The role of the treasurer is continually evolving. When it comes to strategic financial decisions, the CFO will often rely heavily on input from the treasury function for the best course of action. It is increasingly important that plans are put in place to encourage synergy between the different functions leading up to what could be a difficult period for the UK come March.
The topic of Brexit seems fairly unavoidable as we gear up to potentially the most defining time for the UK since initially joining the EU. One question circulating amongst people I meet is how might the world of financial services change post-Brexit and will this have an impact on Treasury functions. The UK’s trade surplus in financial services was £68bn in 2017. To put that into perspective, that’s nearly the combined surplus of the next three leading countries, the US, Switzerland and Luxembourg. London is undoubtedly the Financial Services capital, but will changes need to be made if this is to continue.
The main concern surrounding Brexit is that in the event of a “no-deal” and no connection to the European Free Trade Association (EFTA) companies may not be able to serve EU countries as they did before. It is for this reason that certain companies have moved their ownership to Europe.
So how are treasurers going to be impacted? The result of Brexit has had an immediate bearing on treasurers. In the aftermath of the referendum, many pointed to the weak pound and volatility of foreign currency markets as the main causes of apprehension. With no definitive solution or outcome even close to being a given, treasury teams have to ensure liquidity and financial risks are managed to cope with various outcomes. Some of the issues that may be faced include Funding, Cash Management and Counterparty risk. If the UK ceases membership of the EU, it may also relinquish the ability to operate under the Single Euro Payments Association (SEPA) resulting in a levy on cross border transactions. This would force treasurers to alter cash pooling strategy and may force moves for companies or hinder their ability to operate in Europe. Access to cash and a dynamic approach to relationships with financial institutions will be vital if firms are to adapt to the changing circumstances and manage treasury effectively.