Guernsey: What US Managers Really Think Of Brexit

Last Updated: 22 November 2016
Article by Kate Clouston

Most Read Contributor in Guernsey, July 2017

Kate Clouston, Director of International Business Development at Guernsey Finance, looks at opportunities for Guernsey from the US funds sector. No surprise, the US presidential race and Brexit are the topics du jour.

The watchword is uncertainty. Systematic risk and global economic volatility have once again taken centre stage this year, calling us back to those turbulent months in 2007-2008 when it seemed the sky was falling. While there have been promising signs of recovery in the intervening years, the UK's Brexit vote and the upcoming Clinton/Trump face-off serve as a reminder that the future remains unpredictable, and we must do the best we can to protect those for whom we are responsible.

In early June, Guernsey co-sponsored an investment funds conference with the London Stock Exchange in New York. Following the conference, two road shows took place during which we shared updates from Guernsey and learned more about market conditions in the US. Universally, the first few minutes of every meeting involved our US friends apologising for the potential 'Trumpocalypse', and ourselves equally apologetic for all the furore surrounding Brexit. In every meeting the conclusion in the room was one of nervous laughter and declarations that neither world-altering event had a chance of happening.

We've been proven wrong on one count already, and we must prepare ourselves to be wrong on the other. Uncertainty of such a magnitude means investments are on hold, deals aren't completed, funds aren't listed, and everyone is waiting to see what happens next. How can one make sense of such chaos? Fortunately, it's not all bad news.

US-UK relations are very unlikely to be significantly damaged by the Brexit vote. Mutual investments, import/export relationships and human capital all strengthen this bond. There are mountains of data to support the fact that the US and Europe are each other's largest trading partners—the UK by far takes the lion's share compared to continental Europe. For example, the US and UK share the world's largest bilateral foreign direct investment partnerships.

In 2014, two-thirds of US FDI in the UK went to holding companies ($248bn) and finance and insurance ($152bn). The UK is host to 22% of US foreign assets in Europe, and affiliates in both countries employ between 1.1m and 1.2m workers in the other. It seems safe to say that both countries will be eager to resolve reasonable and mutually beneficial bilateral agreements. From the US perspective, it will certainly be easier to negotiate on a bilateral basis rather than striving to find an agreement that satisfies 27 partners.

Even so, questions remain over the UK economy's ability to recover from the shock of Brexit, with the depreciation of the British Pound cited by many as a disaster. But there are always winners and losers in any situation, and in this case the FTSE 100, for example, is likely to benefit thanks to their international focus and overseas earnings. Unfortunately for many, the answer is that is too soon to tell exactly what the longer-term effects on the economy will be.

Some managers in the US raised concerns over market access to the EU via the UK. The unwinding of the UK-EU relationship can't possibly conclude before 2019 and many will be seeking some certainty in terms of regulatory environments and market access. In a bizarre twist of events it is Guernsey, which has comfortably maintained 3rd country status with the EU for decades, who is helping advise the UK on how to proceed. Guernsey itself plays an integral role in facilitating capital flows into and out of both the UK and the EU—and this will not change. Guernsey will remain a jurisdiction of stability, likely continuing to act as conduit for an excess of £25 billion of overseas (non-European) investment into the UK from global investors, and £71 billion of investment into Europe—of which £51bn is from global investors.

The political volatility of 2016 is almost unprecedented, and that is heavily contributing to economic uncertainty. Many in the US financial world are questioning how the vote in November will affect them. While at first glance it may seem US domestic tax developments are less relevant for the UK or Guernsey, issues such as corporate tax rates and free trade agreements have far-reaching implications. Neither candidate in the forthcoming election has been particularly candid about their economic policy, although both are guilty of adopting a protectionist stance, opposing the TPP favoured by the Obama administration and promising to revisit trade agreements.

Perhaps a greater worry for those of us outside the US is the ominous silence on the issue of US debt. Whoever ends up seated in the Oval Office in January will find almost $20trn in debt on their desk. Federal debt in the US held by the public has doubled since 2007 to 75% of GDP. This debt will continue to grow, especially if interest rates are likely to rise. Indeed, Federal Reserve chairwomen Janet Yellen indicated that the case for the Fed to raise its benchmark interest rate is building. An interesting move, considering that a 1% increase, for example, would cost $200 billion a year on $20trn of debt. Indeed, if mutual investment is the real backbone of the transatlantic economy, it is in everyone's interest to encourage the financial well-being of one the world economy's main engines.

Works consulted:

  • Wright, Mark Antonio. "It's Time for a U.S. – U.K. Free-Trade Agreement". The National Review, 1 July 2016. Accessed 26 August 2016.
  • Irwin, Neil. "We're in a Low-Growth World. How Did We Get Here?". International New York Times, 06 August 2016. Accessed 26 August 2016.
  • Smith, Geoffrey. "Here's Another Sign the U.K. Is Weathering the Brexit Storm". Fortune, 23 August 2016. Accessed 26 August 2016
  • MacArthur, Hugh, Global Private Equity Report 2016, Bain & Company, 2016.
  • International Monetary Fund, Total Debt to Equity for United States, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TOTDTEUSQ163N, August 25, 2016.
  • International Monetary Fund, Global Financial Stability Report: A Report by the Monetary and Capital Markets Department on market Developments and Issues. Potent Policies for a Successful Normalization. April 2016.

This article was written in September and originally published in the October edition of FTSE Global Markets.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.