With the recent extension to the Brexit deadline, businesses have an extra six months to prepare. To help you use this time wisely Adam Jackson, director of Brexit advisory services, highlights practical steps business leaders can take to plan for Brexit and shares our experiences helping clients.
Predicting the eventual outcome of Brexit is an impossible task, but broadly speaking there are probably three likely outcomes to the current Brexit impasse: no-deal, a deal with the EU, or no Brexit.
But, even when we know the outcome, there will still be uncertainty. It is important business leaders understand that agreeing on a type of Brexit won’t answer all questions. It should be seen as a longer-term process. Brexit uncertainty is part of the new reality and can be seen as simply a reflection of longer-term trends in politics and the economy.
We have tried to take a practical and positive approach to Brexit uncertainty, putting the politics to one side and focusing on the needs of those running businesses and facing decisions. Our Brexit room tries to get management teams into the right frame of mind for Brexit planning. We take clients of all sizes and from any sector through a range of scenarios, helping them identify the main issues that will affect their business and, more importantly, to see where Brexit may present opportunities over the longer-term.
In order to help CEOs steer through Brexit planning and to start getting ready for life after Brexit, we focus on three main issues and look at their business through nine lenses.
The starting point for Brexit preparation is to understand and map how your business interacts with the EU. But, even if you are entirely UK-focused, only employ UK citizens and have no supply chain interactions with Europe, it is still worth considering. Your customers and suppliers will be affected by Brexit, and the economic impact of a disorderly Brexit will affect UK consumer markets. It is almost impossible for a modern, growing business not to be practically affected in some way.
The first step is therefore to analyse EU touchpoints. Which markets do you sell to? How 'European' is your supply chain? How many EU nationals do you employ and what tax or customs issues might arise? What product standards do you use (UK or EU) and who does your conformity testing (A UK or an EU organisation)?
This assessment will allow you to build a clear picture of how any potential changes to UK-EU relations might affect your organisation. To be thorough in this, it is best to do some scenario panning. for example, what will happen if there are several days of delays at ports in and out of the UK? Having looked at interactions with the EU, it is then useful to model the impact of the scenarios on financial performance and operations.
Having assessed your level of Brexit exposure and considered different scenarios and their impact on the business, it is worth thinking about how you can protect yourself through any transition. The key is to consider what decisions can be taken now to mitigate risk or exposure.
It is also essential to minimise inefficiencies across the business, and explore alternative solutions to sourcing labour and developing domestic talent. As with any issue that causes uncertainty, communication is critical and opening up a dialogue with key stakeholders – including your people, investors, customers and suppliers – is important.
It’s good to plan for Brexit well, but just as important to communicate that fact to those who need to know. To be fully prepared, it is essential to develop contingency plans that explain what needs to be done and when.
It hasn’t always been easy for businesses to focus on the positive aspects of the Brexit process, but all change shakes up markets and, in such disruption, there are opportunities for those businesses that are able to see and seize them. It is possible to achieve growth during and after the UK’s departure from the EU, but it requires careful thought and planning.
This presents an opportunity to reimagine business models, to rethink and streamline business processes and controls, to explore exciting new international markets and to capitalise on new domestic opportunities, as well as to assess any weaknesses in how competitors are affected by Brexit.
How should your company plan for Brexit?
Every organisation is different. In the Brexit room we look at the potential risks and opportunities a business faces through nine lenses. The nine lenses are:
customers and markets
legal, data and regulation
funding and ownership
tax and customs
Brexit room case study: Brompton Bicycles
Brompton Bicycles, the maker of the now-iconic folding bike, is widely recognised as a UK business success. Run by a small team, the company’s management opted to join a half-day workshop in our Brexit room.
The Brompton Bicycles board already had a clear risk register in place, which helped when it came to working through the likely scenarios. It also examined and prepared for a potential change of government and considered what a Labour leadership might mean for the business.
Perhaps ironically, one of the biggest issues to consider was transport. The board had to look hard at whether the company would have access to the necessary parts to make bikes and where they would come from. The other side of the logistics coin was how to get products to Brompton Bicycles customers. The board worked through a plan for Brexit and asked how it married with the company’s strategic direction.
The agreed best option was to increase the stock of components in factories and get finished stock out to the market before ports clog up. The board examined what it knew about sales patterns, for example Korea has peak sales in the spring, just when Brexit might hit. To counter this Brompton Bicycles has already shipped stock to the market and has modelled for increased customs costs - regardless of whether there is a deal or not.
The board looked at business continuity and the potential for increased transport costs and tariffs in some locations, as well as higher employment costs. But perhaps most important was how to communicate all of this internally, especially to employees from within the EU. This communication needed to be open, frank and ongoing.