There’s no doubt that 2020 has been a truly unprecedented year. We've had a lot on our plate: remote working, economic anxieties, and social connectedness to name a few. But if you're a UK-based business accessing the European Union, you also need to be thinking about... Brexit.
Before Brexit, the UK was pretty integrated into European financial markets. Minimal legal barriers facilitated cross-border activities, particularly financial services. The single market enabled a financial services business already in Europe to passport into another EU host state without the need for separate authorisation.
However, many will lose this ability to access the EU when the transition period ends on 31 December 2020. This means that if you’re in financial services and planning to maintain relationships with European customers in 2021, it’s important to put arrangements in place now, so that you’re prepared.
We've seen more and more companies looking to:
- Determine which European regulatory frameworks are most favourable for expansion plans;
- Obtain financial regulatory licenses to offer banking services in EEA Member States;
- Research and advise where to relocate London offices in Europe; and
- Understand any regulatory effects on group structures, previously under FCA purview.
Choosing how best to access European markets post-Brexit is a key strategic decision, worthy of significant consideration. Getting this wrong, or failing to investigate which jurisdiction is most advantageous can cost hundreds of thousands of Euro in ongoing maintenance costs with lasting effects. It’s important to take the time now to make the right decision.
Key considerations for businesses navigating Brexit:
- Do you have or serve European customers?
- Are you part of a wider corporate group based in Europe?
- Do you receive funding for a European entity?
- Do you have agents acting as your intermediary in Europe?
- Are you party to contracts that refer to EU law?
- What is your preferred official language?
- Is English fluency required?
- Is the local regulator pragmatic or bureaucratic?
- Are you concerned with the stability of the political environment and whether it is business friendly?
- Where do you want to store personal data?
- Is moving quickly important?
- If so, is it quick and easy to move into a particular jurisdiction?
- What are the usual timelines for this jurisdiction and its regulators?
- Is cost a motivating factor?
- What is the local currency, and is it stable?
- What sort of tax treatment do you require?
- What are the basic rules on corporate tax, income tax, VAT?
- Are the tax rates stable?
- What is the usual timeline to open a bank account and are there minimum capital requirements?
- Is the jurisdiction’s reputational clout important?
- Do you want to be present in the same jurisdiction as your competitors? Eg. a FinTech hub or is somewhere in Eastern Europe suitable?
- Where will your employees be based?
- Does the jurisdiction have local staff requirements?
- If it’s necessary to take office space, what is the cost?
- Must board meetings occur in the jurisdiction?
- Does the regulator insist on local appointments?
These are the key drivers you will need to discuss internally with stakeholders before talking to the right legal expert. Once you have worked through this process and can point to priorities amongst these competing considerations, it’s time to engage local counsel. Counsel ensure that you’re aware of local legal rules including regulator tips, tax implications and employment requirements. In addition to engaging local counsel, consider engaging a UK-based expert to formally recommend which jurisdiction is best for you, based on your drivers.
Download the full report including pros and cons of popular European business hubs such as Dublin, Frankfurt, Amsterdam and Luxembourg 👇