As organisations seek to harness information to maintain and grow competitive advantage, the importance of developing a clear data strategy is becoming increasingly evident among enterprises.
As the clock ticks on towards a no-deal Brexit on October 31st, the effects are already beginning on the UK economy.
The pound has hit a two-year low, and the economy contracted by 0.2% in the second quarter of this year. This is bad news for home based growth and a clear motivation for companies to look elsewhere for new opportunities, fuelling their move into new markets.
Not every business can follow Dyson’s business structure and set up a new HQ on another continent, but fast growth businesses looking to maintain their trajectory towards unicorn status are certainly eyeing the EU.
It’s clear that our nearest trading partners still exert a significant pull on UK enterprises consider Starling Bank’s recent £75m funding round to power their European expansion, or furniture retailer Made.com plans to move into four additional EU countries in 2019, bringing its total footprint to 13 across the continent.
Brexit will bring with it all kinds of challenges when looking to expand across the channel. One often overlooked challenge is around maintaining basic business communications.
Without a suitable communications plan in place for a post-Brexit transition, businesses may find it increasingly difficult to communicate with overseas offices, colleagues and contacts due to complex and varied regulatory requirements.
Businesses must consider that each new market must navigate the varying legal regimes and requirements, and make costly infrastructural investments with high potential costs (fines, operating restrictions, even criminal culpability for business owners) for getting it wrong. As a final anti inducement, many European regulators still accept only hard-copy paper-based applications in their native language to be filled out in triplicate.
If you need any assistance or require further information please contact us on 0870 228 1999
Since the UK voted to leave the European Union (EU) in 2016, there has been one thing on the minds of HR professionals and business leaders alike the issue of hiring and maintaining overseas staff.
Planning to move or expand your business overseas?
Brexit has cast a question mark over the future of the global workforce and with VISA issues for existing staff looking to be problematic and hiring overseas talent going to become more difficult, businesses need help.
To achieve this, Human Resource (HR) departments and those responsible for recruitment must be aware of the options available to them to enable the business to easily expand and hire the people they want, where they want. This is where organisations should look towards partnering with a direct Employer of Records (EOR) service provider.
With a potential economic slump on the cards, preparation is key. A third party service used by businesses looking to expand and create entities overseas, an EOR takes care of all of the issues traditionally associated with the minefield that is global recruitment. Helping make the transition into new territories more simple, these service providers speed up the process of setting up shop abroad in a cost effective way. So how does it work and how can it really help in a post-Brexit world?
Time saving
Carrying out HR tasks is time intensive and it’s no wonder that companies often wildly misjudge the time it takes to carry out processes which are traditionally the expertise of HR professionals during periods of global expansion.
Sorting out documentation and translations, hiring new staff, and getting to grips with local payroll and tax regulations are all obstacles that can take a relatively long time to work through when setting up a new office abroad. Underestimating the time it takes to establish a business overseas is a key pitfall faced by organisations expanding globally.
But this is where an EOR service provider can help. Taking responsibility for all processes relating to employment contracts, payroll and tax compliance away from HR departments, EORs can save them time and prevent unnecessary stress when it comes to dealing with the nuances in specific regions.
Outgoings
The costs associated with expanding overseas can be crippling, especially for small business wanting to ride the wave of success onto pastures new.
Unforeseen costs can come from multiple sources, depending on the country you are looking to expand into. These include, but are not limited to, recruiting staff, funding health or housing benefits and complying with the legal requirements for annual leave outlined by the host country.
For instance, in China, an employer is required by law to foot the bill for an employee’s housing fund and social healthcare programmes and in Switzerland, those under the age of twenty are entitled to one week more annual leave than the rest of the population. And those are countries that aren’t even in the EU, so add the other twenty seven member states and the nuanced ways they do business into the mix and you can see how complex things get. Especially as the UK does much of its business with EU countries.
It’s factors like these that not only mean business owners are confronted with costs they were not expecting, but also are at risk of legal repercussions should they not comply with these country specific regulations.
EOR service providers can help here too. Setting up an entity abroad no longer needs to be decided on the basis of the financial reserves; time or legal expertise a business has available to it. Instead, this will be the only time that hiring another entity won’t actually cost the company money, but help it make savings.
Legal compliancy
Ensuring the decisions a company makes are above board is paramount to both its financial success and the longevity of its trading. The process of ensuring legal compliancy can be a daunting one and can put companies off recruiting staff and setting up shop in overseas territories altogether, or lead them to cut corners. The principal issue with this is that by bypassing the aforementioned formalities, businesses then run the risk of breaching both employment and tax laws.
