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Asia-Pacific accounting market remains calm after Brexit vote

While the majority of businesses and investors in Asia-Pacific brace themselves for a blow to financial markets as well as other knock-on effects across the region following the UK's decision to leave the EU, the accounting industry is remaining steadfastly optimistic about what this could mean for them. Xiou Ann Lim speaks to two CEOs to uncover their sentiments on the matter.

While Brexit may have major implications on member countries of the EU and the UK, its impact on Asia-Pacific is not to be taken lightly. As chief executive of CPA Australia Alex Malley says: "It's important to understand that the consequences of the Brexit vote are much more than a Eurocentric phenomenon, they will have global implications." He attributes this to the interconnectedness that means "any downturn in Europe could impact the profitability of firms anywhere in the world".

After the shock
Malley believes that globally, "larger firms will have now begun preparing both themselves and their clients for the consequences of this outcome even though the impacts are largely unknown". Indeed, the British government and the EU will have to engage in negotiations, which may take a while to work through.

According to Peter Allen, chief executive officer at Grant Thornton Singapore: "After the initial shock in the financial markets, I would expect that relatively few clients would make early decisions based on this political change."

Allen adds that businesses will not wish to make any precipitous decisions until the broad structure of the deal becomes clear. "For example, a business in the financial services market that relies on passporting rights into the EU will not want to decide to move out from London to Frankfurt until they're sure that they have to - because obviously, there's massive cost involved," he explains.

Equally, Allen believes that some clients who are thinking about investing in any business that relies on passports may decide to delay their decision. "It's that delay in direct foreign investment into the UK that may cause a recession or downturn in British economic performance," he says.

Finding opportunity in adversity
But amidst all the uncertainty, both Allen and Malley believe that the accounting industry in Asia-Pacific will remain robust. "Change can be an opportunity - professional accounting firms in our region may gain additional advisory work from firms relocating from the UK to the region," Malley says. He adds that - from an advisory perspective - there will be opportunities as companies may seek advice on potential changes to tax in the UK and the impact on the movement of goods and services, including human capital. Even more significantly, he thinks they may seek advice on restructuring or relocating.

"Accounting businesses - like all professional services businesses - tend to perform in accordance with the economy they serve, that's the broad generalisation," Allen explains. He further adds that the industry is geared towards helping clients with decisions. "Therefore, an increase in uncertainty or disruption is not always bad," he rationalises.

Citing - as an example - his experience in running the financial services practice for Grant Thornton in the UK before he took on his current role, Allen discloses that the business tripled in size in the five years following the global financial crisis. He chalks this up to the fact that clients needed advice around regulation, capital allocation, accounting and tax.

"So, the impact on professional services businesses and accounting firms will be dependent on how much clients need advice at this point and some clients will need advice as they scope out the impact of this event," Allen surmises.

In terms of Grant Thornton Singapore's business model, Allen doesn't expect there to be any significant impact. "Certainly speaking for ourselves, there are no implications - particularly in this decision. In fact, the structure of our own business is well-adapted to geopolitical change of this kind," he says.

As for the future, Allen believes that the implications of this decision will only become clear over time - perhaps over a five- to ten-year view. "Realistically, you can't make no decisions within that time scope," he says, adding that the economic impact will probably be much less than the initial market reaction. "My advice is to keep calm and carry on."

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