Brexit: Should we be worried?

A City Law Firm – Awarded ‘Innovative Law Firm of 2016 London’

We pride ourselves on being the ‘leading entrepreneur law firm in the City of London’, offering our clients alternative options, out the box ideas as well as traditionally sound legal advice.

What does 2016/2017 hold for you and your business?

I am not one to be scared or deterred by rumours following Brexit and in fact changes in London often have positive ripples on business if you adapt quickly:

Start-ups in the technology sector in the UK and especially London are thriving and have a sound platform to surpass most countries enterprises. This firm continues to see successful investment rounds, with Asian  and Russian investors seeking to plough even more than before into the UK. This week alone ARM Holdings, a Cambridge based technology company, will reportedly be acquired for in the region of £24billion by a Japanese company, Softbank.

 If bank interest rates go down (which is being predicted) it will assist company start-up loans.

The UK startup culture has proven to be a significant hub of innovation both here and internationally. In fact, London was awarded no. 1 city in Europe for supporting both startups and scale-ups in the European Digital City Index in 2015, as such so long as skilled workers continue to seek out training in this developing sector and are permitted to do so, it can only continue to thrive

‘David Cameron’s former adviser Rohan Silva, who supported the setting up of Tech City, tweeted: “I also believe that Britain will always be open, creative andentrepreneurial.”

Entrepreneurs and those wishing to expand their business have new exciting opportunities by means of fixed corporate bonds, where no personal guarantees are requested, they can set their own repayment terms and interest amounts, and foreign investment continues to be attracted to the UK and these debt financing arrangements. After all the pound is starting to stabilise again, we have been through recessions (and out the other side) and the UK continues to present itself as a market that stabilises and grows through recessions. These bonds are fixed interest for fixed terms, so afford investors continuity and stability like no other offers.

Best International, Owner and Director says, ‘Bond returns are fixed and are not open to volatility due to uncertainty, so are safer to back’.

 Those wishing to sell their businesses are being offered more opportunity to do so, perhaps this will admittedly for a reduced rate given the strength of the pound but if it is done tax efficiently all parties can profit.  If you are thinking of selling your business in the future you should consider whether now is an opportune moment whilst the UK is part of Europe.

Gibraltar, where we assist many of our clients to establish businesses or residency, have adapted very quickly offering:

  • Property owners , where the investment asset is for residential rental a tax free 2 year period . Quote : where any property is constructed in the next thirty months from the 1st July 2016 and that property is rented for residential purposes, the owner of that property will receive a tax credit equal to the tax payable on the profits earned on the first twenty-four months of rent occurring in the first five years after the completion of construction of that property. The tax credit is not refundable and can be offset against the tax payable to extinguish any liability to tax.”
  • For business owners 0% corporation tax for 2 years : Quote ‘ 2016 Gibraltar budget is to provide new companies establishing in Gibraltar an effective corporation tax rate of 0% for three years.  5 jobs must be created and the rate is applicable to the first £500,000 of profits per annum’

Their swift reaction to the market has meant estate agents are selling and renting more properties already this year and businesses who will be effected by Brexit are showing commitments to stay.

The Bank of England has confirmed it is going to maintain UK interest at 0.5% , but we still hear that loan interest is to come down , which will be good news for home owners , commercial property owners and anyone with business loans, so we watch this space eagerly

Immigration investment. Entrepreneur’s looking to invest into the UK economy for a Visa do so for many reasons : UK school education for their children , stability in a safe and secure culture , a growing developing economy that many European countries cannot offer and yes access to Europe (which hangs in the uncertainty pool). However, many of the reasons above are unlikely to be effected by Brexit so investors have not shown signs of slowing down. In fact they see an opportunity to acquire a greater shareholding while shares are lower value and people in the UK are panicking so keeping a calm head your business can obtain investment and skilled workers via this route.

Westkin Associates who assist many Entrepreneur clients have informed me:

“We have found that many of our existing clients who were planning for the Entrepreneur Visa have continued to do so after the Brexit news as they still feel the UK is the perfect place for business start-ups and rapid growth of existing business.  In fact we have seen a number of new clients since Brexit who have cited the weak pound and the opportunity from leaving the EEA as reasons to start in the UK.” 

A City Law Firm has, this month, secured investment by way of two entrepreneur visa clients for its commercial client who launches this summer as a result. The client says ‘the efforts of our legal team means we not only have funds to launch, but two very active and smart entrepreneurs to work with us, which is worth as much , if not more, than the monies. We were securing an equity sale at first, but here we benefit far more and remain in control of the company.’

Should you be doing anything now?

I have heard lawyers promoting that companies review their contracts now, check their employee’s status and start looking at tax and trade agreements, but in reality none of this can be adapted until the regulations/agreements with the EU change.

What you could be doing , in my opinion, is look at the advantages open to you right now, cheaper share prices, cheaper business purchase prices, cheaper property – along with cheaper loans to secure these.

Overseas investment is coming in from Asia and Russia who do see opportunities start building & securing these relationships.

Stay calm and look at the potential opportunities and adapt your business and model around this.

If the regulations change and we are all advised on the terms and consequences then be prepared to adapt and invest in the changes.  I am not saying don’t be aware of the potential reviews that will need to be done and the risks / changes that could come , but no one knows what lies ahead , but right now there are benefits and opportunities you could be taking.

Karen Holden, Managing Director