Thank you for registering your interest

Our whole ethos is centred around you, the student. Fill out this form and we’ll get back to you. Quickly.

Edinburgh Business School will use the information you have provided to contact you with information on our products and services. For more information see our terms and conditions.

Which Programme are you interested in?


Your details



Brexit: businesses face a series of issues whilst driving blind

Colin Garvie, Assistant Professor

Faculty Blog

The much-talked-about Brexit is certain to impact business life in the UK. Whether you were a "leaver" who voted to exit the European Union or a "remainer" who voted to stay and preserve the status quo no longer matters as the UK Government seeks to implement Article 50 to start the process in the next few weeks. It would seem that there will be no stopping Brexit. We have made our own bed; we now must lie on it.

Businesses will need to prepare for Brexit now, despite the fact that final severance may be a couple of years away. Or despite the fact that complete severance may prove impossible? The country, its people and its businesses are in unchartered waters. There is no historical precedent or series of events that can be correlated to predict what might happen.

Decisions with potentially game-changing results will need to be made now, with no vision at all what might or might not be the consequences. This is not something that entrepreneurship will necessarily solve. It is akin to asking companies to adapt to all of the rules of a game being changed (potentially fundamentally) after the game has started and resources have all been committed. For example, a risk-averse company may find itself in the unwanted position of making highly risky decisions - not necessarily what its shareholders invested in when they bought shares.

One thing seems certain. Businesses, even those with a risk-seeking outlook, will not want to make any hasty decisions.

In terms of accounting, what might Brexit mean? What areas of financial and management accounting might be impacted? The simple answer is: almost all.

A quick journey through the MBA Accounting text may shed some light on this and highlight some of the key areas that accountants will require to address now in preparation for the forthcoming and, likely, messy separation.

In terms of financial accounting, the "Financial Accounting Framework - Accounting Standards" will need to be addressed. The current layout of the profit and loss/balance sheet originated in an EU Directive. The European Commission decrees that all companies with a share quotation on a stock exchange within the European Union must use IFRSs (International Financial Reporting Standards) for their annual reports and accounts. Does this remain enshrined in annual reports going forward or will the UK deploy its own exclusive version of these accounting standards? Or will the UK follow the US and have a different set of standards completely?

In terms of management accounting, there are numerous potential impacts of the impending divorce that businesses need to consider. To give a flavour of what might be involved, some of the questions to be addressed, in no particular order, might include:

  • Which of our products and services are affected?
  • What (if any) additional costs will we incur?
  • Will we save costs?
  • What tariffs and excise duties might push up our selling and/or cost prices, making us uncompetitive?
  • Where do we currently make our goods - outside the UK but in the EU?
  • What if we rely on EU workers to produce our goods?
  • Should there be any changes (upwards or downwards) to pricing goods when EU rules no longer apply (i.e. can the same product/service be sold to customers in different EU countries at different prices)?
  • If EU product standards no longer apply as they do just now, what impact will any changes have on our costs?
  • What should we do about our European divisions and subsidiaries? Will they be subjected to different laws if the UK rejects the current applicable EU law and implements its own in the future?

The list just goes on and on.

So what skills will accountants within businesses have to display? It would seem that business planning, budgeting and investment appraisal will all require to be subjected to even more rigorous work.

For example, sensitivity analysis and scenario planning will feature highly. Product profitability, cash flow forecasts and investment projects will have to be tested under many different assumptions (mostly in uncharted territory with no precedent to measure against). A range of many more potential outcomes than currently envisaged will need to be produced to enable management decision taking.

And this is all before the topic of taxation, direct and indirect, is addressed. The implications of changing the status quo and abandoning EU laws and rates will be a veritable nightmare for businesses.