Brexit – Too close to call

Brexit is the abbreviation for “British Exit” from the European Union (EU). The country will vote on the issue of whether to stay in the EU or leave in a referendum on Thursday 23rd June 2016.

At the time of writing, the Brexit referendum is only 3 months away and the indicators are that he result could be very close. The website “What the UK thinks” (www.whattheukthinks.org ) shows the following split in voting intentions in its poll of polls:

• Remain in the EU – 51%
• Leave the EU – 49%

It is an independent social research website. Commentary is provided on the website by respected academic, Professor John Curtice of Strathclyde University. Famously, he was the academic whose exit poll analysis at the 2015 General Election correctly forecast the result when the major professional pollsters got is so badly wrong.

The views of the major bookmakers and betting websites regarding the referendum result tend to suggest a sentiment in which the outcome of the referendum is a “remain” vote. The website “Odds Checker” (www.oddschecker.com ) shows the odds offered by all the major betting websites. The vast majority are showing the following betting odds:

• Remain in the EU – 1/3 (75%)
• Leave the EU – 9/4 (40%)

Bookmakers and betting websites are not infallible and they do sometimes get it wrong. However, bookmakers do have a track record of generally being better forecasters of election results than the major pollsters.

So can we read anything into this? Well the outer range of forecasts appears to suggest that the result could be a vote in favour of staying within the EU, but how close the result is likely to be is far from certain. When margin for error is taken into account for both the polls and for the betting odds, the only conclusion that can be drawn is that neither the stay nor the leave campaign has yet opened upon a substantial margin in favour.

With 3 months of campaigning yet to be fought, there is time for the public mood to be influenced by current affairs and by continuing campaigning by key political figures. In short, at this stage, the likely result is too close to call.

Brexit Planning

The question of the moment for many firms should be “What risks arise from Brexit?”
Whilst the result may be too close to call at this time, the nation will decide on 23 June 2016 and if the vote is to leave the EU, the transition will start immediately. Brexit may be only 3 months away.

This raises the question for firms of what risks may be faced and what planning is needed to respond to them. As the UK has been a member of the EU (in its current and previous forms) since 1973, the accumulation of 43 years of intertwining of UK and EU law and regulation means any transition will not be easy.

The EU is intended to be a business friendly and continental-wide market. It is based upon the principles of

• A single market
• Freedom of establishment
• Free movement of capital
• Free movement of labour

This is facilitated by common rules and regulations. EU Directives are supranational laws that must be enacted into national law. EU regulations are automatically adopted into national law.

Over the last 43 years, the EU member states have made integrated law that permeates most areas of business life and everyday life.

The obvious consideration in assessing risks is that initially very little is likely to change. However, over time, should the UK seeks to distance itself from existing EU law and practices, then businesses will need to consider what may change in the way they are allowed to do business and what this means for their ability to import goods and services they need from the EU or to export goods and services to the EU.

There are some obvious areas where the impact will be felt across almost all firms. These areas are common to nearly all firms, such as

• employment
• health & safety;
• insurance;
• banking;
• payment services;
• business finance;
• food hygiene;
• energy consumption;
• transport.

This list is by no means exhaustive. As well as facing common areas of impact and potential risks, firms will face their own specific impacts and potential risks within their own business sectors, their own supply chain and their own markets.

The risk relating to Brexit are risks are additional to the general business risks that many firms will already have identified via the risk assessment phase of their annual Enterprise-wide Risk Management (ERM) process. However, it may take time to track the Brexit related risks and evaluate the true impact over time as the shape and substance of future trading relations, the impact on markets and the impact on the supply chain may take time to work through.

It is not the intention in this article to consider the benefits of remaining in or of leaving the EU.

However, it is a timely reminder to directors and senior managers of UK firms that it is not too soon to be considering the impact of Brexit on the firm’s business activities. Nor is it too soon to start to identify the likely areas of impact and to start forward planning to monitor and evaluate relevant developments as they unfold.

Register of Persons with Significant Control (PSCs)

This is a reminder to directors of companies that from 6th April 2016, all UK companies must establish a PSC Register and make an annual filing at Companies House.

Guidance on the PSC regime is available from
https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships

If you require assistance to work through your PSC Register, please contact Complyport.

LLPs Brought within Regsiter of PSCs

This is also a reminder that Limited Liability Partnerships (LLPs) will also fall within the scope of the Persons with Significant Control (PSC) Register from 6th April 2016.

LLPs are a favoured trading vehicle for professional partnerships and for some fund management structures especially in the private equity fun and hedge fund sectors.

The requirements for LLP members and partners is broadly the same as for companies. LLPs must identify and keep a record of any PSCs and prepare an annual filing with Companies House.

Guidance on the PSC for LLPs regime is available from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/505303/NON-STATUTORY_GUIDANCE_FOR_COMPANIES_AND_LLPS.pdf