Brexit: Bridging the Gap
On Thursday, June 23, 2016, the British voted for the United Kingdom to leave the European Union. This is unchartered territory. The world reacted with immediate shock and affected markets. It will take time for the real effects of the British exit (“Brexit”) from the European Union to be felt, and plans will be carefully developed. On Thursday, September 15, 2016 the BABC of Greater Philadelphia collaborated with Morgan, Lewis & Bockius LLP, which hosted the region’s first seminar to educate and guide companies through these momentous times. Leading experts discussed likely business adjustments, as well as the new opportunities Brexit may provide. Presenters focused on corporate reactions; contingency plans; the rapidly changing global landscape; and talent management reorganization. Michael Pedrick, Partner Morgan Lewis & Bockius LLP, Philadelphia Office and Vice President, BABC welcomed everyone to the Firm and provided opening remarks. Michael spoke briefly about the BABC and introduced the speakers and the moderator.
Jonathan Doh, Herbert G. Rammrath Endowed Chair in International Business, Faculty Director, Center for Global Leadership, Professor of Management and Operations, and Editor-in-Chief, Journal of World Business, from Villanova University School of Business seamlessly moderated the panel. Jonathan provided a brief record of the UK’s history with the EU, an overview of the issues that would be covered during the seminar, and posed probing questions for each speaker to address. Topics included the British government position; steps that are being taken; strategic direction from a financial point of view; broad legal implications; and employment and data protection/privacy laws.
Ross Allen, Director Trade & Investment, USA and Deputy Consul General, New York Department for International Trade discussed the British government position and current facts as of September 15, 2016. To kick things off, Ross was asked about timing. When will the UK leave the EU? Ross explained the new Prime Minister, Theresa May will not enact Article 50 this year. Once Article 50 is triggered the UK will have two years to complete the exit. He discussed the Transatlantic Trade & Investment Partnership (TTIP) which is a concurrent, ongoing trade pact being negotiated. The UK supports TTIP and all trade with other countries. The UK is traditionally a strong supporter of trade and that will continue and grow. Ross confirmed the overall mood regarding foreign investment in the UK is as strong as it was pre-Brexit vote. The language, culture, time zone, talent, creativity, and stable legal environment position the UK as an excellent place to do business. There is an overall sense of confidence from investors, corporate tax rates are low and the tax position stable, and the UK is an innovative place to conduct business. When asked to forecast what things will look like five years from now, Ross explained the government will still be very focused on maintaining the UK as an attractive location for foreign direct investment. With respect to the US, the UK will look to agree a comprehensive free trade agreement to go alongside the deep defense, security and intelligence sharing between the two countries.
John Stadtler, PricewaterhouseCoopers Leader of the United States Financial Services Practice focused on the financial services industry – strategic direction, response to regulators, business continuity plans, and the impact on taxes, tariffs, mergers & acquisitions, treasury, and the labor force, (“passporting” between UK and the EU). John, recently returned from the UK, noted the overall sentiment is one of both uncertainty and opportunity. He noted the competitive landscape may be swinging in the UK’s favor. There is a gravitational shift from the City of London to other parts of the country. London and New York City continue to remain the focus of the financial services industry market but technology is playing a big role in expanding the geography. John explained many insurance companies, banks and asset managers have UK domiciled headquarters and use the UK as the entry point to the rest of Europe. All companies, big and small should look at their current footprint and evaluate what contingency plans need to be put into place and what changes need to be anticipated and made. Talent is the area most companies are concerned about at all levels of the workforce. John believes the post Brexit merger & acquisition environment might be easier and more straightforward.
Matthew Howse, Partner, Morgan, Lewis & Bockius LLP covered the broad legal implications of Brexit, the UK’s influence and involvement in EU law; international affairs; employment law; cross border employment; restructuring; implications of Brexit; and immigration consequences. He also focused on data privacy and protection. Matt mentioned in some cases Brexit is being used as an excuse to make people redundant. He has confidence in London as a financial center. The region is excited at the prospect of eliminating some of the current EU regulations, such as the banker bonus cap. The current mood seems positive at the moment. Big companies will be less impacted than smaller entities. Immigration and innovation are at the epicenter of much of the Brexit debate. London has always been a mecca for talent at all levels from around the world, and is the leading “fintech” global center. The industry is growing exponentially in the UK. Perhaps the biggest concern for governments and companies is data protection and privacy. The UK is viewed as the “voice of reason” within the EU. The Safe Harbor Agreement/privacy shield is the brand new European Law, data protection regulation in the EU and will apply to the UK until Brexit is completed. At that time the UK will need to adopt its own data protection laws. Brexit will enable the UK to become a greater trading partner with other parts of the world.
After the moderator led each panelist through a series of questions regarding their areas of expertise, we heard from attendees. Executives from a myriad of business sectors, including but not limited to: insurance, banking, food service, relocation providers, book publishing, manufacturing, financial service providers, etc. asked questions. One thing is clear, the current state is uncertain but there is less cause for alarm than might have seemed the case immediately after the vote. Businesses should proceed with caution and optimism, evaluate current business plans and strategize for the future. There are still many reasons for transatlantic trade and investment to flourish. Technology, innovation and immigration are major factors in the post-Brexit world. Things will continue to evolve and change during the coming months and years. This is an area to be closely watched and observed as developments are put into place.
Special thanks to our sponsors: The Department for International Trade, Morgan, Lewis & Bockius LLP, and PricewaterhouseCoopers LLP.
To view pictures from the event click here.
BABC Navigating Brexit
Morgan Lewis Brexit Publication
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