The FT & KPMG Brexit Regional Roundtable series brings together the views of senior leaders from the worlds of business, politics and academia to discuss how they can practically respond to the challenges and opportunities of Brexit.
KPMG has been meeting with organisations around the UK to assess how they are responding to Brexit in a series of dinners, hosted jointly with the Financial Times. Here are a few of the interesting things we heard in Manchester:
Business and public sector chiefs in the North-West are already reviewing their future and taking action in light of Brexit. In summary companies are looking at hedging currency risk, evaluating recruitment procedures, identifying potential new markets and considering locations.
2. M&A continues regardless
Since the referendum vote the deal market has remained robust. Although there was an impact on larger M&A deals in the immediate aftermath of the Brexit vote, with some withdrawn overnight, the regional mid-market has fared better. The majority of these have continued and have either completed or look like they will complete. Overseas firms, particularly US corporates, have been interested in deals and this has probably been on the back of the pound’s fall against the dollar, which has plunged by as much as 18% since the referendum. The expectation is that the number of deals could drop over the next six to 12 months and there are concerns about the impact of cost inflation feeding into overheads. There is also growing evidence of defensive acquisitions to address potential tariff changes.
3. ‘No deal’ fears
Can a trade deal between the UK and EU be worked out and ratified in time? There was real concern what a reversion to a World Trade Organization (WTO) regime might mean in practice. Leaders at the Manchester event called on government for greater clarity on how WTO rules would apply and how they should plan accordingly. Participants asked how tariff and non-tariff barriers will be worked out and what the EU’s attitude to UK goods would be – for example whether the EU would recognise UK-certified goods and services.
4. Talent remains vital
Academic institutions and some businesses are reporting a drop in applications from EU-born citizens, a trend they expect to continue. Leaders were united in their view that as changes to EU citizens’ freedoms hit home, there was a need to improve the productivity of young people in the UK and rethink the UK’s workforce needs. They also agreed the need for a new approach to recruitment and investment in training and education.
5. Market access concerns are raising location questions
Some firms are considering their location strategy as a result of concerns about access to markets, people and funding. One business chief, whose firm operates a call centre in the North-West, said their firm had already opened premises in Poland and Hungary – and had others in the works – to mitigate the possible raising of barriers. Others have sped up existing strategies to open offices in mainland Europe. One multinational expressed concerns import tariffs and duties could put pressure on the competitiveness of its factory in the North-West.
6. The North-West offers post-Brexit advantages
The attractions of the region as a business location remain postitive and in several respects, could be enhanced by Brexit. For example, Manchester was ranked the most competitive business city in Europe in a recent KPMG report and the continent’s third most influential city behind London and Paris, according to Colliers’ Cities of Influence TLC index. The region has an opportunity to benefit from ‘north-shoring’ as cost and infrastructure challenges in London and the South-East encourage firms to look elsewhere. The region is increasingly attractive for young talent; studies show London residents spend significantly more of their disposable income on accommodation than those in Manchester.
7. There are many questions about how EU funding will be replaced after 2020
It is unclear whether funding will be matched by the UK government in areas such as research, infrastructure and agriculture. It will also be important to know whether the government will apply different criteria to funding projects in the future. This is a particular issue in the North-West which hosts major EU-backed projects such as Manchester’s tram network, the Copeland marina in Cumbria and considerable funding for the region’s research institutions.
8. The UK must project a welcoming image
Whether it be from government, businesses or individuals, the UK needs to send a positive message to the world that the referendum did not change its outward and welcoming attitude to those from overseas. Reaching out to countries like India and China with a strong and consistent message will be particularly important, business leaders agreed.