Neil Jones, a director at Stockport accountants Bennett Verby, takes a look at how the decision to leave the EU might affect the finance industry in the north west.
Neil says that ‘north west businesses face tumultuous uncertainty for the foreseeable future’.
He adds: “After London, the north west is best-placed to take-on the economic uncertainty imposed by the Brexit. For many businesses, it’s a case of hanging on until the storm is over.
“The professional and financial services industries raised the north west out of recession after 2008 and FPS remains one of the strongest sectors in the UK economy.”
Neil also warns ‘companies could abandon their UK head offices in favour of more central European locations as a more affordable way of doing business’.
Here are Neil’s thoughts in full:
Avoiding decline after Brexit
For almost a decade, growth in the north west has been powered by the Financial and Professional Services (FPS) industry.
In that time, the sector has grown by more than 40% in the region and just last year, FPS businesses employed 250,000 people in the north west.
It is thanks to these businesses that Manchester’s economy has been powered into second place behind London.
There is no doubt that these firms play a major role in both the regional and national economy, having contributed massively to the north west’s recovery following the 2008 financial crisis.
But Britain’s vote to leave the EU has cast a shadow of uncertainty over the future success of the sector, rendering existing forecasts for growth irrelevant.
Whereas the FPS industry was predicted to create an additional 50,000 jobs by the year 2020, now north west businesses face tumultuous uncertainty for the foreseeable future.
Why Brexit puts north west business at risk
Up to now, most global companies have done business in the EU by setting-up head offices in the UK and using their right to passport to the other 28 member states.
But now that Britain has voted to leave the EU, experts are concerned that these companies could abandon their UK head offices in favour of more central European locations as a more affordable way of doing business.
Of course, while questions of HQ will be raised in boardrooms, the UK’s financial and professional services maintain their excellent reputations.
The City of London is home to many of the world’s leading minds, legal systems and the English language. No international organisations will pull out of the UK in a hurry.
But the same can’t be said for the north west’s young FPS industry.
Global banks – the likes of Barclays and Coutts – are relatively new to Manchester’s Spinningfields area.
If there is risk of international companies moving headquarters out of the UK, this is likely to impact the north west more than it does the City of London.
After all, the North West represents just a small part of the UK’s massive FPS industry.
The country’s financial sector is now expected to shrink by billions of pounds by 2020. The question is how much of this burden will be shouldered by London, and how much it will affect areas like the north west.
Weathering the storm
It’s easy to get bogged down in the uncertainty. The good news is that, with Brexit, comes increased financial independence for UK policy-makers.
Faced with the increased possibility of recession, the Treasury’s next Budget will likely focus on wealth-creation through pro-business policies.
Indeed, while politicians navigate through the uncertainty, they will looks to business groups and leaders to help outline the post-Brexit agenda.
It will certainly be worthwhile lobbying any groups of which you are a member to get your voice heard in the negotiations.
Ultimately, those businesses which will outlive the post-Brexit insecurity will be those armed with contingency plans and flexible strategies.
The professional and financial services industries raised the north west out of recession after 2008 and FPS remains one of the strongest sectors in the UK economy.
After London, the north west is best-placed to take-on the economic uncertainty imposed by the Brexit. For many businesses, it’s a case of hanging on until the storm is over.