Article

The Impact of Brexit on UK Businesses

How are different UK businesses preparing for Brexit with Leading Resolutions?
February 18 2019

On June 23rd 2016, Britain voted to leave the EU in the referendum. A country divided with 51.89% voting to leave and 48.11% voting to remain. It’s already been two and a half years, and no one is any the wiser about what the post-Brexit economy will look like.

That said, there’s definitely a change happening, and businesses need to prepare for it. Here are our views on that change and how Leading Resolutions can help you to manage it.

Are you a Brexpert?

Just like the referendum result, we’re divided 50/50 (well, almost) – you either completely don’t want to talk about Brexit, or you’re a Brexpert

If you’ve found yourself surrounded by those who don’t want to talk about it, Leading Resolutions can be your Brexpert.

We understand that uncertainty is the hardest hurdle to overcome. And with tariffs, taxes and immigration yet to be decided, companies aren’t sure what will happen to their finances, EU national employees and supply chains.

In this article, we talk about the various Brexit scenarios and how Businesses are planning to deal with them

So, whatever scenario, planning to navigate unpredictable times is essential for every company. It’s time to futureproof your businesses in the uncertainty that is Brexit.

Planning for change

Across the businesses we work with, we see many planning for the No Deal scenario for two reasons:

  • The prospect of ‘No Deal’ is arguably the most serious and disruptive to businesses and so it makes good sense to plan for the most impactful outcomes, even if all planning needn’t be used in the end.
  • With so much uncertainty around how the relationship between the UK and EU will end up, ‘No Deal’ is actually the most defined scenario to prepare for with businesses having requirements to work towards.

Needless to say, the changes you will need to implement will be completely dependent on your business.

So, here are some general examples with the view that at least one will be relevant to you.

Losing talented employees

Many companies have already, and may do in the future, lose valuable EU national members of their workforce as the UK leaves the EU. However, there are ways around this if you need to retain such employees.

Retaining talent is hard enough sometimes regardless of the ‘No Deal’ scenario, but how do you do retain talent to keep them on board in unstable times like these? You need to think outside the box. And by this, we mean you need to think beyond salaries and the package you could offer.

For those companies whose office-based staff are EU nationals, leveraging technology can certainly be of great help here. Top employees that impact the bottom line don’t have to necessarily leave the business. Use IT and the cloud to your advantage. For example, by using the Internet of Things (IoT) you can improve picking speed and accuracy in warehouses by enabling real-time stock management. Where staffing levels have been high due to legacy systems and processes, consider the use of Robotic Process Automation (RPA) to improve the productivity of existing staff while leveraging automation to improve efficiency.

In warehouse environments, 10-20% of staff during particularly busy periods can be EU nationals. With a potential change to migration rules, some businesses are planning for the eventuality that staff can no longer be employed.

One potential solution to this problem involving warehousing staff who are EU nationals, which is being undertaken by some businesses already, is to relocate larger warehouses to the EU, while retaining a smaller UK workforce in UK warehouses.

Finances

With ‘No Deal’ comes potential for further downward shifting of the exchange rate of sterling. This will undoubtedly lead to rising costs of products which are imported from the EU, if the exchange rate of the euro stays relatively stable with respect to sterling.

So, to combat this, some companies are looking to increase the cost of imported products to include the overheads associated with the exchange rate, and indeed import tax. However, this could potentially have a negative effect on the volume of sales as consumers could therefore opt for cheaper, non-imported goods.

One of the key ways businesses can mitigate their exposure to volatile changes in the exchange rate is to use a strategy called ‘currency hedging’. The following list includes some examples of currency hedging techniques:

Foreign Currency Bank Accounts

  • By setting up a bank account in the currency that your supplier or customer trades in, it’s possible to reduce (at least in part) your exposure to volatility by allowing your business to choose when currency is converted at the exchange rate that suits best.

Forward Contracts

Businesses can use forward contracts to sell or purchase in foreign currency amounts at a given time at a given exchange rate as dictated by the contract, rather than being at the whim of any fluctuations in the exchange rate.

Flexible Forward Transactions

This is very similar to a Forward Contract but with a key difference. The settlement of the contract can happen at any time up until the maturity of the contract, meaning that businesses can choose the exchange rate that’s right for them at the right time.

Currency Swaps

Essentially two businesses agree to exchange one currency for another at a pre-agreed exchange rate.

One you’ve identified your businesses exposure to currency fluctuations you can start to consider if any of the various hedging options is suitable, and plan how to mitigate your exposure.

Supply Chain

With the prospect of trade barriers also comes the prospect of delays at ports or airports. As a result, some companies are, and some considering, stockpiling products in advance of the UK’s exit from the EU in the ‘No Deal’ scenario.

The key to preparing for Brexit with regard to supply chain is to identify and manage the risks. This is what you can do with the help of Leading Resolutions:

  • Identify your important customers and suppliers. The key part here will be to consider not only financial value, but also the impact on your operation. For example, a small supplier could have a large impact on your business.
  • Categorise the supply chain relationships into those that will cross the UK EU border, those that cross a UK non-EU border, and those that are UK domestic. For each of these categories the risk will be different.
  • Review any long-term contracts which extend past 29th March 2019, and those which extend past 31st December 2020.

Once you’ve identified your key risk areas you can start to plan how to mitigate these risks.

But, it’s worth saying that it’s not all doom and gloom. The Confederation of British Industry (CBI) found that 69% of businesses surveyed had looked (or planned to look) for opportunities arising from Brexit, and 29% had found opportunities as a result.

How can Leading Resolutions help you prepare for Brexit?

What all of these examples have in common is that IT and business strategy will play a driving role in a company’s preparation for Brexit.

Leading Resolutions has already worked with many businesses across various sectors to develop their No Deal Brexit plans. This has included:

  • Identify contracts which may be impacted by the change in trading relationship with the EU
  • Review and develop IT strategies (including the identification of areas where automation or artificial intelligence can be used) to establish whether changes can enable solutions to business challenges identified by Brexit
  • Draft business cases for IT development and make the changes required to mitigate the impact of Brexit
  • Management of IT transformation required to mitigate the impacts and risks introduced by Brexit

If any of these apply to your business or you would like to discuss further the various Brexit scenarios