Understand Your Rights. Solve Your Legal Problems
This is according to the 2019 Henley Passport Index and Global Mobility Report, published by global residence and citizenship advisory firm Henley & Partners.
The report – which offers cutting-edge analysis by 16 leading scholars and professional experts on current global mobility trends, including the significant divide created by war, climate change, economic inequality, and political instability – has been released just a week before Henley & Partners’ attendance at Davos.
Taking part in two key panels around the annual gathering in Davos, Dr. Christian H. Kälin, Group Chairman of Henley & Partners says that the impact of migration on geopolitical affairs cannot be overstated. “Migration is both a cause and a consequence of almost every issue of global importance, and it will only become more central in years to come, as globalization deepens even further and its effects entrench themselves.”
Davos: Sovereign Equity and Digital Government
Henley & Partners will host two multi-stakeholder panels at Davos that bring together heads and ministers of several governments and leading academics and industry experts, including the Prime Minister of Antigua & Barbuda, the Finance Minister of Malta, and the Chairman of the Investment Migration Council. The first discussion will be co-hosted with Ledgerstate, a group of blockchain and decentralizing technology experts who identify innovative, secure and efficient solutions for organizations. ‘Global Citizenship, Blockchain, and Digital Government’ will explore how digital technologies are transforming governments and citizenship, as well as the need for global citizens and their societies to create a sustainable legacy of greater sovereignty and cooperation.
The second panel will focus on ‘Investment Migration: Sovereign Equity versus Sovereign Debt’ and examine how governments can create economic freedom and security by harnessing investment migration options. It will explore the global shared responsibility to define a new world order, break the shackles of systemic debt burdens, and enable new opportunities for growth.
Unprecedented Displacement due to Climate Change
One of the key issues on the Davos agenda will be the threat climate change poses to socio-economic development. The Henley Passport Index and Global Mobility Report reveals that at least 25 million people worldwide have already been displaced by climate change.
Commenting in the report, Prof. Rosemary Lyster , Professor of Climate and Environmental Law at Sydney University and Director of the Australian Centre for Climate and Environmental Law, says the World Economic Forum’s Global Risks Report 2018 has already warned that seven of the top nine global risks are likely to be influenced by climate change. “This means that the number of climate-displaced people worldwide is likely to increase to 2 billion by 2050, if global temperatures continue to rise.”
Democracy, Global Mobility, and the Great Divide
Another central issue to be discussed by world leaders in Davos is the need to overhaul current thinking on globalization, its proliferating effects, and the imbalances it has created, issues covered by the report in its discussion of the positive and significant impact that travel freedom has on economic growth and democracy.
In new research conducted for the report using historical data from the Henley Passport Index, political science researchers Ugur Altundal and Ömer Zarpli, from Syracuse University and the University of Pittsburgh, found a direct and positive correlation between a country’s passport power and its democracy score. “We found that the number of visa-free destinations held by a county has a positive and statistically significant effect on that country’s democracy score. Similarly, there is a strong correlation between visa liberalization and economic growth and job creation. It’s clear that despite the important progress we have made in overall global mobility, there remains a significant ‘global mobility divide’, with some passports much more powerful than others.”
According to the Henley Passport Index, in 2018 the average European could travel to about 163 destinations without a visa, while the average individual from Africa could travel to only about 61 destinations. Commenting in the report, Dr. Parag Khanna, Founder and Managing Partner of FutureMap and also one of the panelists at the Henley & Partners events in Davos, says world leaders need to develop coordinated and pragmatic migration policies. “We live in a world where all major issues including migration have become, by definition, cross-border. Geopolitical tensions will not be resolved by competing approaches working at cross purposes.”
Wealth and Talent Migration: Expanding Horizons and the Impact of Brexit
In his analysis of wealth migration trends in the report, Henley & Partners Chairman Dr. Kälin points out that there is ample evidence that the migration of wealth around the world continues to accelerate, as high-net-worth-individuals seek enhanced business and lifestyle opportunities in other nations. “China, India, and Turkey have seen the biggest outflows of high-net-worth-individuals in recent years, while Australia, the US, and Canada remain most attractive for wealthy individuals and their families.”
In other key trends, there has also been a noticeable increase in appetite among wealthy individuals in both Europe and the US for access to residence- and citizenship-by-investment programs in other countries. These trends and patterns have had markedly positive benefits for all parties involved. As Dr. Kälin points out, “Nearly half of the 17 countries that saw the biggest percentage increases in wealth from 2016 to 2017 were assisted by inflows of wealthy people.”
