What a no-deal Brexit means for your firm

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Philip Fisher examines the opportunities and potential threats practices may face if the UK crashes out of the EU without any deal.

Whether readers belong to one of the extreme factions favouring remaining in Europe or leaving without any deal or prefer some middle ground in between, it seems unlikely that anyone will be satisfied with the current state of uncertainty.

Having given ourselves the best part of three years to arrange the country’s affairs, Britain is due to leave Europe in less than two months’ time and still has no idea of the terms on which it will do so.

As more heated wranglings go on in Parliament -- and news stories contain messages of anticipated woe from parliamentarians -- their European counterparts and captains of industry, the man in the street and the accountant in the office seem to have closed their eyes and hoped that the consequences can be ignored until the moment of truth.

However, at some point, every accountant has a duty to take responsibility and try to make a series of decisions that will protect and potentially promote the prosperity of our practices.

At this point, it seems premature to be considering the long-term consequences of something that may never happen – ie the no deal option.

Instead, it would be better to concentrate on immediate actions that might help to make your business stronger.

We are lucky in that our industry is likely to be far less seriously affected by the immediate consequences of a cliff edge departure from Europe than manufacturers, farmers or those in many other industries.

While it may be inconvenient to discover a lack of variety on supermarket shelves or delays while returning from a long weekend in Paris, these should not have a major impact on any accountant’s business.

In case anybody believes that this accountant's guide to Brexit series is purely intended to be scaremongering, it might be beneficial to start with some positive outcomes that might arise for accountants if Britain does go forward under what has also been christened “a disorderly Brexit”.

At least two strands of immediate opportunity might arise in such a scenario.

First, firms might be able to provide consultancy services to clients who are concerned about the impact on their businesses. They might, for example, require financial projections based on a number of different assumptions or possibly just some handholding if difficult decisions have to be made.

Secondly, there has to be a strong possibility that as a result of the uncertainties staff with European roots may decide to move on.

This, in turn, could lead to general fluidity in the employment market. If clients lose finance staff then there may be an opportunity for accountants to fill in, charging competitive rates with a guarantee of 100% utilisation.

In terms of our own businesses, some simple steps might be sensible. The starting point might be to appoint a named individual who can act as a focal point for any queries that staff may have about the future.

Rather than allowing concerns that may not be justifiable to fester, these can thereby be nipped in the bud and a positive message delivered. You might also consider a series of staff communications answering common questions and delivering the kind of briefing that can be offered to clients.

If you believe that staffing issues might damage your own practice then clearly it would make sense to try and ascertain the scope of any potential losses and take steps to get temporary or permanent cover.

In addition, if you are in the process of recruiting staff from European countries or plan to do so, it may be necessary to consider immigration clearances if they are not going to be on the staff by 29 March.

Should your practice act for a large number of clients with strong European connections it would be wise to understand their intentions since departures from the UK or drops in their business activity might have a significant impact on your own business.

While it may be completely irrelevant for the majority of practices, those with offices in Ireland could be faced with catastrophic consequences if a hard border is imposed at 11pm on 29 March.

Staff may literally be unable to get to work on 30 March and it may be impossible to visit clients a short drive away.

These are a few initial considerations but individual practices are likely to have their own concerns.

Whatever your own position might be, you are urged to take action now rather than following the politicians’ line and leaving everything until the last minute or even later.

About Philip Fisher

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By DJKL
07th Feb 2019 17:50

Not much we can do, though we are not a practice but a property group. (My practice being P/T, small, and shutting down)

I have stockpiled two pallets of toilet roll/ hand towels, we lease some units on inclusive terms where their provision is our responsibility so I want to ensure any logistics logjams at UK/EU ferry ports do not impact our ability to meet our obligations in terms of these licences.

We are carrying higher bank balance than might normally be the case to ensure any tenant issues do not embarrass our cashflow re our single bank lender-I have no interest in revisiting the post 2008 period vis a vis lenders ever again, that turned what was left of my hair white.

I have still to stockpile office paper and coffee, but I will next week.

Re clients I have chatted with one who purchases from The Netherlands and Republic of Ireland re possibly ensuring stocks are a tad higher than normal and have confirmed they have got in place their EORI number, per HMG advice to impacted business entities.

https://www.gov.uk/eori

https://www.gov.uk/government/publications/trading-with-the-eu-if-theres...

My other major importing client sources from China and goods do not come in through the channel ports so am not really expecting logistics issues with their stocks; it is too late anyway as from order to production to UK arrival tends to take minimum three months, normally longer.

Other than that all preparations are more personal re
things like bank balance location (Sweden) and SIPP investments (EU/UK centrics now mainly gone, sitting with circa 15% in cash at present, rest overseas investments/companies who do not really earn in Sterling)

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08th Feb 2019 08:27

I am expecting Brexit to have almost as much impact as the Y2K bug. Or withdrawal from the ERM. If memory serves, these were both terrifying events - until they happened.

