It can be difficult for businesses to plan for the unknown at the best of times but throw in a challenging timescale and a lack of clarity, and it can be near impossible. As Brexit day draws closer however, businesses are left with little choice.
Happenings at a political level may seem to have little impact on business on the ground. The truth is, these developments can have serious impacts on business outlook.
Surveys conducted by the IoD have found that shortly after negotiators reached an agreement on ‘transition’ at the March EU summit, company directors’ economic confidence turned positive for the first time since negotiations began. At the other end of the scale, over the summer when the possibility of a no-deal scenario seemed to increase, confidence dropped to its lowest point of 2018 so far.
Taking note of political goings-on is crucial when it comes to businesses planning for Brexit. Updates can be gleaned from events such as EU summits, parliamentary votes and Prime Ministerial speeches. Negotiations are on-going, but the political circumstances are an important driver and are often hints for what might lie ahead.
Business steps to take
Brexit is a challenge and an opportunity, although in these times of uncertainty it can feel more like the former. One thing that is clear, is that Brexit is a chance to get your house in order. On a practical level this means understanding the (potential) implications of Brexit, maintaining strong lines of communication and reading widely is vital.
Above all, it is imperative that you understand your company’s exposure to the EU market. This involves mapping the supply chains of your business and identifying areas where ties to the EU are particularly strong. From here, you can have a better idea of which aspects of your business might be most exposed to Brexit. Ask yourself questions such as:
- Where is inbound and outbound cash flow most sensitive?
- What would be the material consequences of time delays at the border?
- What ports do we use and what is their capacity?
Understanding the potential impacts of Brexit goes hand in hand with understanding how your own company operates.
Secondly, it is advisable to consider possible negotiating outcomes and their respective consequences for your business. SMEs are typically less resourced than larger firms to plan for the future, but that doesn’t mean they shouldn’t at least think about the consequences of different outcomes. For example, if the UK were to strike a Canada-style free trade agreement, would your business have the capacity to prove the origin of goods? Or, in the event that the UK ceased membership of the EEA, would you look to set up an entity in another EU country? Having said that, to plan for a no-deal outcome is the safest bet as it is the worst-case scenario. This involves familiarising yourself with the rules for what ‘third country’ trading with the EU entails.
Lastly, do not underestimate the information and advice already out there. Information is widely available from several sources. The UK Government has published no-deal technical notices explaining what businesses need to know in the event of a no-deal scenario. The European Commission published its own guidance earlier in the summer.
Furthermore, it is important now more than ever to leverage the support from your trade or membership association. Lobby groups are working hard not only to advocate to government on behalf of their members’ interests but also to provide advice and support materials for their members.
Navigating the unknown can be a tricky environment for businesses. Hopefully, these steps will help you manage your company in these uncertain times. Try and take comfort in the fact that there will be a transition period but be mindful that it is always better to plan ahead instead of leaving it to crunch time.
Stay tuned for the final article of this series which will look at more ways your company can steer through the fog of Brexit.
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