On the other hand, the looming prospect of Brexit has had an impact that stands in stark contrast to these positive global developments. Commenting in the report, Dr. Simone Bertoli, Professor of Economics at Université Clermont Auvergne (CERDI) and a Research Fellow at the Institute of Labor Economics, says the future status of EU nationals in the UK is still unclear, and the attractiveness of this destination for talented individuals could substantially deteriorate. “Net migration flows from the EU to the UK have plummeted over the past two years. However, while highly educated and highly skilled individuals may feel pushed out of traditional migration destinations, they are receiving a very warm welcome in other parts of world, such as China, where economic and career opportunities might one day even eclipse those offered by countries such as the UK and US.”
Dr. Kälin says the agenda set for Davos shows that migration is an increasingly decisive issue shaping world affairs at every conceivable level. “Migration-related issues dominate the global conversation, while many states develop pragmatic migration policies in response to ever-expanding globalization, and world leaders resolve to address the unique challenges presented by a rapidly changing world.”
And two thirds (66%) said they were concerned about employees committing fraud due to the lack of job security that Brexit brings. Below, senior forensic accounting investigator Andrew Durant at FTI Consulting explains.
These results do not come as surprise to me after 30 years of investigating fraud. Motive has always been something I have tried to understand when carrying out investigations together with opportunity and rationalisation – the three aspects of the so-called Fraud Triangle. One of the primary motives for committing fraud is need, both the need for money now and in the future. And fear of losing your job clearly exacerbates that need.
Data has shown that employees are more likely to be able to commit fraud against a company versus an outsider. The reason why? Employees will know what systems are in place and, more importantly, where the weak points are - particularly those who have been with their company for more than five years. They will also have built up trust, meaning they will have more authority. So, if the fraud does get spotted, they are less likely to be put under the spotlight as most of the focus will be on outsiders. of UK business leaders are fearful of job losses in their company as a result of Brexit* 80% The results of our recent Brexit survey, Brexit in the Boardroom - Autumn The results of our recent Brexit survey, Brexit in the Boardroom - Autumn The results of our recent Brexit survey, Brexit in the Boardroom - Autumn The results of our recent Brexit survey, Brexit in the Boardroom - Autumn The results of our recent Brexit survey, Brexit in the Boardroom - Autumn of UK business leaders are concerned about employees committing fraud due to increased job insecurity as a result of Brexit* 66%.
Our survey showed that 71% of UK business leaders said they were concerned that the disruptions caused by Brexit will enable external fraudsters to target them. This is interesting not least because companies tend to overlook the more likely threat of their employees committing fraud, and often do not pay enough to potential internal dangers. There is a clear need for businesses to up the ante in their efforts to protect themselves from fraud and be on their guard.
71% of UK business leaders said they were concerned that the disruptions caused by Brexit will enable external fraudsters to target them.
So what should business leaders do to counter the increased risk of fraud?
10 key steps for businesses to combat fraud
Don’t discuss it with anyone as they may be involved
Don’t mark any evidence
Do be aware that losses may still be occurring
*Source: Brexit in the Boardroom – Autumn 2018 Update: 522 UK business leaders out of over 2000 in the UK, France, Germany and Spain.
Speaking about a second referendum, Chuka Umunna tells Sophy Ridge about what would need to be on the ballot paper this time around.
As is often the case and due to the unique nature of the mid-market, it [the M&A market] behaves differently than publicly traded bonds, currency or stock markets. Sentiment is very important and public markets are sometimes critical influencers. However, most of the transactions in this market are private, cover a very broad range of opportunities and happen for a wide variety of reasons, strategic or otherwise.
The number of deals completed in the UK with a transaction value of under £500m has reduced by around 12% in the year-to-date 2018, when compared to the same period in the prior year, however the cumulative value of these deals is only down by around 2%.1 In contrast, the Office for National Statistics (ONS) reported that there were no transactions with a value of more than £1bn completed between July and September of 20182.
In addition to top line numbers, there are always winners and losers in any of the mid-market sectors.
While statistics will never tell the whole story, our experiences of 2018 in the mid-market have seen many happy sellers, buyers paying full prices, strong transaction multiples sand international buyers remaining very interested in UK businesses. Brexit, and the political and economic uncertainty it brings, has been one of the biggest macro diligence issues of 2018, but buyers and sellers alike seem to be more focused on the micro impacts, investigating the components of the potential Brexit threat on a business-by-business basis.
