A glimmer of hope

The draft withdrawal agreement between the UK Government and the European Commission announced last week has provided a glimmer of hope. It has now been welcomed by most business leaders and many major companies as a step forward, but much remains to be done.

As the 29th March 2019 draws ever closer, the Brexit vacuum continues to dog and disrupt businesses across the European Union.

ICAEW’s Business Confidence Monitor for Q4 2018 shows a sharp fall in confidence among UK members, from -0.2 in Q3, to -12.3. This decline is widespread across most sectors and all regions, and drags confidence to its lowest level since the financial crisis ten years ago.

The need for greater stability cannot be overstated. Businesses have been unable to plan ahead, and that is a toxic environment for investment. As I have said before, it is crucial that we avoid a disorderly exit and the activation of costly and disruptive contingency measures; the potential adverse impacts upon business and the wider economy could be severe.

The deal

The draft deal now on the table broadly ensures that the status quo is maintained for the duration of the transition period. Established professionals such as chartered accountants would continue to enjoy mutual recognition between the UK and the EU27, including after the end of the transition period. Individuals will also be able to continue to apply for recognition of their qualifications during the transition period. This is good news and provides us with a much-needed measure of certainty.

We do not yet know exactly what the situation will be beyond the transition period, but it’s reassuring that all sides clearly see professional qualifications as an area of high importance.

We also welcome the acknowledgement of the need for an ambitious and comprehensive agreement on services for audit and accounting. This needs to include a similar type of UK-EU regulatory interaction as that proposed for the financial services sector.

Avoiding ‘no deal’

We know that larger businesses are mostly well-advanced in planning for the range of possible Brexit scenarios. However, while many smaller and medium-sized businesses have been thinking long and hard about how Brexit might affect them, with limited resource there is only so much they can do to prepare for every eventuality.

Those companies with a December year-end are also currently having to account for Brexit in their ‘principal risks’ for 2019. This is time, money and resources that could be invested elsewhere.

While this draft deal represents progress – and makes a ‘no-deal’ exit a little less likely – it  still has to pass through the UK Parliament and gain the approval of parliaments and governments around the EU.

Now more than ever, British politicians need to listen to the concerns of business, and put prosperity and jobs first. ICAEW will continue to make that case to ministers, parliamentarians and in the media.

As ever, please continue to visit ICAEW’s Brexit hub for updates, information and guidance at www.icaew.com/brexit.