Yorkshire and North East middle market businesses are becoming increasingly alarmed about the impact of a no deal Brexit according to a new survey by leading audit, tax and consulting firm RSM.
Almost half (46 per cent) of middle market businesses surveyed by YouGov indicated that a no deal Brexit would be either harmful or catastrophic to their business. This is a 21 per cent rise over the previous quarter; and the highest level when compared to all UK regions.
With only 24 per cent stating that a no deal outcome would be favourable or advantageous, although this was slightly up from 20 per cent in the previous quarter.
Overall, regional business sentiment about the impact of Brexit on their performance over the next two years dropped to its lowest quarterly level since RSM started the survey in Q3 of 2017 where it stood at 120, now registering just 74 on the RSM’s Brexit Monitor index*.
Yorkshire and North East businesses also hold an equally negative view of the two-year impact of Brexit on the UK economy, with the index registering its lowest ever score of 80, down from 113 when the survey began.
Viewed over a longer five-year horizon, middle market businesses were slightly more optimistic about the impact on the UK economy with average sentiment just straying into positive territory with a score of 100.
On a national level, the top Brexit concerns for middle market businesses are concerns around the stability of their workforce (38 per cent); worries around future trading arrangements tariffs and import/export costs (34 per cent); while 21 per cent said they were concerned about the knock-on effect on consumer confidence.
When asked about actions taken to prepare for a no deal Brexit, the most common actions taken included increasing prices (21 per cent), adjusting supply chains (20 per cent) and setting aside contingency funds (20 per cent). However, firms reported taking fewer actions to prepare than in the previous quarter.
Kevin O’Connor, RSM’s regional managing partner for Yorkshire and the North East, said: ‘Not surprisingly middle market businesses in the region are becoming increasingly concerned with the uncertainty surrounding Brexit and the prospects of a no deal departure on 29 March. What is also apparent is the shift from optimism this time last year to an increasingly more pessimistic viewpoint this quarter although longer term sentiment remains positive.
‘Despite the views referenced in the survey, the closer we potentially get to Brexit, the region’s business leaders appear to be taking fewer steps to prepare. A sort of paralysis seems to have set in as everyone just waits to see what actually happens.
‘Nevertheless, our regional businesses should focus on some key scenario planning and ensure they are either ready for material eventualities or have identified the key risks and have taken a considered view on whether they do something or not based on that work.’
To prepare for Brexit, RSM is advising businesses to cover five key areas:
- Regulation and compliance – Maintaining compliance with changing regulatory frameworks will be crucial to enabling a business to continue to operate and trade across the EU and non-EU countries as they do now. For example, businesses will also need to consider how Brexit might impact their ability to access some tax reliefs and whether insurance provisions will still be appropriate.
- Financial planning and management – Forecasting the impact of decisions and price shock uncertainty will be crucial to maintaining business continuity. Equally important will be the ability to access finance to fund suitable working capital requirements.
- Trade – Businesses need to consider the potential impact of increased customs duties, greater regulation causing delays to the movement of goods and services and the effects on cash-flow.
- People and talent management – Changes to UK immigration policy will have a profound effect and businesses should be thinking about how they will continue to recruit and retain the right people to maintain business continuity and make the most of Brexit opportunities.
- Business management – Avoiding disruption to core operations and maintaining business continuity will require careful planning and may involve restructuring the business or acquiring additional entities in different jurisdictions. This may also mean outsourcing key areas to increase efficiency and enable a business to focus resources elsewhere.
For future information visit https://www.rsmuk.com/brexit.
* The index measures sentiment between a range of 0-200, where any score above 100 is considered positive, any score below 100 is negative.