This article was first published in the September 2016 UK edition of Accounting and Business magazine.

As Theresa May became UK prime minister on 13 July, she admitted she faces the toughest of briefs. Unravelling 43 years of close legal and trade relations with the UK’s European Union neighbours will be complex. As her government begins work on finding a ‘British solution’ to a trade deal with the EU, businesses and their advisers are beginning to assess the potential impact of Brexit.

Finance professionals, among the best placed to manage the effects on their clients or on their business, can now play a significant role in helping companies through the short-term uncertainty. ‘As with any period of change and uncertainty, professional accountants will play a critical and strategic role in bringing much-needed stability to business and society,’ said ACCA chief executive Helen Brand.

The Big Four are all over it. Karen Briggs, KPMG’s newly created head of Brexit, says clients are now looking to the longer term opportunities – ‘whether these are bolstering trading relationships with China or out-manoeuvring competitors. We are also observing predatory intentions from other European nations that are considering what competitive advantage a Brexit might mean for them.’

Deloitte, EY and PwC also have dedicated Brexit teams. EY, which set up its Brexit unit last year and is now 60 partners strong, says it is helping in particular with ‘business strategy, supply chain, funding, tax position, regulation, growth opportunities and talent pipeline.’

PwC’s Brexit group is doing similarly. Chairman Kevin Ellis adds to this list of services: ‘We are already seeing increased appetite for strategy advice as well as for support around treasury management, immigration advice and pensions.’

Taking it step by step

The critical issues that businesses and their advisers will need to consider, according to ACCA’s head of technical advisory Glenn Collins, can be broken down into three key areas: talent, supply chain and access to finance. ‘Taking a step back and breaking down the issues into manageable parts is the first step in your methodical approach to impact assessment and subsequent business planning, he says. ‘You do not have to be an expert an expert in all the areas, but you need to understand what areas are critical to the business.

‘In terms of talent, for example, business should look at the the nationalities of their staff. Which employees might leave because of policy changes? Which might be poached by competitors that are also faced with departing staff? Which of those staff are critical to the business and might warrant special attention - your direct involvement in their retention?’ 

As regards supply chain, Collins suggests looking at the potential impact of Brexit on imports, for example. ‘While we don’t know yet about future duties and tariffs, what is the impact now on movement of goods within supply chains? Should you consider keeping higher levels of stock during any period of uncertainty? What impact might that have on your margins, and how might you finance that increased inventory?’

In terms of taxation issues, these are likely to be significant although still very uncertain. A lot rests on decisions of tax policy that the government will have to take - for example, in response to the base erosion and profit shifting (BEPS) issue. As Chas Roy-Chowdhury, ACCA’s head of taxation says: ‘With the EU gold-plating the BEPS model released last year by the Organisation for Economic Cooperation and Development (OECD), the UK will have to decide if it will follow the OECD or EU blueprint. While ACCA has backed the OECD model, if the UK adopts these rules, it will face some significant compliance issues, given that multinational companies generally operate across the EU, including the UK.’

In other tax-related challenges, VAT, duty and tariff compliance is likely to be significant. There is an expectation that companies will have to register for VAT in every EU country they trade in. 

However, with the mandated UK exit deadline being two years after the government decides to give notice of withdrawal under Article 50 of the Treaty on European Union, companies should be able to plan for relatively proactively. 

Roy-Chowdhury urges advisers to help businesses through this period of turmoil and uncertainty. ‘Make sure that you are there for your clients,’ he says. However, he adds that accountants shouldn’t overstretch themselves: ‘Don’t go beyond your own competence,’ he warns.

In response, ACCA is developing a business guide exploring number of Brexit issues, including fact sheets on risk optimisation, employment law and access to finance. Anthony Walters, ACCA’s policy manager for Western Europe, says the guidance will ‘evolve over the coming months and years in the run-up to the UK’s formal departure as well as post-Brexit’.

Keep focused

As for the impact on finance professionals in the public sector or with government clients, Manj Kalar, ACCA’s head of public sector, advises members to keep their eye on the ball and try not to get distracted by Brexit. ‘As the dust settles, one thing is for certain: change continues apace within the public sector, which may detract from the important business of delivering effective, efficient and economic public services,’ she says.

Additional work is likely be created by shake-ups within the structure of government caused by the EU, such as the new department for Brexit. She warns: ‘Any change to the structure of government departments will have significant impact on resources, both human and capital,’ especially if civil servants become focused on structural change rather than service delivery. And these issues will become acute: while the new May government has indicated that austerity is no longer its main aim, ‘funding will become even tighter due to increasing demands such as an ageing population and health and social care spend.’ The Bank of England has made an additional £150bn available to support banks to ensure continued lending but with UK government net borrowing totalling £82bn in 2015 and the Brexit-related downgrade of UK credit ratings making government borrowing more expensive, the government’s room for manoeuvre is limited. 

Also, the civil service is at its smallest since the the Second World War, so expertise is in short supply: ‘Finance professionals will need to draw on reserves and remain resilient,’ Kalar says. ‘Focus on what needs to happen based on discussions with policy leads and their departmental heads.’

Policy priorities

At policy level, ACCA’s Roy-Chowdhury said it was important that the UK government remained engaged in the EU, including during Brexit negotiations. Britain would continue for some time to be a ‘fully paid-up member and needs to be participating on all the relevant EU committees,’ he said.

Walters urges members to keep a close eye on the negotiations so that they are clear about the UK government’s end-goal, whether that is being associated with the EU though membership of the European Economic Area – which would involve freedom of movement of labour – or a clean break. ‘Once this becomes more apparent, members can plan and advise on the risks associated with whichever option appears as the most desirable,’ he said.

‘It’s likely that negotiations will be far from a straight road, so members will need to prepare for sudden changes of direction,’ Walters continues. ‘But I see our members playing a critical role in assessing the financial implications of any decisions made, identifying and managing longer-term risks and navigating the legislative and regulatory minefield that’s likely to take shape in the next two or three years.’ 

Keith Nuthall, journalist