London Update: The View from our London Office
14 February 2017
2017 should reveal what Brexit actually means for the UK and for the EU it is leaving behind. We consider the outcome of the Brexit vote and the prospects for Irish businesses as the year unfolds.
The UK is Ireland’s largest trading partner and therefore the Irish economy is very dependent on the UK’s success. We will be following even more closely than our European neighbours the developments over the next year including how that affects the British economy.
2016 saw a reduction in mergers and acquisitions across the UK and Ireland presumably as a result of the macroeconomic issues surrounding Brexit and the political events in the US. However, the FTSE has proved to be strong since the vote to leave and it will be interesting if this continues throughout 2017 once Article 50 has been triggered and it becomes clearer how negotiations to leave will develop. It is likely that there will be an upturn in transactional work around this time.
Additionally, the recent fluctuations in foreign exchange rates have had some effect on the markets and level of transactional activity. There is interest in UK assets from buyers in other jurisdictions where those UK assets have become cheaper, but may not continue to be so for a long time. Therefore, we expect that this interest will grow in 2017. There will be interest in UK assets from Irish buyers but also interest from the US where there is a UK-Irish business and the valuation is driven by the UK company’s share price.
The public markets have also been quiet in 2016 but we predict an increase in IPOs and public takeovers during 2017 in the UK and Ireland.
Movement of People and Institutions
Although some predicted that there would be a wide-scale movement of people and businesses out of Britain as a result of the vote to leave, that has not yet happened. It remains to be seen whether the further developments around the mechanism for leaving the EU will trigger such an exodus, but it feels unlikely.
To the extent that businesses are looking to move operations overseas Ireland is naturally one of the top choices, being an English-speaking, common law, GMT time zone, progressive jurisdiction already with strong financial services and technology hubs in Dublin and across the country. Its proximity to London and ease of travel is also attractive, as is its close relations with the US.
We think it is unlikely that the City of London is going anywhere en masse either. Dublin needs to make the most of the opportunities where operations and people need to be moved back into the EU and the Irish Government is aware of that.
Although signs that the UK and, perhaps more importantly given the levels of foreign direct investment, the US are to become more inward looking than in recent years due to the recent political developments, Ireland may well fair better than many other countries as a result of its extremely close ties with both of those countries. Indeed to the extent that London and Dublin can work together closely with Dublin being the key ally in Europe, we expect that the tripartite relationships between the three countries grow even stronger.
We also are expecting more transactional activity between other European countries and Ireland than in the past as they look to Ireland as the only remaining English speaking country in the EU and due to its close links to the UK.
We are starting witness more interest in Ireland from Asia and the Middle East as people there are becoming more aware of what Ireland has to offer. Brexit has brought Ireland to the forefront where they are looking for a similar alternative to the UK, but within Europe.
In 2017, we may start to see ways in which English law will start to evolve away from EU law. Irish law has tended to remain close to English law but once English law does not need to comply with EU law then marked differences could appear between the jurisdictions. We will follow with interest the posturing in 2017 around what direction English law might take.
2017 will be a key year in the history of the United Kingdom and will have significant ramifications for Ireland as a whole. We learned last year that nothing can be predicted and so wait with anticipation to witness what 2017 will bring.
For more information, please contact Graeme Bell in our London office or visit our Brexit hub here.
The content of this article is provided for information purposes only and does not constitute legal or other advice.