Beyond Brexit - Time to Act: Dispelling the myths (video)

12/06/18

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Anna Wallace, Head of Political Relations and Emily Khan, who runs our Trade and Investment Hive, share some of the top questions clients ask about Brexit. They will dispel the myths and explain why it’s time to act.

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Transcript

Anna Wallace: Hello, I'm Anna Wallace. I'm Head of Political Relations at PwC, and today I'm joined by Emily Khan, who runs the Trade and Investment Hive, here at PwC. What we thought we'd do is spend just a few moments going through some of the top questions that we get from clients about Brexit and why it might be right for them to act now.

So, Emily, if I turn to you and ask what some of the most common questions are that you and your team hear from clients.

Emily Khan: Yeah, thanks, Anna. The first one is definitely one for you, and I get this quite a lot. This Brexit, it's not really going to happen, is it? What would your answer be to that?

Anna: Well, you're right. This certainly is a question that I hear a lot from clients when I go out and talk to them. I guess there are a couple of things for businesses to be aware of. First of all of course, we're only 12 months away, in fact, less than 12 months away from leaving the institutions of the European Union. It would require an electoral event, probably, to reverse where we are now, so another general election for example, or maybe another referendum, and the Fixed-term Parliament Act would certainly reduce the likelihood of that happening. Even if we were to have another electoral event, like a general election or a referendum, there is still very little evidence in the polls that public opinion has changed and that the outcome we would see would be any different from the one we saw two years ago.

Emily: Okay. So link question, follow up question to that, if we accept it's going to happen, isn't the outcome still too uncertain to do anything now?

Anna: Yeah. Well, Brexit does feel very uncertain. That's in its nature, I think, but so is technological advance, and businesses don't know exactly where technology might end up in the future, but it doesn't stop them thinking about it. We've been quite clear in PwC that, actually, the contours of Brexit have been quite clear and there is already quite a lot within those parameters, if business understand those scenarios, that they can be doing to plan for change.

For example, we know that freedom of movement will come to an end, so if you rely on EU workers in your businesses a lot at the moment, and or you rely on being able to move your people around Europe, well, there's one change that you know is going to take place in the next few years.

Emily: Yeah, good point.

Anna: Okay, so a question for you, Emily, sitting where you do, in the Trade and Investment Hive in PwC. If I'm a business, I don't currently trade with Europe, surely Brexit doesn't bother me?

Emily: Yeah, that's one I hear a lot too, and there's a lot of different responses to that, two off the top of my head. First is the point you just made. You might not trade with the EU, but what does your workforce look like? Most businesses across the UK are going to have some employees who are from the EU. They might be senior executives, really specialist skills that are hard to come by. They might be large volumes of people that they're dependent on in things like distribution centres. Both those situations need some attention.

Secondly, you might not trade with the EU, but what about your supply chain? Maybe they do. Any delays and costs that they incur could well become delays and costs for you too.

Anna: Great point. Okay, so you talked about delays at the border. Lots of people are worrying about tariffs, but is that a little bit of a red herring if we imagine we're going to get to zero tariffs in any EU-UK FTA?

Emily: Partly true, partly false.

Anna: Okay.

Emily: We think it's most likely that we'll get a deal with the EU, and if that happens and it looks a bit like the Canada deal, then chances are there will be no tariffs on most, if not all, manufactured and agricultural goods. But that's only true for UK and EU goods and there are particular rules called rules of origin that specify how much content needs to come from the UK and the EU to qualify for those rates. For complex goods with lots of inputs from all over the world, calculating whether or not you meet that threshold can be quite complex.

Anna: Very clear. Thank you.

Emily: We've recently reached an agreement on the transition period. Does that mean we can all wait a bit longer before putting any plans in place?

Anna: Yeah, the transitions is probably what we've been calling internally another false positive, so lulls us into a sense of security that we perhaps don't have to act now. There are a couple of reasons why that's not the advice that we would give to clients.

Firstly, as Michel Barnier talks about a lot, nothing is agreed until everything is agreed. So there is still a chance, although we think it is a small one, that this all unravels and that we exit all of the institutions of the European Union, and the single market, and the customs union on the 1st of April, next year. Like I said, small chance, but still not a risk that should be taken lightly.

That really comes onto the second point around transitions, which is at the moment they're only a political agreement. They aren't legally binding. So for some businesses, that will be enough for them to sort of delay or finesse their Brexit plans, but actually, for lots of organisations, only legal certainty will allow them to take their foot off the pedal. That's particularly true in regulated industries, where regulators want certainty and assurance that businesses would stand up in the event of Brexit on the 1st of April, next year.

Okay, then, last one for you.

Emily: Okay.

Anna: I'm a business person. This all feels very complex to me in my large organisation. Where on Earth do I start?

Emily: First of all, and this is the thing we're advocating to all clients, is decide on the right person or team, that are going to have responsibility and authority to ask the difficult questions about what it means for your business and start putting those plans together.

Anna: Just for me to say thank you to you for watching, and as Emily said, if you want any more information on some of the issues that we've covered today, please do have a look at our Time to Act blogs, which you can find on our website, pwc.co.uk/brexit.

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