Posted by Jim Rodgers, Sr. Director, PSA Specialists Team, NetSuite
Brexit has unleashed uncertainty and challenges across the historically robust professional services sector in the UK, ranging from a record 31-year low for the British pound to impacts on labor mobility, cross-border business, taxation and ultimately revenue and profitability.
One thing, however, is certain as the industry confronts a clouded post-Brexit future—more clarity and precision than ever before are needed for professional services organizations that are either based in or do business in the UK.
As it is, many PS firms tolerate some degree of guesswork and process delay in project delivery, client service, resource utilization and financial management. That’s a risky strategy given the uncertainties surrounding Brexit for professional services, and indeed the UK and EU economies at large.
So far, the UK economy has weathered fallout from the June 23 Brexit vote better than some expected. The International Monetary Fund in early October revised previously pessimistic predictions to say the UK will be the fastest-growing G7 industrial country in 2016, though it forecasts low 1.1 percent growth in 2017.
If growth does slow and companies curtail spending, in-country professional services consulting work could diminish. Real or perceived barriers to cross-border work could deter prospective EU clients from engaging a UK consultancy. Some firms have recently seen a spike in work as companies in multiple industries affected by Brexit look to consultancies for guidance, but long-term effects are unknown.
FX and Mobility Concerns
Foreign exchange is a major concern. With the British pound slumping in early October to its lowest mark since 1995, UK-based professional services organizations doing business abroad face a financial hit if fees are paid in a currency other than the pound. Similarly, firms based outside of the UK but serving UK clients face lower net revenue if compensated in the British pound.
Wages and expenses for professional services personnel working outside the UK are another issue. If a consultant works for a London-based firm in, say, France, the organization could face unfavorable exchange rates if the individual is paid in Euros—along with the accounting headache of keeping currency conversions straight.
Cross-border resource flexibility is also a question mark. While “freedom of movement” remains in place, changes could occur as terms of the UK’s exit from the EU are negotiated over the next two years. Conceivably, those changes could affect nationals of EU countries working in the UK, and UK citizens working in EU nations.
It will be years before the economic, regulatory and political dust settles from Britain’s historic vote. Rather than a wait-and-see approach, professional services organizations can take action now withstand potential negative fallout by improving visibility, operational efficiency and client service.
A key transformational strategy is to replace disconnected financial, project management and CRM applications with end-to-end professional services automation software (PSA). Ideally based in the cloud, PSA improves revenue forecasting with real-time insights into key project metrics, automates currency conversions and streamlines resource allocations and project delivery. Integrated PSA capabilities eliminate the costly inefficiency and poor visibility of siloed applications.
With more than 1,500 customers, NetSuite OpenAir is the world’s #1 cloud PSA solution. To learn how NetSuite OpenAir can help you strengthen control in the post-Brexit world, contact us for a complimentary services value assessment.