In addition to top line numbers, there are always winners and losers in any of the mid-market sectors. For example, the divergence of success in retail between those in bricks-and-mortar, those that have moved to ‘clicks-and-mortar’ and e-commerce retailers is much more pronounced than some of the general gloom around consumer sentiment. Equally, in the industrial and business services sectors, the gap between winners and losers is widening, with technology often at the centre of some part of the manufacturing, supply or distribution chain process.
So, will 2019 be better or worse than 2018? Much may depend on what happens in Westminster between the time of writing this article and publication, but from an adviser’s perspective, it feels like it will likely be a tougher environment, but equally interesting. We sense there may be a widening of the gap between buyer and seller expectations, which means adviser’s may need to be smarter about how transactions are structed and executed. There may also be a tightening in the debt markets, although the flexibility of approach from the increasingly varied lender community continues to grow. The private equity investor community may become more conservative in deploying capital, but given there is more dry powder in the UK private equity community than ever before, there is a pressure to invest.
While 2018 cannot necessarily be any guide for 2019, the themes of Brexit, business investment confidence and consumer confidence will continue to dominate the minds of buyers and sellers, and the mid-market in 2019 could be a good place to be, while all around looks uncertain.
Sources: 1. Capital IQ data, deals that include a UK target and transaction value < £500M, between January 1, 2017 and December 13, 2017 and 2018.
2: ONS data – https://www.telegraph.co.uk/business/2018/12/04/overseas-firms-making-fewer-ma-deals-uk-british-firms-still/
Written by Henry Wells, Managing Director and Head of UK Mergers and Acquisitions at Duff & Phelps
Blair told Sky News that the "logical thing is to go back to the people", with Theresa May struggling to fight divisions in her own Cabinet over the withdrawal agreement.
He admitted that he feels "sympathetic" towards the Prime Minister, but she must "switch course".
Mrs May has fended off a confidence vote on her leadership, but must now try to push her Brexit deal through Parliament.
EU migrants are leaving the UK at levels not seen since the financial crisis a decade ago and net migration from the bloc has fallen by more than 60% since the referendum, new data shows.
Data recently released by the Office for National Statistics show total EU net migration at 74,000, a fall of around 115,000 since the referendum, and lower levels than at any period since 2012.
A8 net migration to the UK for the year ending June 2018 was estimated at -14,000 per year, though margins of error mean that this number is not statistically different from zero.
Net migration of A2 citizens (from Romania and Bulgaria) has almost halved from 62,000 in the year ending June 2016, reaching an estimated 34,000 in the same period two years later. This is the lowest level since 2014, when these countries got full access to the UK labour market. Net migration of EU15 migrants – from the older EU member states such as Germany, Italy and Spain – fell from 84,000 in the year to June 2016 to 47,000 in the same period this year.
Madeleine Sumption, Director of the Migration Observatory at the University of Oxford said: “EU migrants have been leaving in larger numbers since the referendum, and net inflows have greatly decreased. The lower value of the pound is likely to have made the UK a less attractive place to live and work and economic conditions in several of the top countries of origin for EU migrants have improved.”
Nevertheless the ONS stats suggest that, despite the fall, there are still more people arriving from the EU than leaving.
The data suggest that non-EU net migration, at 248,000, is more than three times the level of EU net migration, although these data come at a time of uncertainty for UK migration statistics. The ONS has started a programme of work to improve the quality of the statistics, but these developments are mostly not yet reflected in today’s figures. Significant issues have been identified with the measurement of non-EU emigration.
Sumption added: “We have doubts about the accuracy of the non-EU net migration figures. Other data sources do not support the idea that non-EU citizens are currently contributing so much to net migration.”
(Source: the Migration Observatory)
Within twenty-four hours of the announcement of the withdrawal agreement, numerous Conservative MPs and Cabinet Ministers had resigned in protest. Amongst them were Brexit Secretary Dominic Raab and Shailesh Vara as the minister of state for Northern Ireland, who stated the withdrawal agreement “leaves the UK in a halfway house with no time limit on when we will finally be a sovereign nation".
Many will agree with Dominic Raab that the transition period set out and the further ‘backstop’ arrangements aimed at preventing the return of the hard border in Northern Ireland could potentially allow the EU to “hold a veto over our ability to exit”.
Some believe the ‘backstop’ is needed to ensure the Good Friday Agreement is maintained if a trade/ customs deal is not agreed in the transition period. Numerous businesses that have UK/EU interests, contracts or supply chains wanted to see a transition period in the withdrawal agreement to allow them to continue trading and operating without the introduction of tariffs and complex customs arrangements whilst a UK/ EU trade deal was finalised.
