(c) Institute of Chartered Accountants of Scotland. Contact ICAS for permission to reproduce this article., Brexit

Brexit: the time has come for clarity

The provisional agreement thrashed out between the UK and European Union in December does not do enough to clarify what the transition to Brexit will mean for business.

That is the verdict of nearly seven out 10 Chartered Accountants in the latest ICAS Brexit Tracker survey.

The survey asked respondents whether they found the provisional agreement “clear and understandable”; 36% said it was “quite unclear” and 32% rated it as “not at all clear” (68% in total). Only 2% believed it was “very clear”, while 24% rated it as “fairly clear”.

The online poll, carried out by ICAS, in association with law firm Brodies LLP, finds that the agreement is seen as most helpful as regards residence rights for UK citizens in the rest of the EU, and EU nationals in the UK, and least helpful on future freedom of movement, regulations and transitional trading arrangements.

The question of the UK/Irish border was addressed, in the provisional agreement, by a commitment that, “in the absence of agreed solutions” the UK would maintain “full alignment” with those EU regulations supporting north-south co-operation and the Good Friday Agreement. What does “full alignment” mean? ICAS members were unclear, with answers ranging from:

  • Continued participation in the Single Market (18%)
  • Continued membership of the Customs Union (16%)
  • UK legislation will be as compatible as possible with the Single Market (40%)
  • Don’t know (8%)

Expectations more upbeat

In the latest survey, ICAS members were more optimistic regarding the likelihood of a UK/EU free trade agreement. In the Winter poll, 42% expected a trade deal (but not membership of the Single Market) would be the outcome of the Brexit talks. This compares with 36% in the Autumn Brexit Tracker survey, carried out before the December agreement.

Only 25% (Autumn: 29%) expect the UK will leave the EU with no free trade agreement in place; 19% believe the UK will continue as a member of the Customs Union, but not the Single Market (Autumn: 20%); and 5% believe the UK will stay in the Single Market after Brexit (Autumn: 6%).

The Brexit Tracker

The ICAS Brexit Tracker for Winter 2017/18 is the fourth in a series of quarterly online polls assessing the degree of optimism (or otherwise) of ICAS members regarding the impact of the Brexit process so far, and the likely impact of the UK leaving the EU.

Respondents indicated optimism/pessimism on a scale of -50 (very pessimistic) to +50 (very optimistic).

For the Winter 2017/18 survey, the Tracker shows (Autumn 2017 results in brackets):

  • Impact of Brexit so far on your organisation -9 (-8)
  • Expected impact on your organisation, post-Brexit -13 (-15)
  • Expected impact on the UK economy, post-Brexit -18 (-15)

Respondents are slightly more optimistic about what Brexit means for their own organisation, but slightly more pessimistic about its impact on the wider economy.

Members were also asked for their predictions for UK inflation, interest rates and the sterling exchange rate. They anticipate:

  • Interest rates are set to rise, say the majority (83%, while just 1% believe they will fall even further and 13% that they will stay the same);
  • Sterling is set to fall (say 44%, against 19% who believe it will rise and 34% that it will stay at around the same level); and
  • Rising inflation (say 70%, while 5% believe it will fall and 22% that it will stay at around the same level).

Bruce Cartwright CA, CEO (Designate) at ICAS, said: “The positive steps announced in December in the so-called Stage One negotiations provided some momentum coming in to the New Year.

“However, our members are very conscious that the next stage, which includes transitional arrangements, is key. This is a crucial stage that should hammer out some detail and provide the much-needed clarity that our business leaders seek.”

Christine O’Neill, Chairman of Brodies LLP, commented: “It may be wise for ICAS members to consider the highest priority issues for their business and at least begin to make their concerns and views known to the UK and Scottish governments without delay.”

The Survey

The survey was carried out online in January 2018, and is based on responses from just over 310 ICAS members. Those taking part were based in Scotland (56%), the rest of the UK (30%) and overseas (14%).

In terms of sectors, 22% work in public practice (accountancy firms); 26% in financial services; 12% in manufacturing; 3% in energy; 10% in the public sector/not for profit; and 27% were “other”.

This article was originally published in the February 2018 issue of CA Magazine.