New research from Grant Thornton’s International Business Report (IBR) finds that the majority of mid-sized businesses in the European Union, including the UK, have done no planning, or believe they don’t need any plans, ahead of the March 2019 deadline for Britain’s departure from the European Union.
The survey finds that 22% of UK businesses have done no planning whatsoever, and a further 42% believe they don’t need a plan for Brexit. Of the less than one-third (28%) who have started planning, the majority remain in early stage development, with 18% having assessed and identified the risks and opportunities of Brexit. Only 9% are currently implementing their contingency plans, and a further 1% have developed a contingency plan which they have yet to implement.
Businesses within the European Union* remain even more unready for Britain’s impending departure, with 27% having done no planning and 62% believing their business does not need a plan. Of the EU businesses who are preparing for Brexit, only 4% have conducted risk assessments and 1% developed contingency plans, with a similar figure having implemented their contingency plans.
As the only country with a UK land border, businesses in Ireland emerge from the survey as seemingly more prepared for Brexit than even the UK. Half of Irish businesses surveyed have carried out risk assessments and 12% are actively implementing contingency plans. Only 10% of Irish businesses felt they did not need a plan or had done no planning at all.
Robert Hannah, partner at Grant Thornton UK LLP, commented: “Two years on from Britain’s historic vote to leave the European Union, businesses on both sides of the debate seem largely complacent over the transformative impact Britain’s EU departure will have. Whilst the number of unknowns and uncertainty at a policy level remain a hindrance for planning in absolute terms, businesses cannot be complacent and need to consider how their operations will be affected ahead of the March 2019 deadline and into the potential transition period. Even in the absence of clarity on Britain’s future relationship with the EU at a political level, there are a number of actions within businesses’ gift to consider now in order to stand them in good stead post-Brexit. This can include a number of scenario forecasts and mitigating actions, such as reviewing forex hedging and working capital requirements to ensure they have the right talent and capabilities to manage exports and customs functions.”
Planning for ‘No Deal’ and confidence in the ultimate outcome
The research also finds that the majority of businesses who have conducted some degree of planning are mostly factoring in an ultimate ‘No Deal’ scenario, whereby the UK and EU fail to reach an agreement and the UK defaults to trading on WTO terms. More than half of UK businesses (56%) and 48% of EU businesses have included a ‘No Deal’ scenario in their plans. Ireland again stands out in this regard, with two-thirds (67%) of its businesses who have started planning having considered a ‘No Deal’ reality.
Businesses were also asked about their confidence in the UK and EU agreeing an outcome that is ultimately positive for their business. Over a quarter (28%) of UK businesses expressed a degree of confidence in a positive outcome, yet more businesses (31%) were not confident. EU businesses, on the other hand, were more confident that an outcome would be reached in their favour, with 34% confident and only 20% unconfident. Ireland, however, remains an outlier amongst EU businesses, with only 12% reporting confidence in a positive outcome and more than half (52%) were apprehensive that the outcome would have a positive impact on their business. The majority, across both the UK and EU, remained largely unsure (42% and 46%, respectively).
Robert Hannah added: “Irrespective of how the negotiation process develops over the coming months, the EU economies will remain important trading partners for many British firms for the foreseeable future. It therefore remains important that businesses take a long, hard look at their operations and identify where they’re potentially exposed come March 2019. As with any transformative shift to the economy, Brexit offers both opportunities and risks to business. From our experience working with businesses to plan for Brexit, we know that taking a more pragmatic approach to planning for Brexit could also help identify areas of low risk exposure, helping narrow uncertainty and allow businesses to focus on what really matters. Cliché as it sounds, the old adage of ‘failing to plan is planning to fail’ certainly rings true at the moment.”
Total survey sample: 776 (651 EU and 125 UK business leaders)