CAs highlight the cost of Brexit uncertainty
The Brexit process has already led to costs for finance professionals and their organisations, even before the UK has left the EU.
According to the latest quarterly survey carried out by ICAS, the Institute of Chartered Accountants Scotland, in association with leading law firm Brodies LLP, seven out of ten CAs surveyed said that their organisation had incurred costs already as a result of Brexit.
For around half (49%) the costs were not material, whilst 18% said costs had been “significant”.
The ICAS Brexit Tracker for Summer 2019 also shows that those in larger organisations were more likely to report costs, with 57% saying that Brexit has led to costs, but not material costs; and 25% reporting significant costs.
Other effects already noted so far include:
- 54% said it is already harder to recruit EU nationals;
- 48% said it has been hard to retain EU nationals;
- 48% said their organisation has delayed making investment decisions;
- 36% had already made changes to their supply chain;
- 34% said it has become harder to secure investment;
- 31% have put extra resources into stockpiling goods or materials; and
- 23% have already transferred some staff/operations from the UK to elsewhere in the EU.
Optimism falls slightly since Q1
The ICAS Brexit Tracker, which charts optimism/pessimism on a scale of +50 to -50, found that CAs are very slightly more pessimistic regarding the impact of:
- Brexit, so far, on the respondent’s organisation (-14, compared with -13 in Spring 2019);
- a negotiated Brexit, on the respondent’s organisation (-10, compared with -6 in Spring 2019);
- a “no-deal” Brexit, on the respondent’s organisation (-23, compared with -22 in Spring 2019);
- a negotiated Brexit, on the UK economy (-13, compared with -11 in Spring 2019); and
- a “no-deal” Brexit, on the UK economy (-13, compared with -11 in Spring 2019).
The survey also asked: “is your organisation prepared for a ‘no-deal’ Brexit?”. The CAs polled said:
- 14% Very prepared
- 44% Quite prepared
- 17% Quite unprepared
- 14% Very unprepared
- 11% Don’t know/prefer not to say
Nearly seven out of 10 (68%) said they had carried out scenario planning for Brexit; 66% had created an internal working group or assigned a senior manager to co-ordinate planning; and 59% had sought external advice.
Less than a quarter expect UK will leave the EU before new deadline
Just under one in four (23%) expect that the UK will formally leave the EU before 31 October (the extended deadline agreed with the EU) and a further 23% think the departure date will be on or after 31 October, but this year. One in four (25%) believe Brexit will take place in 2020 or later, and nearly a third (29%) say it will not happen at all.
Meanwhile, expectations for the economy over the next two years reflect the general mood of uncertainty. On the Bank of England interest rate, the overwhelming expectation is that it will go up (38% say this will go up but will still be less than 1.5%; 43% say it will go up to 1.5% or more).
More than half (55%) expect sterling to fall over the next two years and a large majority (74%) see inflation rising.
ICAS Chief Executive Bruce Cartwright CA said:
“It’s good to see that a majority of our members’ organisations have already taken action to prepare for Brexit, but the continuing uncertainty over the timing and nature of what might happen makes it hard for businesses to take appropriate steps.”
Christine O’Neill, Chairman, Brodies LLP, said:
“The survey suggests that organisations are increasingly taking steps to plan for Brexit, including a no-deal scenario, and this accords with what we have seen in terms of our clients seeking and implementing advice.”