‘No deal Brexit’ in FTSE 350 annual reporting

‘No deal Brexit’ in FTSE 350 annual reporting

On 17 October, it was announced that a draft Brexit deal had been agreed between the UK and EU, although at the time of writing approval by Parliament remains uncertain. The agreement comes after mounting fears over the past six months that the UK may leave the EU without a deal.

Market Tracker has conducted research into companies referencing Brexit within their annual report across those FTSE 350 companies (excluding closed ended investment funds) with a financial year end between 1 April 2018 and 31 March 2019, holding an AGM between June 2018 and July 2019. The findings highlight while that Brexit is an unavoidable fact for companies listed on UK markets, with 93% of companies making some reference to Brexit, only 24% of the 284 FTSE 350 companies reviewed specifically referred to a ‘no deal Brexit’ in their annual report. Unsurprisingly, 95% of those companies were incorporated in the UK, perhaps suggesting that the issue is not as significant for companies incorporated outside of the UK.

When considering industry sector, we found that a disproportionately higher number of Aerospace & Defence companies referenced a ‘no deal Brexit’ in their annual reports, citing border control and customs issues as a key concern. In March 2018, BEIS published a report, The impact of Brexit on the aerospace sector, which highlighted the importance of negotiating clear terms with contracting partners and concluding that ‘It is in the interests of the UK and the EU27 that both sides in the Brexit negotiation reach a firm agreement in the coming weeks on the arrangements for a transition or implementation period after March 2019, to avoid firms having to commence costly contingency plans.’

Companies operating in the Engineering & Manufacturing sector also ranked highly on the list of companies citing a ‘no deal Brexit’, with concerns around a weak pound, import tariffs and supply chain failures topping the list of risk factors. Rotork plc’s annual report (in its

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