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We are just over two weeks on from the announcement that the UK has voted to leave the EU, and many tax professionals will be wondering what it means for their career prospects and the likely impact on the UK jobs market.
The UK employment market for tax professionals is broadly made up of those people; providing professional tax services to others (individuals or businesses); providing an in house tax service to a business (or individual); responsible for the collection of tax for government.
All three of these markets have been party to expansion in the last 15 years, meaning that job opportunities for tax professionals have been both diverse and plentiful. The complexity of tax legislation has supported the advisory firms whilst the drive for tax transparency and desire by governments to increase their tax take has meant increased burden on companies through a more proactive HMRC. This expansion of the market has slowed in recent years as all types of provider have achieved critical mass, legislation has evolved to dissuade certain types of planning, and lower economic growth has driven tax functions of all types to operate more efficiently.
Up until June 23rd 2016 the key drivers for growth in the tax jobs market were:
– global coordination of tax authorities
– economic activity
Post the Brexit vote, it is too early to comment on the extent of change that the UK will experience and the extent to which businesses operating in the UK will be affected. There have been many interesting articles written on the reasons for the UK population voting to leave the EU. Some speculate it is a backlash against globalization, the concentration of capital in the hands of the few, and that the low real term wage growth in the wider UK population since the financial crisis has invoked the courage to vote for change.
What are the impacts on the tax jobs market in London?
In the immediate week after Brexit we saw little change in our client’s appetite to hire and minimal cancellations of mandates. However, not surprisingly, candidates have approached changing roles with caution and those individuals currently on their notice period have sought reassurance over their decision to move. It is still early days, but so far we have seen little evidence of tax professionals from outside the UK looking to leave nor indeed non-UK multinationals with a UK tax presence seeking the same.
There is, however, likely to be change should there be a downturn in economic growth – as predicted by many. This will impact those people in transaction based tax functions if the number of transactions diminishes (arguably with UK asset process 10-15% cheaper it will fuel further M&A activity). Likely too is a drive by UK companies (FTSE 75-200) with in-house tax functions to be more efficient through headcount reductions and/or outsourcing. For the larger FTSE businesses with a significant % of earnings overseas, there is little anticipated change within the tax function bar a continued drive for efficiency and accuracy/transparency in reporting.
For professional service firms the changes in the market for their services will continue to evolve at pace, meaning they need to be agile, efficient and effective. For some firms the broader headwinds of audit rotation, transparency and fall off in international planning are currently more challenging than Brexit. The traditional London battlegrounds of FTSE 100 tax advisory and transaction services are likely to be replaced by technology tax solutions and also move to the mid market and regional centers as the fallout from London evolves over the coming years.
We expect to see little if any impact from Brexit within HMRC. Recent years’ increased collaboration with EU reform bodies may diminish, but our government’s (and the members of the EU) desire to increase tax take is unlikely to mean a significant reduction, if at all, in HMRC headcount.
Broadly then we anticipate no immediate change to the job market for tax professionals. Over time, as clarity emerges from the economic change and political instability plays out, we may see a reduction in investment in the UK both from domestic and overseas businesses. This will have some impact on the UK tax jobs market, however, we believe this to be minimal. Given the current levels of economic and political volatility, there may be some short term decisions made to place permanent headcount on hold, subsequently increasing the demand for tax professionals who work on short term temporary and interim contracts.
Perhaps of more worry to all of us is the sluggish improvement (if any) in wage growth since the global financial crisis. Low inflation and low interest rates mean this has less impact on people’s disposal income. However, with the 10-15% post referendum slump in the pound, many economists predict an increase in imported goods and a 2-3% rise in inflation. Amidst high levels of uncertainty employers will resist large salary increases and we are likely to see real growth diminish or even decline.
It is fair to conclude that the short term impacts of the Brexit vote on the tax jobs market have been minor; clients remain keen to hire and businesses have shown little sign of leaving the UK. At this stage we can only speculate on the long term impacts. However, one thing rings true: top tax talent will always be in demand. The key is for tax professionals to stay abreast of how tax is transforming – ensuring they focus their skills not just on traditional tax planning but on reputational risk, compliance and stakeholder management. In this way they will stand out as top talent, remain attractive to employers and, ultimately, be able to enjoy significant career progression.
For a confidential conversation about the shape of your tax function, your career, or how the Brexit vote might impact you specifically, please contact Charles Ferguson.