LISTEX 2019 BREXIT IMPLICATIONS FOR UK TOUR OPERATORS
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LISTEX 2019 BREXIT IMPLICATIONS FOR UK TOUR OPERATORS
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LISTEX 2019 BREXIT IMPLICATIONS FOR UK TOUR OPERATORS
- 5. The impact of Brexit for UK companies with a continuous activity in France: Tour Operators and the role of the French Chartered Accountant.
- 6. What are the repercussions of Brexit on British tour operators operating in France? What are the concerns of the directors faced with the current conjuncture? In this uncertain and constantly changing environment, what are their expectations in terms of advice and assistance from the French chartered accountant and what guidance should be provided to support the sustainability of the business and to enable the management to make informed decisions?
- 7. • LinkedIn • Email • LISTEX
- 8. • 25 responses in total • 22 respondents in targeted population • France represents more than 50% of the turnover for the 64% of respondents Reason for the choice legal structure Source : Brexit Questionnaire - qu 0 2 4 6 8 10 12 Advised by our UK and/or overseas accountant Minimum required to operate legally Allows optimisation of taxable profit split Uk/France Limits the risk to the UK business Reasons applicable to the choice of business structure Not important/not considered Slightly important Important Very important
- 9. Legal and tax related impacts of Brexit Additional admin/compliancy requirements to manage a non EU branch or subsidiary Costs and challenges associated with requirements for a Fiscal Representative Impact of Brexit Not important/not considered Slightly important Important Very important Source : Brexit Questionnire - question 12
- 10. The legal structure allows us to post UK workers overseas Enables us to post UK staff to work in Europe Reason for choice of business structure Not important/not considered Slightly important Important Very important Source : Brexit Questionnaire - question 8
- 11. Reasons for posting staff to France 0 2 4 6 8 10 12 14 16 Gap year culture facilitates recruitement Lower social charges in the keeps staff costs lower Uk staff can converse in their mother tongue with customers, positive for the provision of assistance and problem solving Cultural understanding of the levels of service expected by our customers Very important Important Slightly important Not important/not considered Source : Brexit Questionnaire - question 10
- 12. Impacts of Brexit Fall in Sterling increases costs overseas & makes travel more expensive for our UK customers Uncertainty of what will happen & when makes planning time consuming & inconclusive Not important/not considered Slightly important Important Very important Source : Brexit Questionnaire - question 12
- 13. Sources of information 0 5 10 15 20 25 UK accountant / lawyer Overseas accountant / lawyer Business colleagues and competitors Organisations / work groups set up to collaborate & share information UK government information / public websites / press I know more than the other sources Source : Brexit Questionnaire - question 14
- 14. Operational and commercial adaptations 0 2 4 6 8 10 12 14 16 Employment of local personnel on local contract Employment Uk personnel on local contract Use of an interim agency to post EU workers Reduced commercial offering, trimming down service provision Reduced commercial offering, reduction of capacity Outsourcing the provision of chalet / hotel services to a third party New source markets, diversifying away from the UK Don't know, still hoping it will not happen Posting european workers from other offices based in Europe Nothing Source : Brexit Questionnaire - question 16
- 16. • Repercussions • Areas of concern • Expectations “We act upon estimates rather than inferences, upon "judgement" or "intuition", not reasoning for the most part“
- 17. SPONSORS
Editor's Notes
- No one can have missed the news! Brexit –Britain, Exit, référendum 23 juin 2016 décision par les britanniques de quitter l’UE Deal or no deal that is the question before the 31st October. The less I say about Boris Johnson the better!
- So where do I fit in and why I am stood up here talking to you today? Introduction to me and context of my study: Pictures illustrate the height of my « modelling » career with Tui Operations Manager for ski programmes in France, Switzerland and Andorra. Career change to French accountant 3 ½ years ago. Finished my Masters degree in London and went to do ‘a’ ski season. My masters in Geography of Third World Developpement equiped me well. Qualified in piste map reading The infrastructural obstacles encountered in the developpment of a gravity fed irrigation project in a semi-arid region of Kenya can be assimulated to the difficulties in setting up telecoms and wifi in chalets in the Alpes Tour Operator to Accountant – applied same operational skills and tenacity to dealings with the tax office. To accompany the career change, I am in the final year of a French Masters accounting qualification ‘DSCG – Diplôme superieur de comptablite et gestion’, comprising of 6 exams and a dissertation.
