Brexit – where are we now?
Now I like a challenge but trying to succinctly summarise what is happening in the UK Parliament at present is somewhat tricky. In the week the UK was meant to leave the EU, the timing of our exit remains unclear and the parliamentary process for agreeing on next steps remains fluid.
What we do know is that the UK and the EU reached an agreement last week to extend the Article 50 process and delay Brexit. If the UK Parliament approves the Withdrawal Agreement (that was previously agreed by the Government and the EU) by the 29 March, the extension lasts until 22 May 2019. If the Parliament does not approve the Withdrawal Agreement this week, the UK needs to put forward an alternative plan to the EU by 12 April or leave without a deal. The 12 April date is significant because the UK needs to confirm by that date whether it intends to participate in the European Parliament elections in May. If the extension is any longer, the EU would require the UK to participate in those elections to ensure that the European Parliament is properly constituted. The UK Government has started the legal process for changing the official exit date from 29 March and further information on this is available here.
At the time of writing (Monday afternoon), the Prime Minister has confirmed that the Withdrawal Agreement is unlikely to be approved and is not being put to a vote at present. The expectation is that Parliament will now hold a series of indicative votes on alternative plans. These include a no-deal Brexit, the current Withdrawal Agreement, the Withdrawal Agreement with a customs union, a second referendum and other types of EU membership.
The BVCA’s view has always been that a no-deal or disorderly Brexit would be a significant issue for the private equity and venture capital industry – for fund managers as well the businesses they invest in and the people they employ. This is because a no-deal Brexit would mean there is no transitional period, effectively creating a “cliff edge” on the exit day whereby UK and EU firms may find that their levels of access to each other’s markets are suddenly significantly reduced or, in certain situations, blocked entirely.
Our March Brexit Briefing (member only) provides an update for firms preparing for Brexit, including a no-deal scenario. It covers the BVCA’s work with UK policymakers such as HMT, HMRC and the FCA, and updates from the EU. This briefing looks at areas that are relevant for private equity and venture capital firms (and indirectly their investors) and considerations for portfolio companies.
The UK government has published statutory instruments (SIs) to “prevent, remedy or mitigate any failure of EU law to operate effectively” in the event of a no-deal Brexit. The BVCA has been in discussions with HMT and the FCA throughout this process and provided feedback. There is guidance on the AIFMD SI (available here) and the EuVECA SI (available here) and the government has stated that there will not be any changes to existing policy; the changes will reflect the UK’s new position outside the EU.
The FCA has updated its Brexit information and published a policy statement detailing near-final changes it will make to the UK’s financial services framework if the UK leaves the EU on 29 March without a transition period. This details the ‘on-shoring’ of EU rules to allow the UK regime to function independently of EU law, the UK’s Temporary Permissions Regime (TPR) for EEA firms, and how the FCA intends to use its Temporary Transitional Power.
The FCA and ESMA have announced the agreement of a Multilateral Regulatory Cooperation Agreement (MMoU) between the FCA and EEA regulators. The FCA has stated that the agreements “should also minimize the potential for disruption, which we know is particularly important for the investment management sector…”. ESMA stated that the agreements “will allow certain activities, such as fund manager outsourcing and delegation, to continue to be carried out by UK based entities on behalf of counterparties based in the EEA”. The FCA press release is available here and the ESMA press release is available here.
Over the past few weeks, the BVCA has been attending the EU Exit Business Readiness Forum, which is run by the EU Exit Business Intelligence & Readiness Directorate (EUXBIRD, part of BEIS). These weekly meetings are chaired by senior civil servants from a range of government departments and are aimed at keeping business intermediaries up-to-date on latest Brexit information and guidance for business, with a particular focus on what to do in the event of a no-deal. Issues addressed so far have included importing & exporting; workforce & people; organizational compliance; and intellectual property. The UK Government has a wide range of no-deal planning information and guidance on its Brexit webpage.
Further information on the BVCA’s Brexit priorities is available here.
Gurpreet Manku, Deputy Director General and Director of Policy, BVCA