Brexit – what next?Commentators have been shocked by the depth of divisions revealed by the UK’s decision to leave the European Union. North and south, young and old, it seems have revealed starkly differing views on the country’s place in the world and the best means of positioning itself in a rapidly changing economic order.
We asked the partners and staff at Russell Bedford member firms Cooney Carey, Dublin, and Lubbock Fine, London, for their views on the referendum, the key challenges they see going forward, and how these are likely to impact British and international businesses most directly.
Doing business in a post-Brexit world
Mark Turner, managing partner of Lubbock Fine, suggests adjusting to a new and more uncertain world is the key imperative for UK – and international – businesses, in the medium term. “Envisaging a future outside the European Union, our clients certainly face a range of uncertainties. Whilst the brouhaha has died down a little, Brexit’s effect on business is still far from clear. Whilst avoiding decision making tends to be bad for business in general, until the government has at least outlined its plan and taken some major decisions, decision avoidance is probably inescapable. As none of us has any idea of what is likely to happen or when, planning for higher interest rates, lower interest rates, for boom or for bust just isn’t possible.”
The collapsing pound – and its effects
Keen to see how their younger staff felt about a change in the political environment likely to affect their generation above all others, Cooney Carey ran an internal survey of its younger members (anyone under 30), managed by audit manager Michael O’Halloran (himself one of the firm’s younger cohort). He reports that, with the pound’s (precipitous) fall against the dollar and the euro being one of the most striking effects of the Brexit vote, Cooney Carey staff had a number of concerns in terms of currency risk. Although recognising the benefits for exporters, some businesses may be concerned that a weak pound could lead to inflation, impacting Irish exporters’ competitiveness against the UK. While currency hedging might form part of a long-term risk-management strategy here, the prospect of a prolonged drop in sterling could be a matter of serious concern.
While also recognising the potential risks, Lubbock Fine’s Mark Turner does see a number of upsides here, however. “For our overseas clients, the fall in the value of the pound might present a range of opportunities to buy into the UK at what is now, effectively, a huge discount as compared to pre-Brexit prices. Conversely, those overseas clients with investments and businesses in the UK may be worrying about their residence status in the country, and whether they should stop investing – at least until there is more clarity about the future. For UK clients in the export business, or those who rely on overseas customers, the fall in the pound may well provide great opportunities for increasing sales and exports abroad.”
Free movement and border controls
Another issue front of mind for Cooney Carey’s under-30s. With many clients making the north–south crossing every day, there was particular concern that their country would feel the impact of any changes here more directly than their peers in Britain or Europe. The potential re-introduction of border controls between the Republic of Ireland and Northern Ireland, in particular, was seen as a genuine and immediate risk to their own lifestyles. While debate continues as to whether this will be limited to ports and airports, or extended to road transit, this was universally recognised as threatening a significant cost for businesses. “While younger staff seem to be broadly relaxed about Ireland’s status within the EU, there is very real concern as to what impact any reintroduction of border controls might have.”
Access to the free market
Younger staff at Cooney Carey were also concerned by potential changes in terms of access to the free market, with many concerned at the re-introduction of borders and tariffs, and the inevitable increases in business costs, both into and out of the United Kingdom. Respondents in Dublin had little confidence in the likelihood of a special trade agreement between Ireland and the UK, arguing that Member States would regard this as putting their own countries at a competitive disadvantage. While some staff believe the UK would ultimately be able to negotiate access to the free market (the “Norway model”), many were concerned that this might come at a considerable cost to the UK. “While remaining confident about Ireland’s position in the long term, there is clear concern that the re-introduction of borders and tariffs could have a strongly negative impact on both Ireland and the UK.”
Mark Turner agrees that the current uncertainty is not helpful for business. “We now know who the Prime Minister is but it’s not wholly clear whether there will be a snap General Election. All of this uncertainty leads to a sense of unease for everyone. There are many different ways our negotiations could go, with the ideal outcome being continued access to the Single Market. But, of course, this will be unpalatable to the EU unless a compromise on the free movement of people can be reached.”
Many under-30s in Dublin also expressed concerns that Britain’s Brexit woes could have a destabilising effect on the EU as a whole. Seeing the UK as a stalwart ally to Ireland before the EU parliament – particularly on controversies including the country’s low corporation tax (an issue of particular interest given the recent ruling on Apple) – they are concerned that the country will now have to battle alone, having far less influence without the UK’s support. “Younger colleagues’ concerns about the potential wider destabilisation of the EU are a clear reflection of the generational priorities of the Brexit vote, and highlight one of its most serious implications.”
So – post-Brexit – what should businesses be doing now?
Lubbock Fine’s Mark Turner suggests businesses could do far worse than to view this as an opportunity to regroup and review. “In this unprecedented situation, it might be helpful for businesses to prepare a risk management or business continuity plan. If predominantly good or bad things might arise for your business as a result of us leaving the EU, identifying the assets and functions that need protecting from the worst of the impact would be a wise move at this stage. Investigating the solutions for ensuring your business will not be unduly affected, and the nature of any inherent risks, might also be expedient now. There are a range of exercises that could be undertaken now, such as revisions to forecasts and projections, reviewing management figures, considering the exchange rate difference and the impact on markets and imports/exports. Clients may wish to consider different trading relationships, opening up other international markets and adjusting prices, fees, forecasts, and so on.”
A view echoed by Cooney Carey’s Michael O’Halloran. “Ultimately, the overriding concern – certainly among people we spoke to – is the sheer uncertainty as to what will or won’t happen. In the stock markets, the currency exchanges, the broader economy, and the UK and EC political systems. But Ireland is consistently among the top-ten most business-friendly environments in the world. The Brexit vote won’t change this. Government and regulators should now be looking at ways in which to enhance investment attractiveness for multinationals and financial organisations. There is wide recognition, however, that until Article 50 of the Lisbon Treaty is actually invoked, it’s very much business as usual.”
Established in 1983, Russell Bedford International is a global network of independent firms of accountants, auditors, tax advisers and business consultants. Ranked amongst the world’s leading accounting and audit networks, Russell Bedford is represented by some 600 partners, 5000 staff and 290 offices in more than 100 countries in Europe, the Americas, the Middle East, Africa and Asia-Pacific. Russell Bedford International is a member of the IFAC Forum of Firms and a member of EGIAN, the European Group of International Accounting Networks and Associations.
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