Brexit – (brek-sit), noun: A combination of the words “Britain” and “exit” used to describe the June 23, 2016 referendum in which the people of Britain voted for the United Kingdom to leave the European Union. The vote sent markets into turmoil and had many concerned over the political and economic futures of Britain and Europe.
Who will be affected by Brexit?
While most eyes were on Britain and Europe, the move is expected to impact businesses and markets around the world, posing significant strategic challenges for business leaders as they navigate the fallout. Experts say the following organizations will all feel the impact of Brexit:
- Companies or financial institutions based in, with a subsidiary in, trading in, or with any presence in, the UK
- Companies and financial institutions that trade with the UK
- Companies and financial institutions that invest with the UK
In an interview with the Financial Times, JPMorgan chief executive Jamie Dimon warned of a “massive dislocation” to London’s financial hub that would send international banks based in the city across Europe. He said Brexit could undo decades of progress.
To be fair, similar dire warnings were issued when the UK didn’t adopt the euro as its currency. Instead, the city flourished.
When will your organization be affected?
The United Kingdom is, for the time being, still part of the European Union. At the moment, the status quo remains.
But as the initial market volatility shows, organizations and financial institutions around the world need to brace for the future. The process is still unfolding, and monitoring its progress is integral for companies that want to stay ahead of the flux.
The United Kingdom and Europe have at least two years to negotiate the withdrawal agreement, though British officials have warned it may take much longer. In order for an extension to be granted, all 27 remaining members of the European Union have to grant their consent.
In addition to ironing out the details of the withdrawal, officials will also discuss:
- Negotiations on future arrangements between the United Kingdom and the European Union
- Negotiations on trade deals between the United Kingdom and countries not in the European Union. The European Union has fiscal and legislative arrangements with countries beyond its borders. Now that Britain is on its own, it will have to form new agreements with these non-EU countries. Companies will have to watch these conversations closely to stay up to date on any changes in trade laws or treaties.
Stay informed. More change to come.
International businesses should keep a close eye on the Brexit negotiations. Only when we see the outcome of the talks will we know what impact Brexit will have on the United Kingdom’s economy and legislation.
Changes could be extreme for certain industries and companies, and it will be important to stay nimble to adapt to whatever outcome is decided.
Steps to take to help you prepare
As the outcome unfolds, companies may need to restructure and reorganize to keep up with any possible new treaties, trade agreements and costs to do business. For organizations, the effects of Brexit could range anywhere from changes in cross-border transactions, to more drastic measures such as having to physically liquidate existing entities and setting up new entities.
To be prepared for whatever changes are coming, it’s important to ensure all entities are in compliance with existing regulations. Double check that all your books are in order, and that you’re ready to restructure under any new agreements.
Now is also a good time to ensure all elements of compliance and entity maintenance are well connected, especially finance and accounting. Human resources and payroll departments should also be ready to adapt to any employment and/or staff changes.
To learn more about how CT can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free U.S.).