TRADITIONALLY August is a quiet month for accountancy firms. Not so this year, though. The surprising ‘leave’ result following the 23 June referendum on whether the UK should exit the European Union means firms of all sizes have got their work cut out for them this summer.
Like many companies most firms set up ‘emergency’ Brexit task forces within hours of the ‘leave’ result announcement. The main aim of these so-called Brexit committees was to have a single port of call for clients where partners could allay immediate fears about the unexpected referendum result and respond to business queries on finance, tax, deals and cross-border transactions, among other pressing issues.
In the wake of the ‘leave’ outcome, the rising panic felt among many businesses was reflected in the markets and sterling. A month on since the referendum and some of that market volatility has subsided. The value of the pound remains low however.
In the calmer climate that is now seemingly prevailing it appears that nothing has happened, and as yet very little has changed, but there is much to do. KPMG is taken a rather nifty, logical approach to their Brexit plan, the so-called 2-2-2 plan. This translates into two weeks, two months, and two years. Not only is this approach rational in guiding companies to map out future plans clearly, it fits in neatly with the supposed timeframe (two years) it will take for Britain to leave the EU once prime minister Teresa May triggers Article 50 of the Lisbon Treaty.
Karen Briggs, head of Brexit at KPMG says the immediate issues that they have been helping clients deal with have primarily focused on people and finance. Many companies have at least some EU nationals working for them so it has been a case of communicating that nothing will change for them in terms of their current status to remain in the UK.
“There are immediate issues, for example people and finance, and then with the less immediate you can set out in a risk map and then for the longer term you need forensic analysis of your business,” Briggs says.
Aside from working closely with companies on the immediate issues Briggs says KPMG is liaising with government, trade and consumer organisations on behalf of clients to influence the debate about Britain’s exit from the EU and what our future trade arrangements with the EU will look like.
EY, PwC and Deloitte have all also set up Brexit teams and are working with clients and liaising with trade bodies to help shape Britain’s EU exit.
BDO has also set up a five-partner Brexit task force with the idea of assimilating all the information and building a strategy not just for its clients but for the firm as well. “It’s important that we look at all the issues first-hand then we can share our own experiences with the clients,” says Stuart Lisle, tax partner who sits on BDO’s Brexit taskforce.
Ifs, buts and maybes
Lisle suggests it is more likely to be three years before Britain leaves the EU given that there are three general elections scheduled for next year in Holland, France and Germany. There would be little point in May, or rather foreign secretary Boris Johnson, negotiating new trade terms with the incumbent leaders in those EU countries if they might not hold power by the end of 2017.
“Three years is a long time in business. There are a lot of ifs, buts and maybe, and few clear messages coming out of government,” Lisle says.
That said, BDO is working with clients to scenario plan around the five possible trade models that Britain could adopt post-exit. BDO has also just set up a Brexit-dedicated microsite for clients. And in terms of opportunities for the firm, BDO has been approached by international organisations overseas wishing to get a first-hand view of “what is happening on the ground in the UK”.
“The main message is ‘don’t panic, there’s lots of time’, but you need to have it on the agenda and have someone responsible for keeping the board abreast of changes and developments,” Lisle says.
How smaller firms are responding
Bobby Lane, head of outsourcing and business development at Shelly Stock Hutter at the smaller end of the accountancy scale, whose clients include start-ups, SMEs and subsidiaries of multinationals, are advising any clients dealing with foreign exchange to derisk their exposure immediately.
The main advice Lane’s firm is handing out is to make sure business forecasts are up-to-date and identify any cash requirements due to the potential for a rise in the cost of capital. The greatest pain point for some of his clients has been the fall in sterling, which may have led to some being close to breaching loan covenants.
Lane is confident opportunities are afoot for his firm. “In times of stability business get complacent and price becomes the driver in choosing a business adviser. But in times of uncertainty people look for the best option and not the cheapest option,” he says.
An issue of mindset
As for the advisers of small, one-person businesses like Dennis & Turnbull, accountant Carl Reader says that after the initial panic following the result “not much has happened”.
“It’s more an issue of mindset,” Reader says.
Of course there is some pain for clients who are importers of goods given the fall in sterling but Reader says markets priced it in a while ago, and on the flip side exporters are benefitting from a weaker pound.
The overall message from accountants is – that once you have allayed the fears of EU staff and ensured your financing needs are in place – to remain calm and to think logically about the potential outcome further down the line and its impact on your business.
Unless something radical happens between now and when Article 50 is evoked – and of course we can’t rule that out given the recent state of political turmoil in the UK – it is indeed business as usual. And for some, a lot more business than is usual for this time of year.
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