How has the accountancy world reacted to Brexit?
In the aftermath of Friday’s EU referendum result, ICAS issued a statement and posed 20 questions to political leaders. How has the wider accountancy profession responded to the UK’s decision to leave the EU?
IFAC: ‘Collaboration is more vital than ever’
The International Federation of Accountants (IFAC) said that the EU referendum vote “caught many by surprise” and warned that the UK’s withdrawal process from Europe could be “long and complex”.
“The accountancy profession will have an important role to play in the myriad issues that will need to be addressed,” IFAC CEO Fayezul Choudhury said.
Fayezul added that IFAC has always stressed the need for governments, businesses and the regulatory community around the world to co-operate and work together.
"Brexit makes this collaborative approach all the more vital, and the global accountancy profession must be engaged in bringing its experience and expertise to bear in many of the areas where work will be needed,” he said.
FRC: ‘Regulatory framework unchanged’
The Financial Reporting Council (FRC) stressed that its regulatory framework is “unchanged” and would continue to apply it, despite the referendum result.
The FRC said it would “pay close attention to the decisions now taken by the Government and Parliament, and continue to work in collaboration with our key stakeholders, particularly investors, business and the professionals we regulate, in order to ensure our work continues to support economic growth."
FCA: ‘Longer term impact depends on future relationship’
The Financial Conduct Authority (FCA) said the result has “significant implications for the UK” and it is monitoring developments in the financial markets closely.
“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament.”
The FCA said that firms must “continue with implementation plans” for legislation that is still to come into effect, including legislation derived from EU law.
“The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future,” the FCA said.
The Big Four and accountancy firms: ‘Businesses will adapt’
The Big Four and other global accountancy firms have sought to highlight the resilient and adaptable nature of British businesses in the wake of the referendum, and stressed that they have been working with clients to help them prepare for either a leave or remain scenario.
EY UK Chairman Steve Varley said the UK was entering “uncharted territory”, making the consequences of the decision “almost impossible to predict”.
He said that businesses will need to “hit the button on the short-term contingency plans that many have been working on in recent months, while also starting to plan for the longer term”.
Steve added that “above all else, it is vital that the message that the UK is open for business should not change”.
“One thing is certain: Brexit will result in a number of large-scale changes for UK plc – in areas such as trade, employment, regulation and Government policy. Few changes are likely to happen overnight. As a result, businesses now have a prime opportunity to take proactive steps to prepare for the challenges and opportunities that lie ahead.”
PwC Chairman and Senior Partner Ian Powell said the decision will have “significant implications for businesses”.
While he warned of uncertainty over the coming months, and a potential knock on effect on business confidence, he said that “history has taught us that UK business is adaptable and innovative when confronted with new challenges and opportunities”.
Gilly Lord, PwC’s UK Head of Regulatory Affairs, added that the UK’s current implementation of EU audit regulation “shouldn’t be affected in the short to medium term”. While in the long term the UK “could see some changes in the rules”, she said it was likely that the UK would “continue to apply the European regime to maintain market access”.
“In or out of the EU, the focus must still be on improving audit quality, confidence in auditors, competition and ensuring auditor independence”, she said.
Deloitte UK CEO David Sproul said that businesses need to ensure they take steps to “navigate the immediate risks and impacts of an exit” and have the processes and people to “manage a period of upheaval”.
David commented that the UK’s place as a hub for innovation and a world leader in R&D will help businesses respond to the new environment.
“Against this backdrop of uncertainty, British businesses must continue to be proactive in finding ways to raise productivity and drive growth,” he said. “They must also play an active role in setting a vision for a new, post-EU environment which is open, pro-growth and delivers prosperity and opportunity for all.”
KPMG Chairman Simon Collins called the referendum result “a new era for business”.
"Companies are concerned and need time to assess the implications”, but stressed that “businesses are resilient and will adapt to any new landscape," he added.
The firm’s UK’s Head of Macroeconomics, Yael Selfin, said that the “thick fog of uncertainty” will make it hard for businesses to make long term plans. Yael warned that in the short term, UK GDP growth could be 0.5% to 1.5% lower on average than if the UK had voted to remain, and 4% to 6% lower in by 2031.
“Businesses need to reassess priorities and adjust for fresh realities in terms of new tariffs and other trade restrictions, pressures on wages and labour availability, and a deterioration in public finances,” she said.
Robert Hannah, Chief Operating Officer of Grant Thornton, said that while most of its clients “favoured remaining in the EU”, the important thing now is “to focus on the future and building a strong and vibrant UK economy”.
"No Member State has left the EU before and there is no agreed process for building a UK outside the EU. Business needs to lead this debate and help shape a vision of what a vibrant UK outside the EU will look like," he said.
Robert added that he hoped the government would prioritise the negotiation of trade deals and said businesses wanted a “review of UK employment legislation” and “agreement on rules governing competition, state-aid and anti-trust regulation as soon as possible”.
BDO's Managing Partner Simon Michaels described the referendum result as sending "shockwaves through UK businesses". He said that businesses that are adaptable will be best placed to trade profitably and take advantages of opportunities.
Simon also commented that it is possible for the Chancellor to call an emergency budget, which could "bring substantive tax changes fairly quickly". "These are expected to be good news for businesses, as the Government seeks to bolster the UK’s attractiveness as a business location."
He called on the government to reassure global markets and "develop a new relationship that plays to our traditional strengths as a great economic and exporting nation".