Crucially, the ‘backstop’ arrangement includes no unilateral termination rights for the UK, which could significantly harm the negotiating power of the UK in relation to the trade deal going forward. It’s always much more difficult to reach an agreement when the other party is already in place and holding many of the cards.
Further, whilst the withdrawal agreement covers various issues, such as a commitment to protect the rights of UK nationals already living and studying in the EU and vice-versa, protection of various geographical goods (such as Welsh lamb), the transition period and the divorce bill – it is silent on many other very important matters.
For example, fishing is excluded from the agreement because it appears it is simply too controversial. The EU and UK will have to use their best endeavours to come to a separate agreement in relation to fishing and waters, and there are still major questions about the rights of UK nationals to work cross-border.
With very little time to return to the negotiating table and many politicians feeling the withdrawal agreement is unacceptable, British industries, business and citizens look to be left in a halfway house along the path to exiting the EU.
The withdrawal agreement and political declaration does cover financial services, stating that financial stability, market integrity, investor protection and fair competition will be preserved respecting both the UK and EU’s ability to take equivalence and regulatory decisions. This approach would not, however, cover the insurance industry, as equivalence under Solvency II does not grant market access for insurance business (though re-insurance is treated differently), and so does not, therefore, appear to preserve passporting rights for UK insurers.
With very little time to return to the negotiating table and many politicians feeling the withdrawal agreement is unacceptable, British industries, business and citizens look to be left in a halfway house along the path to exiting the EU. Businesses across all sectors that have contracts, supply chains or interests that straddle the UK/ EU should now prepare for a hard Brexit to ensure continuity of business, contracts, supply chains and resourcing if they haven’t already done so.
What benefits and opportunities do you think lie in the current state of the investment sphere?
Initial Coin Offerings are an area to watch in the coming years. ICOs are being considered more and more, especially by technology companies developing suitable products linked to the blockchain. For example, a company can raise funds in return for tokens, which are a tradeable commodity in their own right and which typically also allow the holder to access and use the product being developed.
In addition, companies with strong intellectual property will remain attractive to investors and trade buyers, even in uncertain times. If you own valuable IP and have a business which is not just surviving but thriving from exploiting that IP, then whatever your size - OMB, SME or larger - there will be people interested in tapping into the IP or acquiring it.
In an uncertain period, what are the risks associated with the transaction process and how important is transparency?
Looking for the risk points in transactions is a dynamic process. It begins from the initial conversation with clients through to closing.
In the OMB and SME space, the biggest risk boils down to expectations: buyers not getting what they thought they were acquiring, and sellers being disappointed if buyers start deviating significantly from the initial terms offered. It can be a rollercoaster ride, particularly for clients who have not been through an M&A transaction before.
As the UK gets closer to leaving, I anticipate there will be a hiatus in M&A activity.
The aim is for no surprises for either side. It is about planning well in advance of a transaction, having honest conversations, identifying issues that might affect a deal later on, and for OMBs and SMEs being transparent about their strengths and weaknesses.
My experience is that deals become problematic when client-specific risks are misunderstood or not well articulated at the outset, so getting to grips early on with ‘skeletons in the cupboard’ that might affect a particular deal is key to keeping the transaction on track.
In terms of the future in M&A and investment, what is the biggest change or development you are looking forward to in 2019?
Brexit is perhaps so obvious that maybe it’s boring to mention. Business has done a great job of staying focused on wealth creation while the details of the political settlement are worked through. But as the UK gets closer to leaving, I anticipate there will be a hiatus in M&A activity. So I am looking forward to getting it over with and finding we haven’t fallen off a cliff.
I am concerned about the Government’s attitude to risk-taking and entrepreneurship, and it will be interesting to see whether at the margins there is a stifling of M&A activity in the OMB and SME sector from recent changes to Entrepreneurs’ Relief announced in the Budget, which may have an impact on those holding alphabet or growth shares in particular.
Adam leads Harwood Hutton’s forensic and corporate finance team and has been recognised with a series of major national awards in both fields in the past two years, including Lawyer Monthly’s Expert Witness of the Year Award 2017.
Adam and his team are experts in valuing unquoted equity and shares and are often called upon to produce business valuation reports, whether for commercial, forensic or taxation purposes.
The corporate finance offering encompasses advisory and transactional assignments, from sale mandates for clients looking to exit to assisting clients seeking external funding and leading financial due diligence work for clients on acquisition trails. Forensic assignments include expert witness work, expert advisory work, accounting investigations and expert determinations. Adam has given oral evidence at the High Court and at the family court.
She reveals more on legislation developers should be aware about, growing environmental concerns which affect planning and regulations which need to be updated.
