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KPMG predicts 'choppy waters ahead' after Brexit

Jan 31
 
Tags: KPMG LLP
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KPMG predicts 'choppy waters ahead' after Brexit

As the UK finally makes its long-awaited exit from the European Union, KPMG has said the country should expect "choppy waters ahead".

Following the referendum all the way back in June 2016, the country finally withdrew from the EU on January 31st 2020, with political wranglings and delays causing the original Brexit date of March 29th 2019 to be repeatedly pushed back.

Despite no longer being an official member of the EU, the UK will continue to abide by the bloc's rules during a transition period due to run until December 31st 2020. Negotiators from both sides will use this time to attempt to reach a permanent free trade agreement.

In a video message released an hour before the country officially left the EU at 23:00 GMT on January 31st, prime minister Boris Johnson said this is "not an end but a beginning".

"This is the moment when the dawn breaks and the curtain goes up on a new act," he added.

KPMG said the "real negotiations" begin now, with officials from London and Brussels having to answer the "fundamental question" of whether a deal on the future relationship between the UK and the EU can be reached by the end of the year.

"With regulatory and trade issues all still to play for, UK business recognises there will be choppy waters ahead," said James Stewart, vice-chairman and head of Brexit at KPMG UK.

"Also, business leaders are waiting for the publication of the government's negotiating priorities, hoping this prompts an honest conversation about the trade-offs involved in securing a future agreement with the EU."

Mr Stewart also stressed that Brexit is "uncharted territory", so there will be an "air of caution" for most businesses as they wait on pledges of domestic investment by the government.

He emphasised the need for key investment decisions to be made in order to stimulate confidence and set the UK back on the path to growth.

Industry impact

The uncertainty surrounding Brexit has had a clear impact on various UK industries in recent years, including vital engines of economic growth like financial services.

PwC released a study this month suggesting that volumes in the financial services sector are expected to return to growth next quarter, with business expectations at their strongest level since March 2018.

Rain Newton-Smith, chief economist at the Confederation of British Industry, said it was "great" that optimism had increased following more than four years of "dire sentiment", but also stressed that the industry "isn't quite out of the woods yet".

"Against the backdrop of another fall in business and profits, Brexit uncertainty continues to drag on investment plans, and concerns over labour shortages have spiked," she added.

"As the UK begins a new future outside the European Union, the government must do everything it can to support and stimulate one of the UK's most globally competitive sectors."

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