EOR service providers can not only save businesses time, money and prevent them from breaching these local laws, but now the once-daunting process of setting up an entity abroad has never been easier. With EOR, companies can embrace the opportunities that lay ahead of them overseas with open arms, rather than confining them to function on a national basis only and HR departments and recruiters can rest assured things will be done correctly without affecting the talent pool.
If you expanding overseas and require help and assistance registering your company and/or employment contracts give us a call on 01612056655 or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk
If the Brexit negotiations last year seemed tense, they are likely to pale in comparison to the upcoming discussions regarding the terms of the new trading relationship between the UK and Europe.
UK politicians are not in agreement about what would replace the EU Single Market and Customs Union memberships.
The uncertainty surrounding London Stock market
Negotiations need to be completed within nine months to leave enough time for any new agreement to be ratified by parliaments before the UK leaves the EU on 29 March next year.
Given the stakes, there is a high probability of a breakdown in talks and of the economically damaging “hard Brexit” materialising.
In such a scenario, the UK would lose tariff-free access to its largest export market and have to fall back on World Trade Organisation rules. This would entail the imposition of mid-single digit tariffs on UK exports to the EU.
More importantly, exports would also have to abide by complex rules of origin regulation, a heavy burden that would be both time consuming and costly, particularly for SMEs. A hard Brexit would likely lead the pound to retest its post-referendum lows. Higher inflation would likely push gilt yields up.
Another risk, with arguably a wider range of consequences, is the spectre of early elections. With Brexit negotiations dividing the government, there is a material probability of a general election before the end of 2019, particularly as Theresa May has a razor-thin working majority of only 13.
A Labour Party win cannot be dismissed, given its surge in the polls since mid-2017.
A wide array of outcomes would then be possible for financial markets. On the one hand, should Labour win a sweeping majority and push for a hard Brexit, UK financial markets would almost certainly come under pressure due to nationalisation and £500bn fiscal spending programme.
In a more benign scenario, Labour would emerge victorious, but without a majority of seats, making it more difficult to pass extreme policy measures. Should it also shift its stance on Brexit and opt for a Norway style agreement where access to the Single Market is retained, it is conceivable the pound and economy could both strengthen.
In our view, UK equities present a less attractive proposition than those of other regions, despite having more appealing valuations.
UK equities lagged in 2017 and we think this is set to continue in 2018, given the unappetising stew of severe political risk and a comparatively weak economy. UK equities look especially cheap compared to other markets, particularly on a price-to-book value basis. This is partly due to the structural derating of banks and commodities.
On a forward price to earnings basis, excluding commodities, the UK trades at a 10 per cent discount to global markets; a level it hasn’t seen in nearly a decade. In our view, such cheapness is warranted, given the risks enumerated above. The earnings growth expectation of less than six per cent for 2018 is comparatively uncompelling. With the number of profit warnings at a six-year high in the third quarter of 2017, earnings expectations may well be reined in further.
As a high dividend paying market, yielding four per cent overall, the UK has tended to underperform when monetary policy is tightened. UK equities are also still largely exposed to commodities and emerging markets, which are both highly sensitive to the US dollar. Should the dollar rally, as we expect, it could also contribute to restraining UK equity performance.
Should the pound weaken due to a breakdown in negotiations, some argue that UK equities could rally, much like they did after the referendum results. But we think this could be interpreted as the worst scenario, in which case, equities may well dissipate. The outlook is finely balanced.
We remain selective, preferring high-quality businesses with sound balance sheets, robust cash flow generation, and a track record of compounding returns to shareholders. We maintain our bias towards international exposure, focusing on companies exposed to the robust European economy, or US tax reform.
We struggle to be enthusiastic about domestic stocks. Domestically focused FTSE 350 stocks have underperformed their peers with international exposure by more than 15 per cent over the past three years.
With the barrage of pressures unlikely to fade in the short term, we believe it is too early to step back into domestic stocks. The UK outlook is mired in uncertainty, and we expect volatility to increase. This could mean better entry points for equity, fixed income, and foreign exchange investors in the months ahead.
We can assist and advise on how to invest on London stock market. send us an email on info@stanleycarter.co.uk or contact us on 01612056655
The UK Financial Reporting Council (FRC) has confirmed it will launch a consultation on changes to the UK Corporate Governance Code.
Among the proposals, the watchdog said, would be the need for companies to link corporate governance to purpose, engagement with wider stakeholders, and consider how they benefit wider society.
