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I CAN SEE CLEARLY NOW, BREXIT HAS GONE?!!

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Dan Drake Audit, Permanent, Temporary...

(Far From) 2020 Vision – Internal Audit Market Review

As the UK’s long-awaited departure from the EU was finally ushered in on 31st January and with IR35 legislation due to come into effect on 6th April, we ask our Director, Dan Drake, what this means for internal audit recruitment in 2020…

The world of internal audit recruitment, like every other aspect of the City of London, has operated under the shadow of Brexit since 2016’s referendum. 2019, and its succession of Brexit delays, ensured most financial services firms ultimately continued to seek refuge in co-sourced / contract internal audit solutions to address immediate resourcing needs. This was contrary to expectations at the turn of the year, when everyone anticipated slashing co-source budgets and a commitment to longer-term institutional strategies, in line with gaining clarity on all things Brexit in March.

Whilst the City appeared to largely react to December’s General Election result and the resultant EU departure with a collective sigh of relief after over 3 years of will they, won’t they uncertainty, false dawns and moving goalposts, the outlook for the remainder of 2020 is still far from clear. Over the 11-month transition period, we will continue to follow all of the EU’s rules and the trading relationship remains whilst a new free trade agreement is negotiated. Consequently, whilst institutional post-Brexit strategies are likely to take shape throughout 2020, timeframes will continue to be dictated by negotiations throughout the transition period (an 11-month timetable that the European Commission has already acknowledged as challenging, even if Boris Johnson insists there will be no further extensions).

So what will this mean for London’s internal audit recruitment market in 2020… until now, almost certainly a continued reliance on co-source providers / independent contractors, but that was in a pre-IR35 world…

IR35 was seemingly long the elephant in an overcrowded room of Brexit debate but now its implementation firmly has its seat at the table ahead of the legislation’s formal introduction in April. Thus far the reaction has, understandably, been cautionary in nature. Initial attempts to utilise HMRC’s CEST tool to determine whether existing contractors would sit “in” or “out” of IR35 have been conducted with about as much conviction as my children’s attempts to do the hokey cokey, and subsequently, not wanting to fall foul of the impending changes, we’ve seen firms largely take the risk-averse approach of announcing blanket bans on limited company contractors, with a movement towards third party umbrella solutions and an uptick in the utilisation of fixed-term contracts.

The contractor community’s reaction has equally been explicably varied, veering from immediate transition to umbrella firms and seeking absolution in permanent employment, through to defiantly vowing only to work on contracts outside of IR35… regardless of whether such contract work even exists given the current landscape!

What we can say with certainty, is that there appears to be little prospect of regulatory demands diminishing, and a contractor exodus potentially puts major programmes and projects at risk. Whilst the future of limited company contracting currently appears threatened, the government’s recently announced IR35 review offers hope that, when combined with better advice and education around future off-payroll rules, some middle ground between blanket bans and hitherto contractor engagement can yet be found. The review seems a little belated in nature to meaningfully impact the 20/21 financial year, but the contract market awaits the Chancellor's March budget with bated breath...

Operating within this blurred post-Brexit/IR35 wary landscape in early 2020, we anticipate continuing high demand for specialist skills within the internal audit market, whether this is on a permanent, fixed-term or contract (via umbrella!) basis. Market Conduct and Prudential Risk expertise appear to be the order of the day alongside IT Auditors demonstrating a strong knowledge of E-Trading, Data Analytics and Cyber Security.

In summary, in the wake of the UK’s historic departure from the EU, it most certainly isn’t the case that I can see clearly now, Brexit has gone… however, be assured, whether your internal audit department is seeking short or long-term resourcing solutions, Paritas’ experienced team of internal audit recruiters will be on hand to assist as we enter the uncertain waters of this new decade…