Are you in or are you out? Keeping our feet under the table can only be a good thing according to insolvency partner

James Sleight is a partner and head of the Leeds office of PKF Geoffrey Martin & Co, restructuring and insolvency specialists.

Are you in or are you out? In

Why?

I’m in, not necessarily because I’m a strong supporter of the EU, it’s mainly because I think we would see a long period where the benefits of leaving would be far outweighed by economic uncertainty.

Article 50 means we have a two-year period to negotiate the terms of exit; I can’t see any of the EU members being particularly interested in ensuring we get a good deal or going out of their way to expedite the agreement of exit terms.

We would also see a hold on foreign direct investment, as overseas investors wait to see what deal the UK eventually gets. I also can’t see other large markets around the world, such as the US and China, wanting to put a nation of 64m in the queue for trade agreements in front of the world’s biggest single trading bloc of 450m people.

The European single market accounts for a large proportion of our trade; it’s likely that we won’t be able to access this market as favourable as we do now. Even if we follow the Norwegian model and become members of the European Economic Area, we would still have to pay for access to markets, yet can’t sit in on negotiations at the European Council or Council of Ministers.

What would a Brexit mean for your business?

Geoffrey Martin & Co don’t do a lot of cross-border work, so the impact on us would be minimal but would have a huge impact on the restructuring sector as a whole.

The EU’s cross-border insolvency regulations that have harmonised industry rules has been good for the sector creating a level playing field, allowing firms to operate across the continent. If we left the EU, it’s likely that UK Restructuring firms would spend more time in European courts fighting competing interests, which ultimately would mean lower returns to all creditors.

One potential huge impact in terms of Brexit concerns Transfer of Undertakings, commonly known as TUPE.

This can often be a reason why companies don’t acquire other insolvent businesses through administration, as not only do they have to employ all the remaining staff from the insolvent company on existing terms but also could be liable for claims from employees made redundant by the administrator or management pre-insolvency.

Perversely, this ‘buyer beware’ culture can lead to all staff losing their jobs, if a buyer can’t be found and the Administrator has to shut down the business.

As EU law in this area overrides UK law, a Brexit could lead to a relaxation of TUPE, which may lead to more appetite from purchasers buying insolvent companies meaning higher realisations and returns to creditors, albeit at what cost to current employee working rights.

As EU Council voting is based on population size, the UK gets around 13% of the vote so we have a major influence, particularly in the financial sector. Apart from banking bonuses, we haven’t been outvoted on anything relating to the financial sector in recent years. Much of the financial regulation has been UK-led, leading to greater harmonisation, and hopefully this would mean we could lead the way in European insolvency reform.

The cynic in me also wonders whether all the grants given through Europe to the North to stimulate economic activity would be replaced following Brexit or whether these funds would remain in London. Does being part of the EU help the North in its bid to bridge the gap between the richer south of the country?

Also, we’re not part of the banking union so the Bank of England, not the European Central Bank, sets our monetary policy; as we’re not part of the Eurozone, we won’t be directly liable for any bailout of another EU country.

Being a member of the EU gives us a single passport to operate, so UK companies can access EU markets by being regulated in the UK. Having this access, yet not being part of the Schengen Area or part of the baking union, really does give us the best of both worlds.