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By Locutus
08th Feb 2019 18:15

Philip Fisher wrote:

"While it may be completely irrelevant for the majority of practices, those with offices in Ireland could be faced with catastrophic consequences if a hard border is imposed at 11pm on 29 March.

Staff may literally be unable to get to work on 30 March and it may be impossible to visit clients a short drive away"

Sorry Philip, this seems like scaremongering to me.

A "hard border" in the context of the Northern Ireland / Republic of Ireland border following Brexit does not mean people from both sides of the border are impeded from travelling between the two - that right is guaranteed from the Common Travel Area agreement of 1923.

Instead, the "hard border" in the context of Brexit simply relates to the potential for different customs tariffs and (in time) regulatory standards.

Both the UK and Republic of Ireland have stated that they do not want a "hard border" and on 30 March 2019 there will simply be no mechanisms in place to do anything different than is done now.

It may be that some technological solution evolves over time to assess and collect tariffs away from the border, but that will certainly take some time to put in place.

Thanks (4)
to Locutus
11th Feb 2019 15:09

Locutus

I am grateful for this helpful contribution. However, if Wikipedia can be believed https://en.wikipedia.org/wiki/Common_Travel_Area, the 1923 agreement may not survive Brexit.

Even if it does, should border checkpoints be established, they will almost certainly disrupt travel to a massive degree, as under-trained staff attempt to check every individual and vehicle trying to pass through, presumably validating and searching them along the way.

We will find out the real consequences in the very near future, if the full chaotic departure is rolled out.

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By Locutus
to Philip Fisher
12th Feb 2019 11:53

I don't see why the Common Travel Area would not survive Brexit - all parties UK, RoI and EU want it to continue. It existed long before the UK and RoI joined the EEC and survived in spite of the 1968-1998 "Troubles".

For political reasons "checkpoints" will never, ever, ever be put right on the border. There is no need to check people, since there is the Common Travel Area. If there ever is any need to check goods for regulatory and / or tariff reasons then it will be done well away from the sensitive border area. This is what is already done for duty on alcohol and tobacco.

I think a lot of myths will be dashed if there is ever a clean Brexit ... but inevitably there will be quite a few challenges to be resolved - quite possibly in areas nobody really thought about.

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to Locutus
11th Feb 2019 12:26

Switzerland is in Schengen and has a hard border, people move "freely" but there are long queues esp in rush hour and people do get stopped and searched etc.

How do you monitor other EU people who can freely travel to Ireland, when they cross the border if you don't have some sort of hard border?

Why is this the massive sticking point that no one seems able to resolve?

I don't know how the heck they would build a hard border in the time we have left!

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By Locutus
to accountantccole
12th Feb 2019 12:24

The volume of cross-border trade on the island of Ireland is actually quite small - around €2 billion per year, so it is possibly a couple of orders of magnitude lower than that which passes between Switzerland and the EU.

Much of that trade is food / agriculture, so it would be crazy for the UK to try to initially apply tariffs on any food, from wherever it comes from in the world, as that would just raise the cost of living for the poorest in society.

Much of the cross-border trade also comes across 3 major crossing points via around 50 large traders, which would have no interest in evading tariffs. Over time, a system could be developed to deal with them.

Due to the Common Travel Area, there would be no system for monitoring people crossing the border. If, say, a Romanian makes it to Dublin, there would be nothing stopping that person going to Belfast and then getting the ferry to Scotland. However, that person may find difficulty legally working in the UK or accessing benefits.

You are correct, there is no possibility of building a "hard" border by 29 March 2019 (or the more likely leaving date of 30 June 2019).

Thanks (2)
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to Locutus
12th Feb 2019 12:46

Hi Locutus. At last someone talking sense on the Irish border question. As someone with Irish family and who also worked in the food industry, I have visited many times for both reasons. I totally agree with your comments.

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11th Feb 2019 19:26

Who is going to build a physical barrier? The British won't and neither will the Irish. That just leaves a quasi military force from the EU such as those who built the Berlin Wall. Will the Irish Republic tolerate this? I don't think so.
As for monitoring those who come from mainland EU to Ireland -its not done now so why is it necessary after Brexit? It isn't necessary to stop EU tourists whose passports could be checked on entry to the UK mainland. If the EU attempt to undermine the common travel area Varadkar will be seen for what he really is - the EU's useful idiot.

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By E Leahy
12th Feb 2019 12:02

In the event of a no deal Brexit Irish incorporated limited companies with only UK directors will have to add/replace those UK directors with EU directors or pay a bond.

We are fielding a lot of calls on this topic as companies seek to find the best option

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12th Feb 2019 13:47

"Whether readers belong to one of the extreme factions favouring remaining in Europe or leaving without any deal or prefer some middle ground in between..."

Why is it extreme to favour remaining in the EU?

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to Jon Stow
12th Feb 2019 15:34

It isn't but neither is it extreme to wish to leave.

Thanks (1)
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13th Feb 2019 08:27

We have traded as a nation for thousands of years so let's not panic, leave and get on with it.

People adapt, survive and get on with the new reality.

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