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The Brexit Business Barometer – Uncertainty and Inertia?

The Brexit Business Barometer



Partner and Brexit Tax & Location Lead

KPMG in the UK


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We are now approaching eight months since the vote for the UK to leave the EU. As brought home by the High Court decision regarding the role of Parliament in the Article 50 process and the reaction to Theresa May's Brexit speech, we can expect a bumpy political road ahead as the UK navigates its way out of the EU.  In these uncertain times, how is business responding?  In this article, we provide some insights based on our discussions with clients and the results of two recent Brexit surveys conducted by KPMG.  

· Uncertainty and inertia – with a couple of exceptions (more on these below), the uncertainty of Brexit has caused inertia for companies when it comes to assessing the impact of Brexit on their business model:  41% of respondents to one of our surveys said their business is waiting for further clarity before assessing, even at a higher level, the broader business impact of Brexit, and a similar number of respondents (40%) said that Brexit has resulted in uncertainty for the overall business activity of the organisation1.

· It is those groups which are headquartered outside of both the UK and the EU that are most likely to be actively considering their Brexit response.  This is our first exception to our “uncertainty and inertia” generalisation.  In our conversations with clients, we have found, as you would expect, that those with UK headquarters have strong ties to the UK and so want to wait for clarity before making decisions which will result in significant structural change to their operating models.  And those headquartered in the EU largely consider that their existing structures will guide their decision making.  But those groups outside of the UK and EU have more options open to them, and therefore more thinking to do – we are seeing this especially with US and Japanese multinationals.

· . . . Unless you are in the Financial Services sector.  This is our second exception to the generalisation.  In the FS sector specifically we are seeing a lot more activity, and this is regardless of headquarter location of the business. The reason behind this is that the regulatory environment is driving these groups to make early decisions. There is a critical business need for passporting and if restructuring is needed to maintain this access post-Brexit, regulatory clearances mean there is an extended lead time for implementation.

· Customs duties and indirect tax are causing businesses disproportionate anxiety. In both of our surveys, indirect taxes were of greatest concern to respondents, specifically customs duties and supply chain (24%) and VAT (18%)1,2.  We also expect immigration and employment taxes to rise up the list of business concerns, given the profile of our groups:  36% of respondents considered their organisation had a very internationally mobile workforce, with a further 29% considering they had a very mobile workforce within the EU (including the UK).  These results may not be surprising.  But bear in mind that the experience of the majority of tax departments has historically leaned towards direct taxes, and it is clear that the tax profession as a whole has some new areas of expertise to swot up on – and fast. Which leads us neatly to our final insight . . . 

· Brexit expertise will be important – both generally and for tax.  In terms of day to day management of the impact of Brexit, 56% of respondents to one of our surveys considered that it would be important for their organisation to have a specific “Brexit task-force” to help with the challenges ahead1. Looking specifically at tax, only 20% of those who responded considered that their organisation would have the necessary resource and experience for coping with the impact of Brexit (although 58% simply did not feel that they were at a stage where they could determine this). 36% of organisation had already engaged advisors, or had firm plans to so – with the most common areas of tax where expertise was sought being customs and supply chain and regulatory matters1.  

In this edition of Tax Matter Strategies across January and February, we explore the tax impact of Brexit through the lens of the four fundamental freedoms of the EU.  If you would like to discuss any aspect of this in further detail, including the potential impact on your business, please do get in touch with me or with your usual KPMG contact.  In the meantime, watch this space for more information.



1KPMG and International Tax Review survey "Are Multinationals Ready?", Autumn 2016

2Survey of attendees joining webinar hosted by KPMG ob 5 October 2016, "Brexit - 100 days on: a view on tax"

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