Brexit in focus: what could Britain leaving the EU mean for your professional services business?


Brexit in focus: what could Britain leaving the EU mean for your professional services business?

Professional Practices Alliance Panel discussion, London, 15 April 2016



David Morley, Senior Partner, Allen & Overy

Alan Higgins, Chief Investment Officer, Coutts & Co

Sarah Long, Counsel, Euclid Law

Ceris Gardner, Partner, Maurice Turnor Gardner


Chair: Mark Douglas, Partner, Hierons


The debate about whether Britain should exit from the EU has, so far, generated more heat than light. Persuasive points are being made on both sides. But what we in the legal profession - and more broadly in professional services - need is a clear picture of how a Brexit might affect our businesses and our clients.

The PPA Brexit in focus panel discussion for the Professional Practices Alliance, chaired by Mark Douglas of Hierons LLP, took the audience through some of the areas that might be affected if Britain were to leave the EU.

There is a lot of uncertainty around the post-EU regime that the UK would adopt. What was clear from our discussion is that a vote to leave could bring big changes for the professional services sector. On a show of hands at the end of the discussion, 75 per cent of attendees indicated that they believe a Brexit would negatively affect their business. No-one put their hand up to say there was an upside.

The discussion was held under the Chatham House Rule, so comments have not been attributed to individuals.

“This is the biggest de-merger in history”

If the UK leaves the EU, no-one knows what the nature of our relationship with the EU would be. With a £20 billion trade surplus in services with the EU, the professional services sector would undoubtedly be affected and may be in a weaker bargaining position than the manufacturing sector.

It was argued that we should not underestimate the emotional response this would trigger among other EU countries, leaving no incentive for them to help us exit smoothly. It was felt by many whose business is to advise their own clients on transactions that this would make it more difficult for the UK to obtain concessions in a negotiation.

Brexit already looms large

It was clear to our speakers that with 10 weeks to go before the referendum, the risk of Brexit is already affecting business. The panel noted that transactions had started to slow down before last Christmas. And while other factors are also at play, Brexit is growing in importance in people's minds. Lots of clients are adopting a ‘wait and see’ attitude.

By contrast, in some areas, the anxiety is creating a surge in activity. Our speakers described how EU and EEA nationals who have been living in the UK for five years or more are scrambling to secure their status by applying for British nationality or permanent residency. There is a backlog of cases.

Talent could become even scarcer

The global war for talent has been well documented. In the past, professional services firms have responded by finding the expertise they needed from the 28 countries in the EU. That, our panel argued, could be about to change.

At the moment, the UK benefits from a straightforward, visa-free process. It was unclear as to what would replace the current EU regime. The Swiss option? The Norwegian? The panel agreed it wasn't clear. But the fear was that the system used for non-EU or EEA citizens would be applied to all EU employees. In this situation, in order to be able to recruit from the EU, firms would have to become a sponsoring employer and issue their own certificates of sponsorship (work permits).

More importantly, firms would have to prove they genuinely needed that person, for that particular role. This would create an administrative burden and associated costs.

“Immigration is the hot potato of the Brexit debate in so many ways. Those firms who do have an international workforce could be severely affected.”

“We have already seen the number of applicants from other EU countries drop: they obviously worry that they could suddenly lose their right to work here if we leave the EU”.

The grandfather of all solutions?

In reality, it was felt unlikely firms would suddenly need visas for all EU employees. Existing rights may well be grandfathered. But for how long is not known, and the view was that it is unlikely to be indefinite.

It was considered that it was also likely that any restrictions which the UK imposes on EU citizens after Brexit would be reciprocated. This would make it as hard for UK nationals to work in the EU as it would be to recruit from there.

And if Brexit raises more questions than it answers in regard to immigration, then the same is definitely true for regulation.

Shaking firm foundations

The mutual recognition of professional qualifications in Europe - mandated by the EU - has defined the business model of international firms. Many of us take for granted the freedom to move people between different jurisdictions. For those firms with an international workforce, it was felt that Brexit could challenge the very fundamentals of their business.

The speakers were concerned that if the UK were to leave, and legal services regulators decline to recognise other EH qualifications, it might be difficult for firms to operate with one profit pool and in one partnership across Europe.

Competition: one system, two or more

Competition is another example of a field in which regulation could become more onerous. If Britain was no longer a member of the EU, there would be no ‘one-stop-shop’ for mergers. Merging companies that meet the relevant thresholds may have to deal with two separate regimes. And our panel saw implications of this dual process: cost, procedural uncertainty and divergent decisions.

