A week in politics is a long time, but a week in the Brexit world can be seismic.
Since the 599-page draft withdrawal agreement was published, politicians of all colours have been chewing over the ramifications. But what does Brexit mean for accountants? Following on from our previous articles, here we discuss some of the main issues for accountants in industry and practice in two different stages: during the transition period, and longer term.
“The discussion needs to be framed with the knowledge that future scenarios are speculation,” says Brian Palmer, Tax Policy Advisor at AAT, “and as will all Brexit discussions, it’s too hard to predict with confidence what will happen. But as the situation stands, the position for accountants is likely to be positive. As a profession of almost full employment, with even small practices sometimes struggling to recruit, there will always be a role for qualified accountants.” By March 2019, assuming we exit the EU as planned, “accountants will be very busy, leading clients through the maze.”
What should accountants in both industry and practice be doing now for their clients, ahead of Brexit? “Familiarise yourself with the Government’s UK Brexit site, and keep an eye on it,” Palmer says. “Think about the range of scenarios – from hard to soft Brexit – and advise on contingency planning in different situations.” From here on, “it is about helping your clients. Generally speaking, accountants should be assisting the management team in terms of stress testing the business and seeing how it will cope under different pressures. Create financial models for the particular business, for each different scenario.”
What are the areas that should be considered? “Do we need to shift some of the supply chains out of the UK? What are the implications of carrying stock and do we need to stockpile? If we look at cash flow, how will the business manage? Will certain parts of the supply chain take longer than others to get paid? These are the kind of questions you need to drill into with the client, and that’s how accountants will prove invaluable to their clients and the client’s bottom line.”
There are particular areas where accountants will be needed even more than they are now. “There’s likely to be a shortage of people who know about customs regulations post-Brexit,” Palmer says, “and that’s an opportunity for upskilling.”
Where are we now?
Is the proposed deal good or bad for accountants? “It depends on the outcome,” says Dr George Salijeni, Lecturer in Accounting at Aston University. “If you look at the history of the accounting profession, they tend to adapt very well when disruptive things happen. Brexit is a disruptive event, and if we look back to the financial crisis of 2008, it caused shockwaves across the profession but accountants were able to dig in and thrive.”
“In fact,” Salijeni continues, “the deal is likely to provide opportunities for accountants in terms of how they see and develop the business.” Clients readjusting their processes to take Brexit into account “will need help on financial reporting and risk management. With a transitional period, it gives accountants longer to understand new processes and create new roles for themselves as the client’s go-to for help.”
Additionally, says Salijeni, “it gives opportunities to navigate how accountants see themselves as professionals.” As an example, Salijeni says, “let’s consider how things might look as the UK becomes a former EU country. The UK is no longer subject to EU Directives and so perhaps, there will be more opportunity for businesses to lobby – they will see they have more chance to influence policy than they did before.” Accountants can be politically engaged: “look at how important they are when it comes to anti-money laundering laws and fraud regulations.”
The eye of the storm
Is Brexit likely to damage the value of UK accountancy qualifications? “To be fair, UK accountancy qualifications are so good – in terms of technical training as well as elsewhere – that I think EU countries would love UK accountants to work there,” Salijeni says. “Longer term, whether that becomes an issue will depend on the individual country you want to work in.” Salijeni adds another point which is that “after Brexit, EU companies wanting UK trade might well want a UK-qualified accountant on the team as they will know the emerging differences.” He points towards Irish accountancy qualifications. “They are very similar to the UK’s. It won’t be an issue as long as the professional bodies keep an eye on their material and ensure it reflects future changes.”
Are there any differences between the transitional phase and the eventual ex-EU landscape? “Across the board – from audit firms to accountants in industry, or in practice, to professional bodies – the discussion now is about the role of accountants. And in terms of Brexit, that role is to help companies with disclosure. Within the disruption of Brexit, you need as much information as you can, to work out how to deal with that disruption.” Disclosure and risk assessment is, therefore, where accountants will best serve their clients. “Because no one really knows what happens after the transitional period.”
Fundamentally, Brian Palmer says, “no one has a crystal ball and expectations are just that – expectations. But the key for accountants now is to focus on helping their clients sift through the range of possibilities and take appropriate action.”
Staying on top of changes both large and small will become essential. Recently, for example, the Government has amended accounting rules in the Companies Act for the post-Brexit environment. This involves removing reference to European Economic Area (EEA) regulation and replacing it with reference to UK markets via the Companies Act 2006 and other supporting regulations. Notably, the Regulations avoid any mention of date – “exit day” has been substituted for 29 March, to allow for extension.
As a successful accountant, Salijeni concludes, “you need to have a cool head. Take things in perspective, and relate Brexit to what’s going on in the individual business.” And in terms of reporting, “things won’t change too much; again, it’s disclosures and business health provisions that will be key to navigate successfully through Brexit.”
Mark Blayney Stuart is Business Journalist of the Year, Wales Media Awards 2017 and Former Head of Research at the Chartered Institute of Marketing.