Fifteen months has passed since the Referendum and there isn’t one clear, unambiguous agreement between the UK and the EU on the terms of the exit.
There has been scant unilateral progress on: membership of [and access to] the Single Market, cross border movement of goods, the rights of EU workers and the recognition [or not] of the European Court of Justice. These are major business issues, with no firm timetable for resolution.
With so much uncertainty businesses can’t plan for the future changes Brexit will bring. Yet Brexit is already having an impact on them, perhaps neither fully noticed or recorded.
Here’s what we know
The UK economy is slowing down, GBP weak and fewer EU citizens are choosing to work in the UK. But, actually, there are hundreds of other Brexit KPIs that businesses can monitor – as markets are adapting to Brexit well in advance of Government efforts.
A picture of Brexit emerges, bespoke to your business, when you look at relevant trends in prices, trade volumes, indices and surveys
For instance, looking at the Office for National Statistics macro-economic data, comparing the averages from 12 months before the referendum and 12 months after June 2016, there are success stories out there:
- The UK is exporting over twice the amount of Sugar to non-EU countries
- The UK is importing 31% more Ships from the EU, but Ship exports to the Rest of the World have increased by 54%
- The Value of Services from UK Transport, Storage and Communications firms have increased by 25%
- There has been a 5% price reduction in imported products used in Manufacture of Motor Vehicles
But KPIs for other sectors aren’t doing as well:
There has been a 51% drop in the value of Art Work imported from the EU (though a 27% increase in exports to the EU)
There are a net 50% fewer seasonal workers arriving from EU 8 countries (Czech, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia) who are looking for work.
Input prices for Manufacturing Materials have increased by 14%
The UK is importing 2% less Tobacco from the EU – but exporting 49% less back [to the EU.]
The list is long and varied but the clues to how Brexit will impact your particular firm are in these KPIs; A picture of Brexit emerges, bespoke to your business, when you look at relevant trends in prices, trade volumes, indices and surveys.
The model we use assesses all the relevant KPIs for costs and sales of a particular firm, combining the two to understand the impact on operating profit. There are many ways to a business can use the data, but first and foremost is to establish a strategy, with resources to actually collect and monitor that data.
Take control, it’s your business
It’s important to establish a Brexit ‘cause and effect’ strategy, which should give you the confidence to make informed decisions for your Brexit plan.
It may be too early for definitive action, but the benefits of a formulated and agreed plan are that it can be monitored, refined and validated, then communicated to your stakeholders – putting you back in control, rather than at the whim of UK – EU negotiations.
But to grow your business – by capturing new markets, building stronger customer relationships, reducing costs, or simply reacting faster than your competition - you can’t just focus on historical information.
Clear and decisive growth plans can be created by undertaking a relatively simply exercise of forecasting what could happen to your business if Brexit delivers certain changes.
Is the future really orange, does that even help?
Businesses should use their own Brexit KPIs to create a Soft/Hard/Other Brexit future scenarios and assess the implications to their forecast costs, sales and overall business operations. This exercise will highlight the stresses a business may face under certain Brexit outcomes, allowing a focused management effort into solutions: For example:
- A UK auto business saw increased tariffs on EU imports as a major threat, but modelling demonstrated increased international car part sales and weaker GBP as offsets
- A UK agricultural business saw risks of declining volumes of seasonal EU workers and increased UK labour costs, but their future scenarios highlighted the possibility of increased domestic sales as consumers/businesses sourced from Britain.
There is a great deal of management information value in Brexit scenario planning, based on macro-economic KPIs that can be observed and updated. While the interpretation of the effect on a business’ costs or sales is subjective, it’s hard to argue with factual based macro-economic data that sign posts the direction of travel and the overall impact to the business.
This strategy allows management to focus on the crucial areas and reduces the complexity of managing Brexit from “How can we make business investment decisions when nothing is known?” to “We have identified a list of material areas of concern – we’ll focus management time on these, communicating progress to our stakeholders.”
Robust planning enables agile management
It’s highly likely Brexit will bring changes to your business – either directly (on your operations, employees, legal structure, financing) or indirectly (your business chain, suppliers and customers).
Management agility is needed to stay on top of these changes, powered by robust planning.
Your advisors are well positioned to provide detailed analysis of your pain points – but you can begin this process internally, exploring risks and maximising possible benefits.
Just don’t wait until the fog of Brexit clears; by then it will be too late.