Escrows to the rescue after Brexit?
Most of us of a “certain age” are familiar with the Python sketch in which the famous line emerges, “nobody expects the Spanish Inquisition” and to the same extent, nobody seemed to really expect the UK to actually vote to exit our membership of the European Union and now that it is here, we must deal with any potential fall-out.
There is still much we do not know and it may take maybe between 2-6 years before the exit process is actually completed, and we have no real idea of what sort of relationship we will have with Europe or indeed how this will impact upon our world trading / fiscal status.
Interest rates on record lows
A number of analysts see possibilities for interest rate sinking to record lows, and banks are notifying business account holders of the possibility of charging interest on accounts in credit: and yet interest rates on home-loans are predicted to potentially rise.
A number of financial analysts predict that our exit may have longer-tern impact upon Treasury rates. UK Companies with offices all over the EU may be currently considering their positions due to the level of uncertainty as to the final Brexit negotiated position, both in terms of trading positions, tax and even the effect of different border controls.
Enter China, the Far East, India and “The Commonwealth”
Add to this heady mix of uncertainty, a movement toward greater trading links with China, the Far East, and India, plus potentially greater ties (in trading terms) with Australia, Canada and African ex commonwealth nations, and those of us who are dealing in high value cross-border business trading start to question how secure and straightforward our financial control and commercial deals may become. Trust is essential and, love it or hate it, membership of the EU and its cross-border rules and agreements made this less complex and more secure that it might otherwise have been.
Without knowing the full impact Brexit may have it is wise to take every precaution to protect any investment and using a UK-based, FCA regulated Escrow Custodian Service you can help to protect your interests and utilise your escrow account in order to help to create certainty.
Already seeing growth in the use of Escrow accounts
In the very short time between Brexit and the publication of this brief report, some escrow account suppliers are reporting an increase in performance escrows as a means of bridging uncertainty.
Improve cross-border confidence between both parties and show good faith
Your escrow agreement helps to maintain and enhance confidence between both parties and by utilising a fully regulated custodian service you can feel more confident that draw-down payments can be maintained and only released when the release clauses have been triggered.
Mitigate against delivery failure
Maybe you may want to use a performance escrow whereby a supplier deposits and agreed sum into an escrow account to act as a surety that the supplier will indeed deliver and it will also mitigate impact should that delivery fail. The added focus of having funds held in escrow often gives a supplier an extra focus to deliver on the terms of a contract and it can be used as a very positive tool.
Build trust between both trading parties
Use your escrow account to support your obligations and to build trust – plus it demonstrates a clear confidence on the part of the supplier that they intend to honour commitments made and that the “goods” / “services” etc., are of the promised quality standard – offering an escrow account can often help to “swing the deal”
As this situation continues to unfold we will issue update updated reports demonstrating areas of new activity and the potential financial impacts upon UK businesses
A little about the writer:
Over 30 years of experience in the financial sector, latterly in the receivables and asset finance industry including establishing and developing new companies. From 2003 Vince built and developed another successful commercial finance business working with companies, normally at board level, assisting them with their financing requirements and providing support and guidance including acquisitions and restructuring. A member of the Chartered Institute of Credit Management (MCICM), Vince is Managing Director of Escrow Custodian Services Ltd.