So it finally happened. As of the end of January, the United Kingdom is no longer a member of the European Union and nearly half a century of the closest economic and cultural ties between an island and her neighbours have been severed, possibly for good.
If January 31st represented “the end of the beginning”, as one Brexiteer politician reflected in a particularly Churchillian mood, it was emphatically not the day on which all commercial and regulatory uncertainty disappeared for Britain and the rest of her former EU companions. “In one sense, all our clients have realised that however long the fall-out from Brexit lasts, it is at least a finite process and that in getting their preparations done, speed will now be of the essence,” observes Paloma Fierro, Linklaters’ Madrid-based partner from the Financial Regulation group. “It’s still the case, though, that while some clients are asking us to get on with implementing the plans they have been putting in place for some time, others are unsure of what the future will bring and consequently what form their plans should take. In general, the trend is towards a more definite course of action, if only because with the amount of money that has been widely ploughed into Brexit plans, more delay could be unaffordable.”
“The uncertainty persists,” opines Nicki Kayser from Luxembourg, where he heads the office’s Capital Markets and Banking Group. “There is not really what you could call a settled position among our clients, which in some respects is understandable. A lot of plans were based on the possibility of a hard Brexit, which has been temporarily replaced by a withdrawal agreement. However, this in turn becomes a genuine hard Brexit once again if there is no trade agreement by the end of 2020 and no agreement to prolong the transition period in which we now find ourselves. If there is one common feeling among many of the largest corporate and financial institutions in Europe, it is that the whole Brexit process has been the most unfortunate waste of time and energy and that whatever the final outcome, it will be far less straightforward than what preceded it. With London’s expertise as the hub of the entire financial sector, transactional flow has been easy – who knows what the situation will be in the next few months and years?”
Such pre-eminence as London has established in the pan-European financial sector is not readily replaceable, despite the competing claims of other centres across the continent. “Frankfurt has been one of the cities to profit from Brexit,” suggests Matthew Devey, leader of Linklaters’ Employment and Benefits team in Germany. “Our team here has been in great demand with foreign investors and banks especially, who keep asking to what extent they should be investing in Frankfurt but at the same time, many have been hedging their bets because like the rest of us, they’re still in the dark about the landscape from 2021.”
“Frankfurt is well-placed and of course happy to pick up whatever business from London or elsewhere might come its way but I am not so sure we will see droves of people relocating from London to Frankfurt,” Matthew continues. “It still suffers from an unfairly negative reputation and I am also a little sceptical about whether the infrastructure could handle a great influx of people in a short period. The Frankfurt area is growing anyway. The system is creaking with a lack of affordable accommodation, an increasingly political issue. Berlin might have been able to compete with London culturally if the city had been managed better post reunification but there are very few centres in Europe that can truly compete with London and Frankfurt has the ECB, a large airport and a relatively international feel. I think we will certainly see increased local hires in Frankfurt and some personnel re-locations among the junior and middle ranks. Many senior finance people seem to be reticent to make that move, certainly at the moment.”
“It’s absolutely all about moving the minimum numbers of people to protect various European markets for financial institutions at the same time as they keep as much expertise as possible in London,” confirms Paloma Fierro.
With so many possibilities still on the horizon and so much to be accomplished in such a short space of time, the number of law firms equipped to handle every Brexit-related client requirement across every major European jurisdiction is vanishingly small. Linklaters’ market-leading expertise from London to Milan, Stockholm to Lisbon and all points in between places the firm emphatically among the select few.
“Brexit has been the perfect showcase for the integration of all our European teams,” says Nicki Kayser. “Every one of us, whether we are corporate, finance, regulatory or human resources lawyers, has long and deep experience of working with our neighbours and colleagues in Paris, Frankfurt or Madrid.” “Even before Brexit, we all worked so closely together across jurisdictions that we didn’t have to change too much when it brought all the extra challenges of the past three or four years with it,” Paloma Fierro adds. “What Brexit has done is to enable us to get to know our clients even more closely than ever and it has solidified the bond between us.”
Despite the political friction that has often been on display in London in the years since the Brexit referendum, market sentiment across Europe remains clearly one of regret at the end of an era. “There is no sense of glee here, far from it. Many Germans and clients have a feeling of regret, almost like the loss of a member of the family,” Matthew Devey notes. “Luxembourg can only prosper as it has through openness to the outside world and the perception here and across the continent is clearly that Brexit has created a situation in which there are no winners,” Nicki Kayser says. “One way or another, Luxembourg, the UK and Europe as a whole will all be in a poorer position by the time that the implications of Brexit are fully known.”
These implications, transactional and regulatory and when they might finally crystallise into political reality are therefore likely to occupy the time of most European lawyers for years to come. “We haven’t seen the true economic impact yet but it is bound to be substantial,” Nicki Kayser believes. “As lawyers, we are going to be navigating our clients through a lot of nitty-gritty detail, which will crop up well beyond a final agreement. Certain de-regulated industries apart, all our clients will have to deal with practicalities, loopholes and eventualities that are as yet unforeseen. It’s our challenge at Linklaters to anticipate them and forearm our clients in all scenarios.”
Paloma Fierro is another to foresee little sign of an ending to Brexit-related preoccupations for herself and her colleagues. “The regulatory implications alone are apparently limitless,” she says. “I’m one of those who believe that the work thrown up by Brexit is just going to go on for some years. It has so many angles that we’ll be dealing with the consequences way into the future, even if we have a final agreement in place on 31st December. At Linklaters, we are ready for that. Even if there is another delay, we are ready.”
As Matthew Devey concludes, Linklaters has been ready since long before June 23rd 2016. “As a firm, we’ve been scoring across the entire continent in ways that most others can’t,” he says. “Clients want impartial, cross-practice and cross-border advice from a law firm that also understands the full political context. That is what we deliver.”