreign buyers with short term horizons, but others view the uncertainty of Brexit as a risk they would prefer to avoid. Restructuring activity is similarly stable overall. All this means that our transaction support and restructuring services continue to be needed.
European cross-border insolvency will change on Brexit, although the European Insolvency Regulation, which governs how insolvency proceedings are recognised and have effect across the EU, continues to apply in the UK for now. We will of course continue to assist businesses with cross-border interests with the intricacies of this European legislation.
What will happen to UK-EU cross-border insolvency proceedings after Brexit is much less clear. An effective cross-border insolvency regime is key to the encouragement of international trade and investment. European recognition of the UK’s post-Brexit insolvency regime, particularly of the judgments made under it, will be a critical consideration as the new regime is put in place. If the UK sought unilaterally to implement European cross-border insolvency legislation as part of UK domestic law after Brexit, the UK would voluntarily recognise other member states under the conflicts of law and jurisdiction and the recognition and enforcement of judgments provisions of the EIR and related legislation, but the rest of the EU would not recognise the UK in those respects. This would be the position on the enactment of the Great Repeal Bill.
Any business that might require cross-border restructuring (European or otherwise) as Brexit approaches should ensure that it plans and takes advice early to avoid being caught out by uncertainty in what is likely to be a fast-moving legal landscape!
Date: 28th November, 2016
Articles from this Author
20th July, 2017
Recast European Insolvency Regulation
26th June, 2017
The Recast European Insolvency Regulation (the “Recast EIR”)
28th November, 2016
Corporate Advisory Services & Brexit
13th July, 2016
While every accelerated M&A is different, finding the right adviser is always essential
Contact a Partner
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole