29 July 2016
So, farewell then European Union and the single market…well, kind of. It is fair to say we might all have expected a greater deal of certainty by this point, following last month’s referendum result, but alas that is not to be with Theresa May confirming last week that we’re unlikely to have much clarity until early next year.
Much was made of the likely economic impacts of Brexit, and there will undoubtedly be some. Already we have witnessed Sterling drop against other major currencies, most notably the US$ – good news for some (exporters), bad news for others (importers/anyone going on holiday any time soon). Overall though, you’d have to say that a major currency losing 20% against another in the space of a week is not a good look. and the UK has lost its prized AAA credit rating. This will make it more expensive for the UK to borrow, and boy, are we borrowing… The fiscal gap that the more expensive debt created by a credit downgrade will, one assumes, be filled by a combination of higher taxes and reduced public spending. Shares in RBS have plummeted. I’m not entirely sure why, but they have. We’re now that much further away from returning the bank to private hands and recouping some much needed money, and who knows what impacts there will be on lending behaviour concerning both businesses and individuals.
From a legal and political standpoint though we are still in the EU, and that doesn’t look like changing in the very immediate future. However, the way the EU and the rest of the world views us has changed significantly so we may find that there is some negative sentiment from business partners overseas. How about beyond the short-term?
- We have heard business owners, manufacturers in particular, talk of the joy of the freedom from EU red tape. I think they may be in for some disappointment unless they’re ruling out exporting to EU countries.
- The difficulty in attracting, hiring and retaining talent and/or sheer manpower from other EU nations is an area of concern to many business owners. Sectors as diverse as agriculture and IT are likely to be affected by this.
- VAT is an area where we could see a shake up. We have very much taken a lead from the EU in recent history but one might be advised not to hold one’s breath if waiting for any sort of giveaways there.
- Some of the more curious/inexplicable aspects of EU interference will be gone, meaning that incentives offered to investors and for investment can be ramped up.
- Employment law may see some simplification, but don’t expect to see great swathes of legislation and precedent cast aside.
Without a clear idea of a post-Brexit world it’s fair to say we will be in an uncertain business world. Uncertainty leads to indecision which leads to investments in physical and human capital not being made, so the sooner the picture is clearer the better, I would say.
Following the UK’s referendum decision to leave the EU, our tax, VAT and sector experts have been discussing the potential implications in a series of blogs which are collated here.
There are undoubtedly some important months ahead as the implications are fully understood. We will continue to monitor the situation and will keep you updated with our views and insights as we move forward, helping you navigate the new conditions and opportunities as they become apparent. If you are concerned as to how the vote of leave the European Union may affect your business or your personal affairs please get in touch with the author of this blog, James Price or with your local UHY contact.