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Michael Lewis, Director at Frank Hirth comments on “UK after Brexit”

Business Tax - 11 Mar 2019

1. Are your clients concerned about the impact Brexit might have on their businesses?

Uncertainty is always unwelcomed by individuals in business who need to be able to plan. There has definitely been some delayed investment as we await the outcome of Brexit negotiations. One of the main fears of our clients was that Brexit would cause such upheaval to the political establishment that a new government which was unfriendly to business and wealthy individuals would come into power. This has abated somewhat in recent weeks but is still a major underlying concern for many clients.

2. How are your clients preparing for Brexit?

Private Clients have been preparing in two main ways:

  1. firstly, by diversifying their investments to reduce risk exposure
  2. secondly removing funds from the potential remit of UK capital controls. A return to 1970’s capital controls being a major fear of such clients.

Entrepreneurs in manufacturing have also looked to build up inventories. Perhaps the biggest gripe from entrepreneurs is the uncertainty and the lack and late guidance from the government which has made planning difficult.

3. Do you think clients might leave the country?

Anecdotally we hear from other private client practitioners that they have seen many clients leave or plan to leave the UK. My experience is slightly different. In a few cases, Brexit was the ‘final nail’, following hard on the announcement of the non-domicile changes, which led some clients to leave but most clients are firmly established in the UK. We should not forget how attractive London is a destination to live, work and play.

In addition, once families are established it is difficult to change as people forget the practicalities such as schooling arrangements. Given the client base of Frank Hirth (with a preponderance of US citizens) it is perhaps also not surprising that many clients have chosen to stay given the ease with which they have adapted to UK culture (due to language) and also the limited tax advantages which could arise from moving given that as US citizens they may tax on worldwide income in any case. Most US clients have therefore decided to sit tight to wait and see what happens. What is perhaps unquantifiable is the extent to which individuals may have been put off moving to the UK by the Brexit disruption.

4. UK has always been considered an attractive destination for businesses – A gateway to Europe. However, now with Brexit, we see a lot of people feeling reluctant to set up their businesses in the UK, do you agree?

This is undoubtedly the case as many American clients would quote both British culture together with access to the single market as the key reasons for establishing in the UK. We will need to see the outcome of any deal to see whether the advantages of British culture can outweigh any market access restrictions. In the short term, I have no doubt it has had a detrimental impact on firms moving to the UK although the quantum is difficult to quantify.

In terms of the attractiveness of the UK as a destination, I also receive different feedback depending on the type of firm. While those in manufacturing and engineering are pessimistic those who are service or technology focussed appear very bullish. The media doesn’t like to relay positive messages but many people in these industries still see the UK as a global hub of talent. Even post Brexit London will still be a magnet for the internationally young and ambitious and such firms appears to be confident in the long term future – of course, whether this optimism is well founded may very well depend on future immigration arrangements and controls and it is hoped that the need to enable talent to move easily into the UK is clearly understood by future governments.

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Michael Lewis

Michael Lewis

Director

T: +44 (0) 20 7833 3500
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Office: London