Asian businesses after Brexit

Singapore companies take wait-and-see approach on Brexit

With little idea of how Britain's new relationship with the European Union will look, businesses in Singapore are taking a wait-and-see approach, even as they make preparations to amend legal agreements.

For now, the main impact on Singapore companies with a presence in Britain has been limited to the sterling's depreciation - and for some, this has been a silver lining.

Local property developer Oxley Holdings, which is developing the Royal Wharf waterfront project in London, said that while the sterling's fall will affect profits, it has also prompted increased inquiries from overseas buyers since Brexit.

As of the end of last month, 88 per cent of about 3,400 units at the Royal Wharf had been sold, it said. It plans to double marketing efforts in the Middle East and Asia.

City Developments (CDL), which has 22 hotels in Britain through its London-listed unit Millennium & Copthorne Hotels (M&C), said the impact of the currency fall is seen when the British operations are consolidated into Singapore dollars in the accounts of M&C's parent, CDL.

Despite perceptions that a weaker sterling will make Britain more attractive to travellers, the firm has yet to see evidence of this. CDL executive chairman Kwek Beng Leng said that raising rates would be difficult, but added that he expects a boost in domestic British tourism, which would benefit M&C.

"During this period of economic uncertainty, our strategy is to ensure that costs are controlled. This is a very important factor," he said.

For conglomerate Sembcorp, which provides utilities to chemical and other manufacturing firms, the weaker sterling has been a boon.

"We haven't seen any fall in demand from our customers in Britain thus far. In some cases, some are even increasing production to take advantage of the weaker pound," a spokesman said by e-mail.

Singapore Business Federation (SBF) chief Ho Meng Kit said for its members with business in Britain, things are back to "near normal".

He noted that as Singapore firms operating in Britain are largely in the services and hospitality sectors, Brexit would be "less impactful" for them than firms using Britain as a manufacturing hub to Europe.

Lawyers here said that clients are making preparations, although nothing has been executed.

Ms Sophie Mathur, a Singapore-based partner at Linklaters, said that while firms here were not feeling the impact on a day-to-day basis, companies and investment managers were looking at areas such as data-sharing rules.

"Under Singapore's Personal Data Protection Act, you can export data to a country with an equivalent regime, or take steps to ensure that data is treated as it would be here," she said. "The EU is generally seen as the gold standard for data protection laws. It is not yet clear if the new United Kingdom rules will be an equivalent regime.

"Singapore firms will have to assess the extent to which the regime there is equivalent to Singapore's, and whether they are allowed to transfer data there without taking additional steps."

The latest available figures from the Department of Statistics show that Singapore's foreign direct investment in the UK amounted to $41.6 billion in 2014.

Meanwhile, investment managers might have agreements with clients to buy EU funds, which would have implications for how the agreements would pan out from a "definitional point of view", Ms Mathur added. "We are poised to start amending those agreements but, as of now, we can't."

Ms Lee Suet-Fern, senior director of Morgan Lewis Stamford's Singapore office, said companies were looking at dispute resolution provisions in their contracts.

"With respect to new contracts, where possible, many Singapore corporates active in Europe are now more keen to push to use Singapore law and Singapore dispute resolution, for familiarity and clarity. Counter-parties are becoming more receptive to this."

A version of this article appeared in the print edition of The Straits Times on September 19, 2016, with the headline 'Singapore companies take wait-and-see approach'. Print Edition | Subscribe