- Here it is. Dissertation was submitted in August. Viva in November. My interest in the subject is both professional and personal and brings my two careers together nicely.
- Dissertation – classic structure – Title, research questions, literary review, method, primary research, results and analysis, answer to the research questions in conclusion. My ‘litterary review’ covers the legal, tax and social situation applicable to a tour-operator setting up business in France. The legal structural set up – branch or subsidiary The tax obligations (and opportunities) – based on the commercial activity of a tour operator – in terms of both TVA and corparation tax The social environment – in the context of the Eu and the Free movement of services, the underlying principal for the posted workers directive
- Main focus of the primary research was an online questionnaire published on Google forms and open to respondents for a 3 month period from mid-April 2019 to mid-July 2019. The questionnaire was distributed in several ways: shared on LinkedIn, link sent via email and via the LISTEX blog. Distribution was tricky and reponses rates even trickier To quote James from Listex (reassuring in my moments of stress) who stated it was harder to get business feedback than client feedback
- 25 responses were obtained of which 22 correspond to the targeted population of UK tour operators with an operation in France. France as a destination represents more than 50% of the turnover for 64% of respondents. 90% of respondents stating advice of the chartered accountant was important or very important in their choice of legal structure. Half of the respondents noted the important of respecting the minimum legal requirement for their operation. The majority of respondents indicated that they gave little or no importance to the protection of the parent company in terms of the reasons behind their choice of company structure. This result concurs with the Limited/branch set up as the Limited is not protected, a direct consequence of the lack of legal personality of a branch. In effect, the legal structure is not an objective in itself but the means to operate the desired business activity. The questionnaire identified 9 possible impacts of Brexit and for respondents to rate the relevant level of importance to their business. Additional administration/compliancy requirements involved in managing a non EU branch or subsidiary company was identified as very important in terms of the impact on the business by the majority of the respondents. This level of importance was higher that the study anticipated, given the additional requirements are minimal and the lack of related questions received from clients. The costs and challenges associated with the possible need for a non EU business to appoint a Fiscal representative, related to VAT liability, received mixed responses with more respondents choosing “not important” than “very important”. However a small majority did consider this to be important or very important. We suggest, in accordance with the World Bank rankings of the ease or doing business in France, which ranks France in 32nd place, that businesses are wary of the perceived demands of French administration.
- The questionnaire identified 9 possible impacts of Brexit and for respondents to rate the relevant level of importance to their business. Additional administration/compliancy requirements involved in managing a non EU branch or subsidiary company was identified as very important in terms of the impact on the business by the majority of the respondents. This level of importance was higher that the study anticipated, given the additional requirements are minimal and the lack of related questions received from clients. The costs and challenges associated with the possible need for a non EU business to appoint a Fiscal representative, related to VAT liability, received mixed responses with more respondents choosing “not important” than “very important”. However a small majority did consider this to be important or very important. We suggest, in accordance with the World Bank rankings of the ease or doing business in France, which ranks France in 32nd place, that businesses are wary of the perceived demands of French administration.
- With respect to the reasons for the choice of business structure, the ability to post UK staff to work in Europe is the reason cited by 95% of respondents as “very important”. No other reason was allocated the same high level of importance.
- The reasons given for posting workers and the level of importance attached to each are shown in the figure. The first 3 reasons were all cited as “Very important” by the majority of respondents and demonstrate the essential nature of this directive. The results also indicate that the value added to the business in terms of culturally compatible service provision and UK staff conversing in their mother tongue to provide assistance and resolve client issues exceeded that of lower staff costs. The end of the ability to post UK staff to work in France is synonymous with a loss of competitiveness. The impact of Brexit in terms of a loss in cost-competitiveness is rated as “very important” by nearly 70% of respondents. The additional costs and challenges, such as visa requirements, in order to staff operations in the EU is rated as “very important” by over half the respondents. For 73% of respondents rating the impact as “important” or “very important”, the end of the ability to post UK staff will negatively impact the quality of their product. Whilst remaining important, the exposure to risk due to a lack of knowledge of the local labour code was not considered as very important by the majority of respondents. This result is coherent with businesses who already have to comply with many aspects of labour code for posted workers. We can also assume that clients are already in possession of much of the relevant information via their French accountants and other sources, which therefore reduces the risk. The essential nature of the advantages linked to posting UK workers overseas to the tour operator’s business model will largely influence their concerns as to the most probable and most apprehended impacts of Brexit.
