Menzies respond as the UK Votes to Brexit Europe

There are a number of important Directives that UK companies will no longer have access to, in their current format, now that an ‘out’ vote has been reached. For small businesses, the loss of the late payment directive could add further pressure to SME cash flow if not replaced with a similar measure to protect firms’ working capital. In recent years, this provision has proven instrumental in increasing the competitiveness of UK businesses.

EU directives aside, it is worth remembering that the UK has one of the most favourable Corporation Tax structures of anywhere in Europe. This will continue to act as a carrot to overseas corporations.

Following the Brexit, European SME funding could be affected. Cessation of access to the EIB’s (European Investment Bank) £100 million investment of loans for UK small businesses may be a concern for business owners. However, in reality this is likely to have very little impact on SMEs as proportionally very few seek funding in this way.

EIB funding aside, investor confidence, interest rates and the activity of UK banks is most likely to impact SME financing and growth.

Depending on your personal point of view you may or may not agree with the statement above. I should take care therefore to explain that I refer of course to the impact of the referendum result upon Investment Markets.

Although a close result was long expected, by the close of business yesterday the City seemed confident of a victory for the “remain” campaign. This confidence seemed well grounded in the recently improved market sentiment (not to mention, shifting betting odds). As late as yesterday evening, Nigel Farage appeared to be positioning himself for defeat, only to subsequently be celebrating victory early this morning. As I have said several times before, investment Markets do not like “bad news” but they positively hate a “bad surprise.” A point that is perhaps underlined by the steep decline in the value of sterling, together with the scale of overnight losses in Asian Markets and the sharp sell-offs in UK Equity Markets early this morning.

Read Ben’s full analysis of the Brexit impact on investments.

“It is going to take some time for the full impact of Brexit to be understood. Many believe it will take at least two years for current legislation to unravel and new agreements to be negotiated. We hope this does not mean an extended period of uncertainty that further impacts on the UK economy.  

The UK relies on migrant labour and EU workers currently help UK employers fill both skilled and unskilled vacancies. As a country we have to ensure that we adapt our training and recruitment practices to minimise any longer-term impact that this outcome has on the UK labour market and skills gap.”

Martin Atkins – Head of Business Services.

“This outcome could have a significant impact on household income, which is likely to leave consumers with reduced spending power. This could hit the hospitality and leisure sector hard and keeping a close eye on cash management, along with efficiency measures, will be vital.”

Dave Gosling – Head of Hospitality & Leisure.

“This decision is a blow for many in the manufacturing sector but there is unlikely to be a significant impact in the short term.

The ability to negotiate our own trade deals, combined with the fact that we have one of the most favourable corporation tax regimes in Europe, means there is an opportunity to boost the competitiveness of UK manufacturers in the global market place.”

Caroline Milton – Head of Manufacturing.

“This vote will lead to a continued period of uncertainty for the property sector while the market adjusts to life outside Europe.

Investment and development decisions have been deferred in the run up to the referendum and it is likely that some property developers and investors will remain cautious at least in the short term.

On top of the continued uncertainty, the market will also still have to cope with the raft of recent adverse tax changes such as the Annual Tax on Enveloped Dwellings, increases in Stamp Duty for second properties and for properties over £1 million in value, the restriction on interest tax relief for buy to Let landlords and the introduction of Capital Gains Tax for UK residential properties owned by offshore companies or individuals.”

Ralph Mitchison – Head of Property & Construction.

“UK retailers will have to wait to see what a post-Brexit Britain will look like. It is likely to continue to be a disruptive time for many with considerable uncertainty affecting areas including long-term contracts, business taxation, customs duties, the strength of sterling and the continued employment of EU citizens, at least until new treaties are agreed with the EU and EFTA.

This unpredictability should not be used as an excuse for complacency, however. Responding to this decision will require some urgency, particularly in areas like supply chain relationships. Retailers have to remain competitive and need to be able to react quickly as and when the picture of life outside the EU becomes clearer.”

Roberto Lobue – Head of Retail.

“Leaving the EU presents some challenges for the tech sector in the UK. Whilst over 85% of Tech UK members polled in March expressed a desire to remain within the EU, the country as a whole voted differently. London in particular has enjoyed a period of being the European Hub of tech development. The city’s strong financial standing has seen huge growth in Fintech companies in particular. The access to funding, talent pools through freedom of movements and large international tech business choosing to establish offices in London have provided a real competitive advantage to London.

With the uncertainty of Brexit now a reality, the tech sector faces a number of potential challenges. Some high profile companies have strongly indicated that they will consider exiting the UK. Impact on sterling, interest rates and access to funding over the coming months as a result of the UK choosing to go it alone are at best going to cause some bumps in the road and at worst, we could see fledgling tech companies disappear off the map.”

Graham Seddon – Partner.

“The logistics industry is, by its nature, a truly international industry. The haulage and logistics industry is the UK’s 5th largest employer industry according to the RHA. The EU is the UK’s main trading partner with over 50% of exports currently being to other member states.

This outcome is going to bring significant disruption – but there could be positives as well as negatives.

In terms of the negatives, existing trade agreements with EU members will need to be renegotiated with the potential for tariffs and the restriction of movement. These changes are also likely to increase red tape.

Driver shortages could be exacerbated by reduced access to EU workers and the financial uncertainty caused by the decision could lead to increased financing costs because the sector is capital intensive.

In terms of the positives, there could be opportunities to initiate new trading relationships around the world and specialist logistics services firms, who can manage complicated and unfamiliar customs procedures, could see an upturn in demand for their services.”

Mark Perrin – Head of Transport & Logistics.