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Some press commented on the exit as “the earthquake”, and that is exactly what it felt like, the morning after the night before. The aftershocks will continue for years to come… But was it a surprise? No it wasn’t, but neither did we expect it (when I say we, I mean almost the other half of the electorate 48% who voted to remain).
Ever since the European marriage in 1975 there have been cracks in the relationship. United Kingdom (UK) secured to opt out from adopting the Euro in 1992 was a casing example. The widening of cracks more recently have been for other challenges. Immigration, the control of borders, and sovereignty won the hearts and minds of the people over hard facts from world leaders, academics, the corporate heads, banking institutions and other intellectuals over economics, growth and opportunity. Perhaps the key messages did not reach the ordinary people up and down the country.
So did the people make the right choice? Not in my opinion, and my opinion resonates with the other half of the population. European Union and the free movement of people have filled gaps in the construction industry, health care, restaurants, hotels and leisure. It has created a rich cosmopolitan society. It has allowed cross cultures and integration through music, arts, food and sport. It provides fantastic opportunities to the young to enjoy experiences in the neighbouring doorstep through holidays, working in new environments, experiencing new languages and acquiring new skill-sets. All these benefits are key to globalisation. Furthermore, the leave vote has created a vacuum in government. The prime minister has resigned and the opposition leadership is under immense pressure. And there is a strong chance that Scotland will force another referendum to leave UK.
So what next? And how will business fare in the new look UK? There is some urgency to restore a new prime minister, so that the process of separation can commence. Pressure is also building from EU leaders to commence Article 50 proceedings. To delay both these key next steps will add to the uncertainty. Uncertainty will affect both the financial markets as well as corporate confidence to invest – investments out as well as investments into the UK. The road ahead for the next few years will be challenging. Businesses will focus more on stability and cost control, over investment and growth. The separation process will create many unknowns for business decision making. Depending on how UK negotiates with EU, will determine new ways of working for businesses. Contracts and company law will have to change. New treaties will mean changes to the tax system. Indirect taxes will have the greatest impact and change. Customs duty, excise duty, VAT and capital duty is completely intertwined with EU Directives and Regulation. Direct taxes are less likely to be affected by the UK’s leaving the EU. It may require considerable planning and resource to implement appropriate changes within the ERP systems and compliance processes currently used by businesses to account for these changes. An extra layer of cost that will have to be borne by businesses until the transition is complete.
Time will be the best judge of the success or failure to leave. And change is never a bad thing. But the focus now should be to manage the uncertainties and to plan and execute the transition as seamlessly as is possible. As for Amesto Global, we will keep a close watch on the transition, and will be well placed to help manage the changes for our current and prospective clients.