Following on from our recent blog on ‘How the UK General Election Might Influence the Recast Insolvency Regulation’ and whether the UK will still be part of the EU in 2017 when it comes into force, we consider the ‘hokey cokey’ of the upcoming EU referendum.
At first glance the Conservative’s victory in the recent UK General Election should help to strengthen the UK economy and in turn lead to a more constructive insolvency market. However, the Conservative’s promised referendum on Europe is likely to have a significant impact on the UK’s economy from the word go. The Conservatives have pledged to renegotiate the UK’s position in Europe and seek reform within the EU prior to the referendum. The success or failure of these negotiations will no doubt have a significant impact on how politicians conduct their EU referendum campaigns and unavoidably the effects will be felt throughout the UK economy.
After the recent news that the EU referendum will not take place on 5 May 2016, the same day as the elections to devolved parliaments in Scotland, Wales and Northern Ireland, it seems the most likely time for the referendum to take place will be late 2016 or early 2017. As yet no date has been set with Mr Cameron stating that the timescale should be determined by the re-negotiation and EU reform process. At the moment, all attention in the EU is focussed on the Greek crisis and it is likely to be quite some time before the UK comes back to the top of the agenda. What is certain for now at least is that businesses will need to consider the effects of this interim period in the lead up to the referendum, and the inevitable effects of the referendum itself, to help manage risks and plan for the future. Businesses will no doubt be concerned about the level of uncertainty at this time and the consequential effect on financial investment, which is only likely to be exacerbated by a delay to the referendum.
In the run up to the EU referendum it is likely that the press will be dominated by contradictory claims of restricted and improved trade and services, job losses and gains. However at this stage and in the lead up to the referendum it will be difficult to estimate the full effect on trade and workers as there is no way of knowing how companies will react and whether UK operations will be largely scaled back on an exit from the EU. KPMG has reported recently that it is likely that Britain’s large foreign- owned car industry will be particularly at risk as “the attractiveness of the UK as a place to invest and do automotive business is clearly underpinned by the UK’s influential membership of the EU”.
It has been reported in the media that Airbus, one of Europe’s biggest industrial enterprises spanning civil aviation, defence and space, would reconsider its future investment in the UK if the vote was for an exit from Europe. However Airbus’ Chief Executive Fabrice Bregier has been quoted as saying he has “no intention” of pulling manufacturing out of the UK if the country votes to leave the EU. Mr Bregier did however admit that he would have to make a judgement about the consequences of the competitiveness of his business following the referendum.
There are many things for businesses to consider regarding a potential “Brexit” from the EU. If the UK votes in favour of a “Brexit”, the form of the UK’s future relationship with the EU would have to be negotiated to allow British firms to sell goods and services to EU countries without being hit by excessive tariffs and other restrictions. Also a “Brexit” would affect not just EU/UK relations but numerous relationships with third countries which are presently governed by EU agreements. Either way, “Brexit” or no “Brexit”, the EU referendum is likely to have a significant impact on the economy.