- The respondents are almost all concerned by the negative repercussions of the falling pound. This effectively increases the cost of any Euros expenditure and increases the cost of holidays for the customer as well as reducing client spending in resort. The impact of the uncertainty surrounding the situation is deemed as important or very important for 100% of respondents.
- Our results show that the French chartered accountant plays an important role in terms of an available source of information to businesses with 91% using this resource to provide information about options moving forward. The majority of respondents were also reliant on business colleagues and competitors as well as collaborative organisations or work groups.
- Options being favoured post Brexit More than two thirds of respondents are favouring the employment of UK personnel on local contract. The results concur with the responses in terms of steps taken or envisaged to prepare the business for Brexit. The two dominant responses are a reduction or modification of the services offered to reduce staffing requirements and study of the implications of local contracts versus UK contracts to enable decision making. Clearly attached to the advantages of posting workers, nearly a quarter of respondents envisage continuing to post workers either via European temporary employment agencies or via business headquarters located elsewhere in Europe. Nearly a third of respondents are considering employing local staff or European staff already working elsewhere for the group. This result was higher than expected. However, looking further at the detail, for 5 out of the 7 respondents planning this as a solution it was in addition to the employment of UK staff on French contract. We take from this the assumption that part of the adaptation strategy is to determine the essential roles where language or other specific customer service skills play a big part, and and those where it is less significant. Whilst most stated that they did not yet know exactly what strategy to choose (and still hoped it won’t happen), only 3 respondents stated that they had not yet started to think about alternative options. The lack of certainty was the reason stated for the inaction. This is one type of observed behaviour in the face of change. Despite the situation being disagreeable, we remain inactive. 86% of the questionnaire respondents indicated multiple adaptation strategies, operational elements combined with commercial aspects aimed to reduce the risk. Here we observe a typical reaction when faced with uncertainty. The difficulty of the situation stimulates creativity and the uncertainly becomes a decisional tool to bring about changes in the commercial offering and operational organisation of the business.
- 86% of the questionnaire respondents indicated multiple adaptation strategies, operational elements combined with commercial aspects aimed to reduce the risk. Here we observe a typical reaction when faced with uncertainty. The difficulty of the situation stimulates creativity and the uncertainly becomes a decisional tool to bring about changes in the commercial offering and operational organisation of the business. Simply put, in an effort to save our own butts, the brain’s pattern recognition system starts hunting through every possible database to hunt up a solution. It creates mandatory conditions for innovation. It trains the brain to think in unusual ways. It trains the brain to be more creative. Einstein at the Beach: The Hidden Relationship Between Risk and Creativity Steven Kotler, Forbes, 2012
- Repercussions: The legal impact in terms of additional administration/compliancy requirements is considered important. From a tax perspective, the costs and challenges of a Fiscal representative are rated as much less of an impact. The major repercussion and the most feared is without doubt the likely end of the ability to post UK staff under the posted workers directive. The fall in the currency and the uncertainty surrounding Brexit are both major issues. Areas of concern: Concern is concentrated around staff headcount and costs in order to provide the in resort services which are essential to the business model of the tour operator. The two major considerations are changes to the product offered in order to reduce headcount and research into the implications of French contracts. Expectations: The expectancy in terms of advice and assistance is logically focused on the main area of concern. The French chartered accountant is recognised as an important source of information and should be prepared and able to provide the answers, particularly with respect to the legal requirements and cost of employing staff on French contract The possible outcomes of Brexit are still not known. The aim of this dissertation is not to predict the future but to enable the French chartered accountant to provide the best possible guidance in line with needs and expectations. Uncertainty is managed by good judgement. “We act upon estimates rather than inferences, upon "judgement" or "intuition", not reasoning for the most part“(Knight, 1921: 223) The economic model of the tour operator will inevitably need to adapt, both operationally and commercially, if the business is to survive depending upon the final outcome of Brexit.