How can businesses prepare for Brexit?
The UK’s path to Brexit has not been an easy one. Since the 2016 EU Referendum the country has experienced three different Prime Ministers, a global pandemic and a recession; all have which have made an inevitably difficult negotiation process even more complicated.
Consequently, a deal with the European Union (EU) is yet to materialise. And with 1st January 2021 marking the end of the UK’s transition out of the EU, the pressure is on Boris Johnson to outline exactly what post-Brexit Britain will look like and, more importantly, how it will impact UK businesses.
Perhaps unsurprisingly, businesses are not encouraged by the Government’s lack of clarity and guidance. Indeed, a recent survey of over 530 UK business leaders, commissioned by One World Express, revealed that 50% are nervous about the potential negative impact of Brexit. What’s more, over two fifths (43%) believe Brexit poses a greater long term threat to their survival than COVID-19.
Interestingly, over the past two months the Government has changed its message to business leaders regarding Brexit, stressing that the onus is on them to prepare for life out of the EU. This can be seen through speeches and advertising campaigns.
That will not be easy without the terms of the UK’s future trading relationship with the EU being known. Nevertheless, it is vital companies do what they can to prepare for Brexit between now and the end of the year.
Supply chain management
It is a certainty that supply chains will be heavily impacted by Brexit, at least in the short term. So, an important starting point for businesses will be to review their existing supply chains and evaluate the various interlinked costs and dependencies.
From there, firms will be able to predict how and where Brexit will impact their operations. For example, Brexit could result in various tariffs being imposed on materials that a company imports to make its products. Additionally, changes to importation laws could mean that some companies experience delays in receiving certain goods as they are stuck in long queues at custom borders.
Understanding the potential impact of Brexit on supply chains will mean that businesses will be able to take preventative action. For example, organisations predicting raised tariffs might consider non-EU suppliers instead; alternatively, they might need to amend their own pricing.
It is important to the note that almost a quarter (23%) of UK businesses have already changed some of the providers they work with in their supply chains in preparation for Brexit, according to One World Express’ aforementioned research. If COVID-19 has not already forced them to do, Brexit will ensure all businesses evaluate their suppliers and logistics partners.
Once potential issues with supply chains have been addressed, organisations can consider their future cashflow.
With Brexit and COVID-19 causing so much economic uncertainty, this may seem like an impossible task. However, there are tools available to help companies to develop various forecasts for potential Brexit outcomes, such as the Office for Budget Responsibility's (OBR) numerous forecasts outlining the different ways in which Brexit could impact the UK economy and public finances.
These forecasts are based on the OBR’s own analysis, judgement and assumptions; however, they will help businesses to predict and prepare for the potential economic aftershock, once the transition period ends.
From there, employers can address potential issues that may present themselves. For instance, if the forecast suggests that it will face a cash shortfall, employers may plan to take on some debt. Alternatively, they can look to redistribute their budgets to protect particularly vulnerable areas of the business.
Communication is key
In such uncertain times, it is vital for businesses to maintain clear and consistent lines of communication with various stakeholders. These will include everyone from suppliers and customers to investors and members of staff.
Positively, One World Express’ research suggests that almost two fifths (38%) of UK businesses have taken steps to discuss the potential impact of Brexit with stakeholders, while a further 25% plan to do so in the coming months.
Being upfront with stakeholders about how Brexit could impact a business, as well as the steps the business is taking to overcome them. Doing so will provide some welcome reassurance to stakeholders and offer them the opportunity to voice any concerns.
Consult an expert
The uncertainty of Brexit can be overwhelming for some businesses. In which case, it is important to seek expert advice.
Indeed, there are a plethora of consultants, accountants and financial planners on hand to help employers to create a tailored Brexit strategy, designed to suit their specific needs. Likewise, logistics and trade experts can help a company understand what changes they might need to make in order to prepare for the UK’s departure from the single market.
Of course, it is difficult to plan for Brexit while UK businesses do not know what the terms of the UK and EU’s deal will be (or if a no deal will indeed transpire). However, by taking the time assess all elements of an organisation, and through clear and concise communication, there is no reason that the UK’s private sector cannot successfully weather the Brexit storm.