It was stressed that anyone advising clients needs to have cost at the back of their minds and in particular, the cost of making two different filings.

“If you have to run two different processes, the cost benefit analysis is really going to change.”

One speaker considered that businesses dealing with the UK and EU competition authorities would, post-Brexit, face a situation where companies would be running two different but concurrent processes that would be likely to have different deadlines, different requirements and different meetings. This in itself, our panel thought, could cause numerous problems.

This was one of the most significant implications in the view of the speakers. Companies could potentially be faced with one competition authority clearing a merger and another not. In theory, both decisions could be binding on a company, causing significant challenges for compliance. In practice, our panel thought this seemed unlikely in the immediate term. However, the risk of ‘policy drift’ in the future could not be ruled out.

“The idea that the UK would suddenly take an entirely divergent view to the European Commission is very unlikely because we play a key role in shaping European policy at the moment. But that in itself becomes another issue: if we were to leave, then that voice is no longer there.”

The importance of informed debate

Perhaps it is unsurprising that the overwhelming mood was one of concern about the potential consequences of Brexit, because all of the panellists and the vast majority, if not all, of the audience came from a City background and do business with clients from throughout the EU. 

One member of the audience, himself on balance an admitted “Remain” supporter, noted that the EU faces some fundamental problems. These include the continuing uncertain future of the Euro project and the political tensions created by the free movement of labour in face of the migration crisis and the perceived lack of democratic accountability of EU institutions. Leaving might involve some short and medium term pain, but history might prove the pain to have been justified by providing the UK with some protection from these concerns.

The panel acknowledged that sovereignty was an important issue, but felt that the UK will be affected by turbulent events in the rest of Europe even if it leaves. It was suggested that Western countries need to stand together now more than ever. The best course was felt to be to remain and to use the UK’s influence to help EU partners deal with these issues.  

All of the panel agreed that it is important for all professionals to make their views known to employees, clients, suppliers and family, and to contribute to an informed debate.  

“The argument to stay in the EU just isn't being picked up by small businesses. We should be engaging with that audience.”

More about the panel

David Morley, Senior Partner, Allen & Overy

David has been A&O's worldwide Senior Partner since 2008. Prior to that, he was the firm's worldwide Managing Partner (2003 - 2008). In 2012, David was listed as one of the 10 most influential lawyers in the UK by The Times newspaper. In 2013, he was recognised as one of The Top 50 Big Law Innovators of the Last 50 Years by The American Lawyer. In 2015, he garnered the FT Innovative Lawyers Special Achievement Award, and was voted Senior Partner of the Year by Legal Week magazine. He is a member of the Mayor of London's International Business Advisory Council. He founded and currently chairs Prime - the legal profession's national scheme to promote fair access to quality work experience.

Alan Higgins, Chief Investment Officer, Coutts & Co

Alan is responsible for the management of RBS Coutts Bank's UK-based discretionary managed portfolios, and advises on the global investment strategy for major asset classes. Prior to Coutts & Co, he worked at Morgan Stanley Wealth Management where he specialised in asset allocation and alternative investments. He has held senior roles in fixed income portfolio management and a multi-strategy hedge fund.

Sarah Long, Counsel, Euclid Law

Sarah provides specialist advice on all aspects of EU and UK competition law, including mergers, cartels, state aid and abuse of dominance. She previously worked in the Antitrust team of Allen & Overy in London, and prior to that spent three years working for the OECD Competition Committee in Paris. Sarah is a contributing editor to Division 1 of Butterworths Competition Law Service, co-editor of the Competition Law Journal, and co-chair and organiser of the annual Junior Competition Conference.

Ceris Gardner, Partner, Maurice Turnor Gardner

Ceris specialises in two main areas: she advises individuals and their employers on UK immigration and work permit issues, and she advises individuals, families, estates and trustees on UK and international tax and succession issues, establishing UK and offshore trusts, family limited partnerships and other cross-border structures. She was named Trusted Advisor of the Year at the STEP Private Client Awards in 2012 and 2014, and was one of Eprivateclient's 50 Most Influential for 2015.

Mark Douglas, Partner, Hierons (Moderator)

Mark advises on general corporate and commercial law, including M&A, joint ventures, reorganisations and restructurings, and commercial contracts. He first qualified as a barrister and solicitor in New Zealand. In recent years, much of Mark's work has involved companies and trusts set up by wealthy individuals and families. Before joining Hierons, Mark was a partner at Reed Smith for 15 years where he worked on many large international transactions.