Large businesses planning to move activities out of the UK, Brexit survey reveals

Brexit Insights

20 March 2017

At least one in four large businesses in the UK are considering transferring some activities to elsewhere in the EU as a result of Brexit, according to a poll of finance professionals.

The findings come from a survey of members of ICAS, the professional body for more than 21,000 world class business men and women, in association with leading law firm Brodies LLP.

More than 1,000 Chartered Accountants (CAs), based throughout the UK, the EU and worldwide, took part in the survey, which took place ahead of Prime Minister Theresa May formally triggering Article 50.

The survey appears in the April 2017 issue of The CA magazine, the ICAS membership publication.

Four out of 10 of those polled predict that the UK Government will not be able to negotiate a free trade deal with the European Union by the time Brexit takes place. The majority (59%) would also favour continued participation in the EU Single Market, even though almost all (98%) believe that will not be the outcome of the Brexit talks.

Of those in larger organisations (250+ employees), 21% said their organisation is considering transferring at least some activities from the UK to elsewhere in the EU, and 8% said that this is already happening. Of the smaller organisations only 4% are considering this and only 2% are already doing it.

The ICAS Brexit Tracker

The ICAS Brexit Tracker is the first in a series of quarterly online polls assessing the degree of optimism (or otherwise) of its members regarding the impact of the Brexit process so far, and the likely impact of the UK leaving the EU. The tracker charts a range of responses from -50 (very negative) to +50 (very positive).

In this, the first survey in the series, on average the sentiment regarding the impact of Brexit so far was moderately negative (-7) for non-retired CAs. Those in larger organisations (250+ employees) were slightly more pessimistic (-10) and retired CAs less so (-3). Asked to predict how positive or negative the outcome of Brexit would be, for the respondent or their organisation, views were somewhat more pessimistic, as shown in the table below:

 

Impact so far on you or your organisation

Impact post-Brexit on you or your organisation

Impact post-Brexit on UK economy

All*

-7

-12

-14

Large organisations (250+ employees)

-10

-16

-19

Small (SMEs and sole practitioners)

-5

-9

-10

Retired members

-3

-5

-4

Retired members based elsewhere in the EU (not the UK)

-17

-30

-24

* excl retired members

The most pessimistic group was retired members living elsewhere in the EU. Within these averages, however, the views expressed by all those polled varied very widely from very positive to very negative.

Objectives

The survey also asked respondents to rate the relative importance of different negotiating objectives. Although all groups selected “minimising regulatory barriers” as the top priority, there is a marked difference between larger (with 250 or more employees) and smaller organisations. The latter rated “a free trade deal with the EU” as the second priority, while the larger organisations said “the ability to hire EU nationals for UK roles” is second. For larger organisations, access to the Single Market per se is also less important than ensuring that there is a transitional period to allow business to adjust.

All*

  1. Minimise regulatory barriers.
  2. A free trade deal with the EU.
  3. Access to the EU Single Market.
  4. Low tariffs (on EU- and non-EU trade).
  5. A transitional period to allow business to adjust.
  6. Ability to hire EU nationals for UK roles.
  7. Ability to hire non-EU foreign nationals for UK roles.
  8. Retaining UK equivalent of EU grants and other support.

Smaller organisations and sole practitioners

  1. Minimise regulatory barriers.
  2. A free trade deal with the EU.
  3. Access to the EU Single Market.
  4. Low tariffs (on EU- and non-EU trade).
  5. A transitional period to allow business to adjust.
  6. Ability to hire EU nationals for UK roles.
  7. Ability to hire non-EU foreign nationals for UK roles.
  8. Retaining UK equivalent of EU grants and other support.

Large organisations (250+ employees)

  1. Minimise regulatory barriers.
  2. Ability to hire EU nationals for UK roles.
  3. A transitional period to allow business to adjust.
  4. A free trade deal with the EU.
  5. Ability to hire non-EU foreign nationals for UK roles.
  6. Low tariffs (on EU- and non-EU trade).
  7. Access to the EU Single Market.
  8. Retaining UK equivalent of EU grants and other support.

Professional practice

  1. Minimise regulatory barriers.
  2. A free trade deal with the EU.
  3. A transitional period to allow business to adjust.
  4. Access to the EU Single Market.
  5. Low tariffs (on EU- and non-EU trade).
  6. Ability to hire EU nationals for UK roles.
  7. Ability to hire non-EU foreign nationals for UK roles.
  8. Retaining UK equivalent of EU grants and other support.

* Excluding retired members

Mike McKeon CA, Chair of the ICAS Brexit Advisory Group, commented: “This first survey is an important step in understanding what finance professionals spread across many industries and geographies are thinking about Brexit. This survey shows the key issues of regulatory barriers, ability to hire the right people and free access to markets remain high on members’ concerns, but it also shows their current optimism is not high that this will be the final outcome.

“We will carry out regular follow-on surveys to assess how these priorities and optimism for their success vary over time.  Members, government and other stakeholders are already taking an interest in these results. We at ICAS will continue to ensure these and future views are made available to our stakeholders and through this seek to influence their future thinking.   We would therefore welcome members’ continued support for our surveys.”

Preparing for Brexit

What are organisations doing to prepare for Brexit? Of the larger organisations 63% are already planning and 26% are considering doing so. Of the smaller firms, only 21% are planning as of now, and 32% are considering it.

Nearly six in 10 (57%) of the larger organisations are consulting external advisers (or considering doing do), while only 15% of smaller organisations are doing or considering this.

Christine O’Neill, chairman of Brodies LLP, commented: “It will be interesting to see whether the very negative scores for business confidence reported in this Brexit Tracker survey improve as the Brexit negotiations progress.  It must be assumed that ongoing uncertainty about how the UK Government (and the EU) will approach the negotiations – and the knock on difficulties of predicting how a new relationship will look – is playing a major part in the confidence ratings.”

The markets

Finally, we asked members for their predictions regarding the UK economy and markets. There is a strong consensus that UK interest rates are set to rise (68%), and also that inflation is set to increase (82%). Opinion was more divided regarding exchange rates, with 20% expecting the value of the pound to rise, 43% that it will fall and 33% that it will stay the same.


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