Moulton on Brexit: I’m definitely in favour of ‘out’

Better Capital founder Jon Moulton is in no doubt about his position on whether the UK should remain in the European Union.

“I’m definitely in favour of ‘out,’” he told Private Equity International.

Moulton’s views are in opposition not only to his Guernsey neighbour Guy Hands, who told the SuperReturn Conference in Berlin last month that he believed “Britain staying in the EU is the right thing for Britain and for Europe”, but seemingly contrary to the majority of the private equity industry.

In a poll by PEI last week, an overwhelming majority – 75 percent – of private equity practitioners expressed their desire for the UK to remain in the EU.

However, Moulton, who is not intending to vote in the June 23 referendum, said he prefers a system under which the UK is “in control of its own direction”.

“The eurozone as a whole has in the last 10 years generated no growth in GDP per capita. It’s not a great advert for the system,” he said. “Why would you want to join a club with such miserable dynamics?”

Moulton added that it is in the interests of all parties to make sure the UK’s exit from the EU is “as soft as possible”, and therefore he is “fairly sanguine that it’s unlikely we’d be chucked into the outer darkness and find ourselves with corrugated iron wrapped around the island”.

“It’s quite easy to say ‘in’ or ‘out’, but the reality is likely that if there’s an ‘out’ vote it will end up intermediate,” he said.

“If you look at the processes for us coming out of the EU, it takes about two years, during which time there is an abundance of opportunity for negotiation and renegotiation. I would expect that if there is an ‘out’ vote, during that period you would end up with some relationship which might be free trade and a few other things remaining in place.”

An ‘out’ vote would allow the UK to shake off “a great deal of the huge number of European bureaucratic nuisances”, including the social chapter and a provision in the Modern Slavery Act 2015 which requires businesses with a turnover of more than £36 million to produce an annual statement on steps taken to ensure modern slavery is not occurring in their supply chains and their own organisation.

“I hate bureaucracy and complexity, and the EU is a master of producing it,” Moulton said.

Within the private equity industry, Moulton pointed to the Alternative Investment Fund Managers Directive (AIFMD), a regulation imposed by European Commission, as an example of unnecessary bureaucracy with little benefit.

“If you stay in Europe, certainly less disturbance in the short term, but long term a really slow strangulation by legislation and regulation as Europe heads towards the softest possible position.”

Moulton said he doubted whether a Brexit would have any net effect across Better Capital’s portfolio companies, although any potential negative effect would come from currency changes.

As a turnaround investor, there may be some benefits to Brexit in that some companies could be brought into distress either through the uncertainties or realities of a Brexit, Moulton said.

There could also be wider benefits for the UK private equity industry as a whole.
“You might find yourself in a world where the anti-private equity feeling that resulted in the AIFMD and the remuneration stuff was not so apparent. You might end up with a friendlier environment,” he said.

“Certainly the UK would be anxious to promote its financial services outside of the EU, although I would imagine if there are going to be changes to regulation they would tend to be in the direction of attracting more business.”

The outcome of the upcoming referendum is still far too close to call; according to the latest figures from a poll of polls, 51 percent of Britons support remaining in the EU.