The FRC added that it would sound out views on the future development of the UK Stewardship Code, including the extent to which the interests of wider stakeholders and broader social impacts, including environmental, social and governance factors were integrated into engagement and monitoring by investors.
The development comes after the FRC faced criticism from corporate-governance campaigners over claims that it had failed to enforce the requirements of section 172 of the Companies Act 2006.
Section 172 says company directors must not only run a successful business but must also take account of a wide number of stakeholders such as employees, its suppliers, the wider environment, and even the wider reputation of the company.
The FRC has revealed plans to conduct a series of targeted thematic reviews of company financial reports during 2019.
The audit watchdog said the reviews, which will supplement its routine oversight of financial reporting, will focus on four key areas. In its sights are smaller listed and AIM companies, revenue recognition, lease and financial instruments accounting.
The FRC said it planned to contact 40 small companies before their financial year-end and select two areas of disclosure from their upcoming reports and accounts for review.
The areas that the FRC will select for review, will be drawn from five areas that have been flagged up in recent thematic reviews or in Financial Reporting Lab reports.
The IASB has recently introduced major new standards covering revenue, leases and financial instruments.
Disclosures about the effects of Brexit are also on the FRC’s hit list.
If you have any queries about how these changes will affect your business please send us an email on info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk
Compliance with the UK corporate governance code among FTSE 350 companies has improved this year, but governance and reporting remains “patchy”
According to Grant Thornton’s (GT) corporate governance review, 66% of the 350 biggest UK companies declared full compliance, up 4% from last year.
However, only 33% of the FTSE 350 provided informative insights, down from 64% in 2014.
The report found that longer-term viability statements, internal control reporting and gender diversity had seen little improvement since last year, while investor engagement continues to decline.
Moreover, only 12.5% of the FTSE 350 reported that the remuneration chair held face-to-face meetings with shareholders regarding executive remuneration.
Grant Thornton also revealed diversity in the boardroom still lacked improvement, with only 26% of FTSE 100 board roles filled by women and 77% of the FTSE 100 and 85% of the FTSE 250 without a woman in an executive role.
The report also found improvements in culture-related reporting, with 39% of companies now providing a strong overview of the culture of their organisation, up from 20% last year.
But GT said it was “disappointing” that only 29% of CEOs made personal reference to culture in their opening statements despite the Financial Reporting Council (FRC) recently highlighting the role’s importance in setting and embedding a company’s culture.
For the UK economy to thrive post-Brexit then companies needed to ensure they were complying with governance requirements.
The International Accounting Standards Board (IASB) has instructed its staff to prioritise the development of new type of financial performance measure to be included in IFRS statements.
The board expressed a preference for a measure based on earnings before interest and tax (EBIT) over parallel plans to include a management-defined measure of performance.
The IASB also signalled a preference for a modified version of EBIT over any off-the-shelf definition.
The body that advises the European Union on accounting matters, EFRAG, has published a draft comment letter in support of an IASB draft statement on materiality.
In a webcast to introduce the proposals, IASB member Francoise Flores said: “The definition of materiality is easy to understand but difficult to apply. It is a totally company-specific notion that requires the exercise of judgement tailored to a company’s circumstances.”
In the context of financial reporting, material information is data that is either significant or relevant.
Flores added: “Currently, there is little if any guidance in IFRS on how to make materiality judgements. This lack of guidance can be regarded as partly responsible for IFRS disclosure requirements not being sufficiently challenged in practice from a materiality perspective and rather being used as a checklist.”
The IASB’s practice statement is non-mandatory. Interested parties have until 5 January 2018 to comment on the EFRAG draft.
UK should maintain international standards post-Brexit
The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that the UK has failed to give sufficient thought to the implications of its vote to leave the EU.
In a policy discussion paper on the implications of Brexit for financial reporting, the institute said it supported a UK-specific endorsement mechanism for new international standards.
The report’s authors argued: “[A] new national mechanism could function more smoothly and far more quickly than the EU’s, and indeed this should be regarded as a key prize available to the UK from the change in endorsement arrangements.”
The paper also considered the option of accepting all international financial reporting standards (IFRS) as issued by the IASB with no modifications, as well as continuing to participate in the EU’s current endorsement mechanism.
Finally, the ICAEW also called for the UK to join the IFRS Foundation’s Monitoring Board and the Accounting Standards Advisory Forum.
Under the rules governing membership of the two bodies, there is no current basis for UK membership of either body.
IPE has learned that UK government officials are considering separate proposals for a UK endorsement mechanism – possibly modelled on the Australian model.
