An update on Brexit
This June will mark the two-year anniversary of the UK’s Brexit vote, but there’s still a long way to go until we reach the March 2019 deadline. We hear from Stuart Morgan, head of IR at easyJet and Tom Morgan-Harris, managing consultant for financial services and IR at VMA Group, who share their experiences on the impact of Brexit so far within the corporate and IR recruitment landscapes.
What has been the main impact of Brexit for you and your company?
Stuart Morgan: The direct impact so far has been the devaluation of sterling vs the dollar and the euro. This has meant a hit to profits across the last two years of circa £200 mn ($285 mn), particularly as we buy fuel in dollars, which represents a third of our entire cost base. There was a very short-term impact for a couple of weeks post the referendum vote as UK holidaymakers took stock of the situation but, since then, demand for European holidays has actually been very strong.
Tom Morgan-Harris: Over the last 18 months, the ‘Brexit effect’ has caused ambiguity in the market and we didn’t see many IRO roles coming up in 2017. In 2018, the year has started stronger with a few IPOs from late 2017. As IROs continue to deal with the regulation changes in the market this may, in turn, open up some more opportunities in the IR space. This year is a good time to be looking – either for IROs seeking a career move, or for companies wishing to hire IR and communications professionals.
How have you planned your activity to overcome any challenges?
SM: We faced some very real regulatory challenges as a result of the vote to leave, although our prompt action in recognizing means we are now in a good position, putting us ahead of some of our competitors. We have engaged with the EU and the UK government to ensure aviation remains high up the list of priorities because without some sort of agreement, technically no airline can fly from the EU to the UK or vice versa.
We have also had to look at our operating model, and have set up an airline based in Vienna to ensure we will be able to continue to fly the same operations as we currently do, regardless of the outcome of negotiations. We have also proposed to our shareholders a small change to our articles of association at our forthcoming AGM whereby we have the flexibility to manage our share register, because aviation regulators require nationality restrictions on ownership of airlines.
EC: How has Brexit impacted upon your company?
SM: We’re carrying out regular communications to investors on all of the above issues – the outcome and impact, the potential risks around the process, and the actions easyJet is taking or has taken to secure its position. We’ve also engaged with our shareholders ahead of the AGM to explain the proposed change to the articles and set up a deep-dive shareholder ID program to establish our current beneficial ownership situation, as well as an engagement program with UK and Austrian regulators to explain our methodology.
In response to Brexit, we’ve also implemented a big change to our shareholder targeting program that has seen us actively targeting, prioritizing and engaging with European shareholders so we are able to secure majority EU shareholder ownership, should future regulations require that. This has been a particularly interesting process as we haven’t historically done much IR work in Europe, so we’ve spent most of the last 12 months playing a bit of catch-up (compared with other European airlines) and educating investors about easyJet.
We’ve also had to stop any active targeting of US and UK investors, which isn’t ideal, but we’ve still prioritized servicing our current shareholders. From a personal point of view, I’ve also consequently spent a bit more time with the board, updating it on the plans and the ownership situation.
TMH: In short, Brexit appears to have had limited impact on the UK job market for IROs and communications professionals more generally. We’ve not experienced clients cancelling recruitment searches or campaigns as a result of Brexit uncertainty but, equally, we haven’t seen an uplift in recruitment requirements to support the challenges, confusion and demand for information that Brexit has presented.
Unlike the financial crisis of 2007-2008, we’ve also seen candidate confidence remaining high and IROs and communications professionals continuing to look for new opportunities and continuing to view moving to a new role in this environment as a low-risk action. This contrasts with 2007-2008, where the majority of the market stopped looking for a job overnight because people were much more worried about job security.