 "Sacha Romanovitch")
Grant Thornton UK CEO Sacha Romanovitch, the first women to head major professional services and audit firm in the country, shares with Sudipto Dey her insights on the legal and regulatory changes Indian businesses should expect in the post-Brexit era. Edited excerpts:
How has business sentiment changed in the UK from the time of Brexit vote in June last year?
Initially there was surprise. All the (pre-Brexit) polls indicated that around 70 per cent of the business community was in favour of remaining within the European Union. Two things were important to businesses — one was access to markets and the other was access to skills and talent. Both these issues are critically important whether you are in or out.
Businesses are always pragmatic. The issues around trade, skills and talent remain important for business. A positive thing to come out of this situation is that it has forced us to stop being lazy. There is a global market out there and it gives us an opportunity to reinvigorate trade ties with countries such as India. This is an opportunity to re-state how we want to trade together. (British) Prime Minister Theresa May is talking to stakeholders on a new industrial strategy, a review of corporate governance practices and how to make a business environment that enables growth and investment.
How have Indian businesses in the UK reacted to the situation?
There are more than 800 Indian companies that have operations in the UK. They employ more than 110,000 people and collectively pay 650 million pound in taxes. The reasons why Indian companies choose the UK as base were different for each sector. But the underlying theme was that the UK was a gateway to the world as a market that Indian entrepreneurs are familiar with. It was a natural place to go West — and all that remains the same.
In the short term there have been a lot of benefits for investors with devaluation of the pound. It has meant investing in assets that have become cheaper. Sophisticated investors use that in a strategic way often to get foot hold in markets that otherwise are prohibitively expensive.
In the long term none of us know how it will pan out. But there are some certainties — we know Britain will leave EU, it will come out of the jurisdiction of the European Court of Justice and that it will leave the common market. We also know that our government is out there forging trade deals and open up trade in key trading routes. The India-UK trade tie is something the UK government is focussing on.
So, are companies adopting a wait-and-watch approach before entering the UK market, or ramping up existing business?
That certainly was the expectation pre-Brexit. Interesting thing is that it actually did not happen from a transactional perspective. Despite the uncertainty, the UK has become a good value for investors. Also, the other thing people realised is that nothing dramatic is going to happen immediately. From the time that government triggers Article 50 to initiate an exit (from the EU) there is time frame of two years from that point to negotiate an exit. Businesses have realised that nothing is going to change for quite some time. Anyway, good businesses are well equipped to plan for uncertainty.
Could you explain why the UK government feels the need for a re-look at governance practices?
There are lots of governance-related compliances that businesses are expected to follow. The government is looking at simplifying the regulations and showcasing how one could get competitive advantage through great governance.
What other regulatory changes should Indian businesses expect in the post-Brexit era?
It is not that all European Union legislation will go way post-Brexit. We may decide to keep some of the existing regulations depending on how the negotiations go. One thing that the government has said it will be very competitive from a tax perspective. It plans to have the lowest tax regime in Europe. However, the government expects businesses to pay their dues under the low tax regime and not look for exemptions. Large businesses are required to publish their tax strategy. One person in the business – typically the finance director- has to sign off personally that their systems and processes comply with the tax policies. There is also a move to bring in legislation so that businesses become more responsive to societal issues, such as use of child or bonded labour.
