No-deal Brexit is likely but business is not prepared for it, ICAS survey finds
A no-deal Brexit is either “very likely” or “quite likely” according to 65 per cent of finance professionals in the latest Brexit Tracker Survey from accountancy professional body, ICAS in association with Scottish law firm Brodies LLP.
The online survey also found that fewer than half (45 per cent) of respondents believe their organisation is either “very prepared” or “quite prepared” for the implications should the UK leave the EU in March without a withdrawal agreement in place.
Compared with the previous Tracker poll (Summer 2018), more respondents (29 per cent compared with 17 per cent in the Summer survey) believe that, following the Brexit process, the UK will be a member of the EU customs union.
The poll was based on responses from more than 400 members of ICAS across the UK, and was carried out in November, during the week that the draft withdrawal deal was published and agreed – albeit with several resignations – by the UK Cabinet.
CAs fear a ‘no-deal Brexit’ but many are unprepared for it
Respondents are slightly more optimistic regarding the impact of Brexit on their own organisation (from -16 in the Summer 2018 poll to -13 in November, where +50 = “very optimistic” and -50 = “very pessimistic”); they are slightly more pessimistic regarding the impact on the UK economy (from -21 last time to -22 this time).
Only 45 per cent of respondents believe their organisation is prepared for a “no-deal” Brexit; 41 per cent say it is unprepared; 14 per cent don’t know. There is a disparity between large and small organisations, however, with 51 per cent of large organisations “prepared” compared with 33 per cent of SMEs.
The survey found 65 per cent of CAs believe that a “no-deal” Brexit is “quite likely” (42 per cent) or “very likely” (23 per cent).
Around half of large organisations have carried out scenario planning for the implications of Brexit on HR, regulatory issues and the organisation’s business plan. A smaller percentage have started scenario planning for supply chain/logistics (45 per cent); location issues (31 per cent); reviewing business plans (37 per cent); or reviewing contracts (34 per cent).
SMEs (small-medium sized enterprises, with fewer than 250 employees) are less likely to have started taking action or scenario planning (for example, 32 per cent have started scenario planning for their business plan, 17 per cent on hiring/HR issues.)
We asked whether respondents were aware of, or had read, any of the UK Government’s notices on the implications of a “no-deal” Brexit. 22 per cent were aware of the paper on Accounting & Auditing and, of those, 4 per cent had actually read it. Of those who had read a summary or the whole paper, 53 per cent found it “quite useful” (47 per cent said it was “not useful”).
Half of respondents were aware of the series of notices on the implications of “no-deal” and 8 per cent had actually read at least one paper. Of those who had read a summary of at least one paper, or any whole paper, 58 per cent found it “useful” (42 per cent said it was “not useful”).
Preferences on the ultimate outcome* of Brexit talks have not changed at all significantly; 61 per cent would rather see the UK remain in the EU Single Market (Summer Tracker: 62 per cent); and 27 per cent would prefer to see a free trade deal (Summer Tracker: 26 per cent)
Expectations, have changed, however, with 29 per cent now expecting the UK to end up in the EU Customs Union (but not the Single Market) (last survey: 17 per cent), the difference being accounted for by falls in the other options. This probably reflects the draft withdrawal agreement, which creates a “backstop” that could leave the UK in the Customs Union if the Irish border issue is not resolved.
Bruce Cartwright CA, ICAS Chief Executive, said: “Businesses are trying to plan for the future against a difficult political backdrop with no clear consensus. There’s no doubt that the clarity they need to prepare for Brexit is in short supply.Nevertheless it’s concerning that only 45 per cent of respondents believe their organisation is prepared for a no-deal Brexit.
“A lack of consensus makes for challenging times, but we have to hope that the current parliamentary debate will tackle some thorny issues and start to deliver much needed clarity. In the meantime, ICAS will seek to inform and support our members, and the wider business community.”
On the UK economy, over the next two years 86 per cent see interest rates increasing; 65 per cent expect sterling to fall; and 75 per cent expect inflation to rise.
Christine O’Neill, chairman of Brodies LLP, added: “Given the uncertain political environment the prospect of a no-deal exit from the EU cannot yet be discounted. There is no call for Brexit-related hysteria, but I would recommend that no-deal planning moves up on everyone’s agenda.”