Professional services would be hit hard by No Deal Brexit

18 October 2018 3 min. read

The UK Government has admitted that the professional services industry of the UK would be stung by a skills shortage in the event of a No Deal Brexit, in the latest of a series of warnings to the nation’s businesses. The news that auditors and other chartered professions would not have mutual recognition follows just days after City Minister John Glen confessed he expected 5,000 jobs to leave London’s financial district before March 2019.

For months, professions across the services spectrum have warned the UK Government that it must take action to enable labour to travel to and from the continent, or jeopardise the future of the economy. This has seen warnings from the NHS, and the UK’s body for architects, among others, call on Prime Minister Theresa May to strike a deal with the EU to continue the policy of mutual recognition of professional qualifications after Brexit.

While the Government has made numerous allusions to this being its target, however, striking a deal with the EU has become an increasingly distant prospect, with the deadline for Brexit negotiations now fast approaching. With just five months remaining before the UK is due to withdraw its membership from the bloc of 28 European economies, the Department for Exiting the EU has now warned that under a no-deal Brexit there would be no mutual recognition of professional qualifications, between Britain and the mainland.

Professional services would be hit hard by No Deal Brexit

This is likely to hit the auditing and advisory firms of the UK hard, and the Department also suggested that auditing rules would subsequently need to be altered. While UK companies operating solely within the UK would not see any changes in auditing rules, there would be additional requirements to the audits of UK companies operating overseas. To this end, a UK audit firm wishing to own or be part of the management body of an EU firm would no longer be recognised among the majority of EU qualified owners or managers.

Additionally, businesses with a branch in the EU would become third country businesses in the event of a No Deal scenario, and as such would be required to comply with specific accounting and reporting requirements in the country where they operate. Meanwhile, companies listed on an EU market may also be required to provide additional assurance to the relevant listing authority.

In line with a number of other professional services bodies, the UK’s accountancy collectives responded together. ICAEW, ACCA, Chartered Accountants Ireland and The Institute of Chartered Accountants of Scotland, stressed the “critical importance” of making use of the remaining time on the Brexit countdown to strike a deal and “avoid the costly and disruptive contingency measures” the Government outlined.

They said it was required to finalise “as a matter of urgency” the withdrawal agreement and transitional arrangements until the end of 2020. They also called for it to enable the mobility of professionals, maintaining open access for the take up of accountancy training and qualifications, and moreover, they requested mutual recognition of appointments and judgments in insolvencies to avoid duplicative court processes and to address the level of cooperation between the UK and Ireland.

The news comes just days after the Bank of England and the Government both warned of an impending exodus among the UK’s financial services community. Some 5,000 jobs are now expected to relocate to the continent before the March 2019 culmination of Brexit.