What are important parts of EU legislation that property developers/developers should be well versed on?
From my perspective there are three areas of legislation: The National Planning Policy Framework as revised in 2018; UK legislation implementing the Habitats Directive; and, legislation related to Environmental Impact Assessment (EIA). While the UK will soon leave the EU, the EU driven legislation is unlikely to change, especially as we are signatories to the Bern Convention, which pre-dates but is similar to the Habitats Regulations in its intent.
The main risk is not prosecution, but the slowing down or failure to progress a planning application.
The requirement for EIA is well-established in UK law and is unlikely to change. There is a lot of confusion regarding EIA: only a small number of projects require it. I have quite a few clients who think it is useful to voluntarily submit an EIA, but my advice is to always avoid this, if possible, using the process whereby a project can be formally screened out of the requirement. Except for its use as a process (evaluating fully the environmental ramifications before freezing the design), EIAs are costly, time-consuming and slow down planning approval. They do not substitute for planning obligations, and indeed do not carry the weight that planning obligations do.
A seller’s pack should include up to date survey information that must be produced to best practice standards and to have been undertaken by competent ecologists.
If they are not well versed on such legislation or regulations, what legal sanctions can they potentially face?
The main risk is not prosecution, but the slowing down or failure to progress a planning application. Applications for development move through the system very slowly. If the requirements of the Habitats regulations are not met, then a planning application may not even be registered, never mind approved. What clients often do not realise is that the competent authority has a duty to consider the effect of development on species afforded special protection. If the information on species, usually presence and population size, is not provided with the application, it will be refused due to the risk to the local planning authority. The LPA will not stick its neck out; it wants the data and all of the legislative boxes ticked.
It is unlikely that a client would get to the point to where they could be fined or sanctioned. It is far more likely that they fail to get planning permission. Maximum environmental fines are not large, especially in relation to the lost opportunity cost of development not getting approved. The costly environmental fines are in breeches to various Environment Act Regulations, but these usually apply to industries, not to developers.
Prospective purchasers should check ecological constraints prior to purchasing; can you share what they should be looking out for?
A seller’s pack should include up to date survey information that must be produced to best practice standards and to have been undertaken by competent ecologists. The purchaser should read these carefully, particularly in relation to findings, recommendations for further survey, and any reference to licensing. If ecological constraints are present, these do not preclude development, but may have cost and timing implications.
Most ecological constraints are not particularly onerous and can be worked around. The need to take into account the protection of bats is probably the most common issue and can create some design challenges if refurbishing a building where bats are found. I also find that the presence of high-quality trees can be quite a constraint and am working on a project now where the designers will need to be innovative on foundation construction. My understanding in that case is that the initial purchase site survey by the buyer did not take note of a significant tree line on the boundary of the site. Obvious site constraints always need to be considered.
There has been some movement in the Agencies to update European Protected Species Licensing, but they have a long way to go.
With ever-growing environmental concerns, can you share ways in which businesses can be more proactive in ensuring their new construction venture is as environmentally friendly as possible? Building Regulations incorporated in 2013 the key elements of Code for Sustainable Homes, so it is not difficult for business to meet sustainability targets simply by complying with regulations. The NPPF also incorporates a range of ways that any permitted development is likely to be environmentally friendly. I would always recommend that a client go the extra distance to identify areas where environmental enhancements can be incorporated, and I would also encourage partnership working with local wildlife groups, to help support local targets in terms of protecting and enhancing wildlife and habitats. Green space within and around development is vital, and involving new residents or users of a development can increase community cohesiveness and also improve sell-on prices for residents. The “value-added” created by Green Infrastructure is now well-documented and developers should look for opportunities to maximise this. Value is not only created by maximising floor space.
Moreover, are there any regulations that you think need updating?
There has been some movement in the Agencies to update European Protected Species Licensing, but they have a long way to go. Once we leave the EU, then the validity of the Habitats Regulations as they stand may be challenged. The licensing system used in the UK to meet the requirements of the Habitats Directive was a very awkward and legalistic “fix”, which cries out for improvement. A system which nationalizes the protection of species and habitats, rather than dumping it on developers on a site by site, un-strategic basis, would be a far better way to resolve the very real issue of habitat fragmentation and species population decline. However, until Brexit is resolved, there is little government energy being directed towards regulatory review.
Jaquelin Clay
Director
Tel: 0845 2263618
Email: jackie@jfa.co.uk
Web: www.jfa.co.uk
Theresa May 'full of optimism' The prime minister says the EU endorsement of her Brexit deal marks the start of "a crucial national debate."
