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Brexit
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Brexit: The Practice Excellence response

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27th Jun 2016
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As the country contemplates a future outside the European Union, UK businesses will inevitable struggle with the uncertainties thrown up by the referendum result. This is a situation where proactive business advisers can prove their worth.

Whatever they think personally about the referendum result, there is still an opportunity for accountancy practitioners to lend a helping hand to clients who may be inconvenienced or more deeply concerned about its impact on their businesses.

No client will ever resent you for overcommunicating with them at times like this. As with any major change, they need your help more than ever.

AccountingWEB member Younis came on to the early on Friday morning to report: “Since 9am I'm being phoned by my EU clients who have invested their money and established their businesses here in the UK. All of them with almost the same questions: what will happen for their investments, businesses and NI contributions if they are asked to leave the UK? And do they have to stop investing?”

Over at last year’s Large Firm Practice Excellence Award winner Rouse Partners LLP, managing partner Neil Relph circulated a message on Friday morning explaining how the practice would go about communicating with clients to present a consistent, reassuring message.

Rouse is now planning a client communication programme, explained marketing director Stuart Eaglestone, which will include “one-to-one communications with clients to individually address the challenges and opportunities that they face”.

Identify and mitigate the risks

It can be helpful in a situation like this to treat the Brexit scenario as a risk management or business continuity planning exercise. If bad things are going to result from leaving the European Union, you should identify what functions and assets need to be protected from the impacts, the nature of the risks posed and solutions for ensuring the business will not be unduly compromised if the worst case scenario should come to pass.

The first step for practices should be to review which clients are likely to experience the most significant impacts or suffer most from post-referendum volatility. One ICAEW guide on the subject in 2011 talked about the importance of communicating rescue plans effectively to create a “continuity culture” within the business. This is a principle that also transfers well to client service.

Many of the firms that have nominated and won Practice Excellence Awards in recent years position themselves as proactive business advisers. In the wake of the referendum result announcement, we contacted them to find where they were anticipating problems and how they were communicating to clients about Brexit.

Opportunities amid the uncertainty

“The inevitable reaction to a time of uncertainty is to avoid decision making, which isn’t good for business, but is probably inevitable,” said Roger Isaacs, a partner at multiple PEA winner Milsted Langdon.

“When you’ve got no idea what is happening, you don’t know whether to plan for increased interest rates or decreased interest rates, or for a boom or for bust. All we and our clients can be is swift in foot and nimble enough to take advantage of opportunities as and when they arrive and mitigate the effect of the inevitable effects to their business,” he said.

Practice Excellence growth award winner Sharon Pocock reported clients feeling the effects of the leave vote as early as Friday. “Obviously with the pound falling dramatically, I have clients who see this result as devastating for their business, where they import their products,” she said.

Pocock echoed the sentiment that it is crucial to stay positive and seek out opportunities amid the gloom: “We have a foreign currency broker client, who has been very worried about the result of the referendum. But this could also be an opportunity for them if we can introduce them to other clients who now need to look at their exposure to exchange rate fluctuations.”

Planning for different scenarios

Throughout the EU Referendum debate Practice Excellence firms like Kinder Pocock, Milsted Langdon and Rouse Parnters took a pro-active stance to monitor developments and keep their clients informed. Rouse, for example, took a neutral position on the vote, but ran a website poll and discussed the tax and business implications with clients.

Speaking at TaxCalc’s smart practice seminar, Mark Lee suggested the result presents “a raft of opportunities for accountants servicing clients if they want to do more than compliance work”, such as revising forecasts, projections, reviewing management figures, considering the impact on markets, exchange rate difference, important and exporting (see below for full interview).

In the weeks ahead, Kinder Pocock will be running multiple scenario forecasts for clients, reviewing the impact of different exchange rates if the pound does or does not stabilise and discussing actions with clients to limit risks.

“As the future starts to emerge and become clear, we need to discuss with clients what changes might need to be made to their businesses, whether this is looking at different trade relationships in other international markets, or adjusting forecasts, prices, fees and so on,” she said.

Replies (2)

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By Ian McTernan CTA
28th Jun 2016 13:31

Larger importers with any sense would already have a currency risk management strategy in place and usually also hedging against major currency movements- especially around the referendum time.
The bigger challenge is adjusting to the new exchange rate which should boost exports and restrict imports, giving a boost to UK manufacturers, and advice should be geared towards exploiting that.
It's too early to plan for multiple scenarios as the only certainty at the moment is it will be at least two years before any agreement comes into force, and until someone at least outlines their proposals any planning is likely to be wasted money.
Expect not a lot of major change to the current agreements in the shorter term except being rid of ECJ and ECHR and some restrictions on immigration, medium term VAT changes.
Biggest issues will be around VAT and the single market and clients should be looking at systems to put in place that have the flexibility to cope with the different scenarios being highlighted by the VAT experts.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
29th Jun 2016 18:49

I just had an interesting conversation with Chris Lamont, a partner with PEA winner Lamont Pridmore in Carlisle.

Ahead of the referendum the firm carried out its own polling exercise and came up with a 50:50 prediction. It also drew up a "worry list" of around 40 clients that were likely to be affected by a Leave victory. The firm also did a bit of work to assess how those clients might be affected and talked to them about things like exchange rate exposure and the effects on imports and exports.

Since Friday, the Lamont Pridmore team has gone into "hands-on" mode with around 18 of the clients on the at risk list. In some cases this has involved conversations with banks and suppliers, and advice on their foreign currency strategies.

Chris told me that the full repercussions may not have sunk in yet for other Lamont Pridmore clients, but the firm will continue to work its way through its list to make sure they are aware their accountant can help when the risks and impacts become clearer.

It's a great example of proactive business advice, married to good planning and execution. We'll be talking again soon for a follow-up article along these lines.

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