On 29 March, Theresa May triggered Article 50. Behind the wildly contrasting political views, millions of British businesses are trying to operate as normal against a backdrop of uncertainty. The steady drip of data released from organisations can help. But so often it is conflicting. On one day in April, for example, the ONS released stats revealing another good performance on jobs, with fast growth in hours worked, employment remaining at a record high and unemployment falling by 45,000.
But research by Grant Thornton UK presented a different story. “Businesses are increasingly worried about their future workforce,” said chief operating officer Robert Hannah. “Concern over skilled staff shortages is at a 14-year high. In a tight labour market it could turn into a crunch point for the UK economy where fewer businesses are expecting to offer above-inflation pay rises. Businesses that don’t provide real wage growth may soon find their workers looking elsewhere.”
What Brexit will ultimately mean for business will largely depend on supply chain, labour demographic, sector and business model, with some industries likely to suffer more than others. Each one will need careful management by their accountants in the run-up to Brexit and after it but, says Richard Kleiner, CEO of City firm Gerald Edelman and president of i2an, an international accounting and audit network, so many unknowns means accountancy firms are themselves operating on informed guesswork.
“There’s no framework yet,” says Kleiner. “We’ve no idea what the government will be able to negotiate across the full spectrum of issues that will have an impact on UK business.” Kleiner and his colleagues have advised their clients – particularly those in the food and beverage sector – to increase their prices. “It’s unpalatable, but it’s reality,” he says. “They’re already paying more for their supplies and if they don’t pass on at least some of those costs, they will see their margins significantly eroded.”
Robert Holland, managing partner at James Cowper Kreston, makes a similar point: “Brexit will disrupt the market, but no one knows how or to what degree. We simply don’t know what shape the negotiations will take or what deals our government will be able to secure so we can’t give our normal level of direction.”
One option Holland is looking at – albeit an expensive one – is foreign exchange hedges, such as forward buying and foreign exchange contracts. “A Forex eliminates currency risk but is costly and difficult and not suitable for many of our businesses,” he says. “We’re not ruling them out – just not jumping in for now.” The other area that Holland is discussing with clients is labour costs, which are likely to rise substantially with tighter immigration controls. “The general consensus is that there will be a reduction in foreign labour,” says Holland, “and that people will be admitted into the UK on some kind of points system. We’ve started looking at alternatives for some of our clients, including increased automation. This could be a viable solution for some.”
Hurst is anticipating that Britain’s likely departure not only from the EU but also from the EU customs union will have serious repercussions for some of its clients.
“The EU customs union is the largest in the world by economic output,” says Paul Brown, tax partner at Hurst, “and so has immense negotiating power. If we leave it the most likely outcome will be that British businesses will face new tariff and customs charges. Any trade agreement our government manages to negotiate won’t come into force until some way down the line, by which time many businesses will have taken a hit; that’s what we’re anxious to prevent.”
Brown and his partners are discussing setting up Irish subsidiaries for some of their clients as insurance. “This isn’t a solution for everyone but we do have some clients who would benefit from having a presence to trade through in Europe. We’ve been talking to Noone Casey, an associate firm within Prime Global, the international network we’re members of, and we’re trying to put together a coherent strategy for how this would work. It’s by no means straightforward – but it is one of the avenues we’re exploring.”
Five live tips
01: Keep up to date
Read the papers, listen to pundits, think about what they’re saying and try to filter out the politics and spin to get to the facts.
02: Don’t plough ahead
Step back to take a view of all the possible outcomes and then come up with a contingency for each scenario. Think what each one might mean for your clients and plan ahead. Devise a plan that will not only help them survive but also to profit.
03: Make clients robust
Start now by helping businesses negotiate better terms on their imports and by making efficiencies. If they’re already facing increased costs, then encourage them to pass some of these on to their customers.
04: Boost the exports
This is a great time for businesses that are exporting, so do all you can to help your clients in this sector.
05: Don’t hang about
Ensure your clients don’t sit on their hands or pretend change is not happening. If they try to coast along until the UK exits, they will stagnate. All businesses need to be proactive if they are to thrive once Britain leaves the EU.