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Brexit: the impact on charities

24th June 2016

As a result of yesterday’s referendum, the UK electorate has voted to leave the European Union, a process that we are told will take two years or more to effect. The immediate impact of this decision, and that of the Prime Minister to resign, will take a while to filter through the various departments and institutions in the UK and abroad.

For charities, the impact of such a decision is likely to vary depending on the type of activity you support, your markets and location of beneficiaries. Certainly those involved in currency transactions will need to think carefully about the volatility in markets and whether to consider forward currency arrangements to mitigate fluctuations in the short term.

For those with investment portfolios, the immediate reaction to the news has been a fall not only in sterling, but also in share prices and investment managers will need to be proactive in advising, or tempering any immediate decision making in such unknown times.

It will also be interesting to see the extent to which EU funding of projects undertaken by UK charities is affected by this decision. You would hope that to the extent that the EU funding supports nation states across the EU that this will remain unchanged, but there may well be a rethink on the extent to which EU funding for the benefit of UK citizens is formulated in future EU strategies.

For now though, after the events of the last few days die down, we must accept that it will take some time to negotiate our way into the brave new world. Charities and sector bodies will have a key role in ensuring that the impact on charities, the way they are funded and the benefit that they deliver are not lost in debate and agreements on exit.

Legislative changes must also be carefully considered so as to acknowledge that charities, being limited companies in many cases, employers, property owners, investors, and service delivery organisations, are also affected by many of the potential changes. I am sure we can all quote instances where there seems to have been very little consideration of the third sector in legislative changes in recent times.

There will be lots of questions over the coming weeks and months and charities will need to identify those areas of their activities that are subject to the volatility as a result of the decision and plan as best they can in an uncertain environment, considering the relationships that they have with funders, beneficiaries and advisers to ensure that they are informed at each stage of the change.

A period of stability in financial reporting for the foreseeable future would be my desire!

Richard Weaver, Head of Charities and Not for Profit
Tel: 020 7969 5567