Does the ICAEW love Brexit?
Recent media coverage of a pronouncement by ICAEW Chief Executive Michael Izza gives the strong impression that the Institute has now embraced Brexit with all of the enthusiasm of the more radical Tory leadership candidates.
The best starting point might be a news article in the body’s house journal, Economia. This tells us that “The UK economy is proving to be more resilient to Brexit uncertainty than expected”.
As a consequence, we may well find ardent Brexiteers shouting from the rooftops that accountants love their baby, although one doesn’t need to get too far into the article to discover that the initial suggestion could be a little misleading, depending upon initial expectations.
The point to note is that views appear to be based on a three-year period during which plans to leave Europe have not at any point been clear. This exclusively historical perspective is potentially dangerous.
As a result, for reasons that aren’t entirely clear, although the information provided by the Institute’s economists suggests that uncertainty has and is continuing to damage the economy, the chief executive’s statements on the topic seem unexpectedly upbeat.
Mr Izza is quoted as saying: “There is no doubt that heightened Brexit-related uncertainty is weighing on business sentiment. Household and company spending and saving decisions are influenced by expectations of the future economic situation. But as long as a no-deal Brexit is avoided, history suggests that the current ‘new normal’ of elevated uncertainty may not impact as much as some expect.
“Of course, cuts in investment by some businesses in response to uncertainty are unlikely to be reversed, even once the UK’s departure from the EU has been resolved. But if policymakers remain on the ball, the overall macroeconomic effect of the Brexit limbo businesses currently find themselves in should be manageable.”
Such conclusions seem directly at odds with the “related” articles highlighted by Economia which include “UK business confidence remains negative”, “EY economists cut UK growth projections” and “Gloomy outlook prevails for UK economy”.
This writer had always been brought up to believe that accountants were supposed to be prudent. Generally if there was any doubt at all presenting a marginally more negative view of performance than the underlying figures might suggest.
In part, this offers much-needed protection if anything goes wrong, which sadly has been the case in respect of far too many audits carried out by those at the pinnacle of the profession in recent years.
In the current instance, as this reader understands the information presented, all that the ICAEW economists are saying is that we expected Brexit to be an unmitigated disaster and to date, it has just been an expensive exercise.
In this column a few months ago, it was suggested that the only way to evaluate Brexit properly was for somebody to work out the future costs and benefits and match one against the other. If somebody could actually take on this exercise then, whatever our view of the subject, we might all feel much better about future prospects.
Disappointingly, rather than attempting to do this, the ICAEW has chosen to make some blandly neutral statements based on what appears to be limited information and then put the kind of positive spin on them that one expects from politicians desperate to protect their positions.
It is to be noted that the Institute stopped short of supporting a no-deal Brexit, which might give pause to thought for at least one and possibly both of the final two candidates in the Tory leadership election, whoever they might be.
It is deeply disappointing that three years after a referendum that was supposed to have determined the will of the people and the actions of the government, we seem to be in almost exactly the same state of ignorance and uncertainty as we were in June 2016.
I now issue a challenge to Mr Izza and his team. As prominent figureheads of our profession, perhaps it is time for you to get off the fence and come up with some firm numerical projections to tell us whether or not Brexit will be better value than remaining in Europe in the medium to long-term and, if there is good news, how an exit and future policies can be achieved that will optimise the financial benefit to the country and, much more importantly, accountants.