Brexit - what are we going to do in our businesses?
Have you considered this yet? Recent reports have indicated that many businesses have not yet done so.
Let`s put aside the posturing of the politicians and bureaucrats. The whole political/constitutional scenario seems to be as clear as mud. What about our businesses?
There are immediate issues and future threats we need to recognise and address.
I am currently engaged with four growing businesses, each at a different stage of development, but all SMEs. Some are very focussed on the global market, others more local. What does it mean for us?
Immediately the referendum result was announced last year, the market reaction was to depreciate Sterling by 12-18% against the major currencies. Is this the new reality?
A direct impact was a 20% hike in the cost of components from outside the UK, later reflected in UK-sourced products. So, in the UK market, our competitiveness has been threatened. Can we readily pass on the cost increases?
Conversely, the equivalent Sterling price of our products outside the UK has suddenly been reduced - in theory making our products more competitive. Does this mean we will make more sales or margin? It depends how price-sensitive our products are.
Right now, we are much more conscious of our ability to hedge currency risks.
Rights of EU nationals to remain and work
The immediate assumption of the EU nationals in our businesses was that they would be repatriated, a massive emotional challenge to manage.
We have assured them they possess such vital skills this would be crazy. No government in its right mind would remove those highly-skilled people who contribute such value to all our businesses.
But there is major uncertainty. The one thing we can be certain about is there will be some curbs on immigration.
In a scenario of more demand than skilled people, recruitment will be harder and cost rates will increase. We are already seeing a drop in net immigration, so this outcome is highly likely.
So, what are we doing? In part, planning on developing our own additional skilled staff now, in the belief that the "easy"recruitment option won`t be available.
But what about those sectors which have become heavily reliant on EU nationals, such as fruit and vegetable farms, the hospitality sector, the NHS!
And what will happen to the highly-successful university postgraduate schools? Will their influx of foreign participants dry up?
This is the biggest unknown of all. Will there be a deal/no deal? What will happen to tariffs? What will happen to customs processes? This is in the context of increasing protectionism coming out of the US.
I don`t know. But does anyone really know? If you listen to people at the different ends of the political spectrum, it`s either going to be a catastrophe or a golden opportunity. I always look for any scenario to offer an opportunity, but with this I just don`t have enough information or understanding.
My conclusion is that we need serious detailed advice to understand our options, so we can start to build the what if action plans.
Where will this information come from? The Chambers of Commerce? Other sources? Or should we just get on with it ourselves? JDI is nearly always my preferred mode.
Access to capital
Access to capital is already tough for SMEs despite Government support through tax breaks and support services.
What`s likely to happen?
Will multinationals continue to invest in the UK as the gateway to Europe? We are already starting to see plans for the relocation of staff in the financial sector away from London.
What will happen to funding for business development/support agencies and university R&D programmes if EU funding dries up?
What will happen to equity funds?
My answer is we should all focus more on securing more commercial deals/partnerships with key players in our respective markets. Effectively self-generating cash so we can invest more in automation, digital technology and skills development to improve productivity.
Is this all a hype? Are we at risk of over-reacting?
My view is that the risk is for real. Although for many years we may have regarded what happens in the EU as somehow remote from us, we cannot blindly do so any longer.
We all need to continue to focus on managing our businesses - planning, reacting and acting - in what may well be the biggest peacetime economic, social and political turmoil we could face.
We need to ensure we are informed about the hard issues, not the political spin and posturing, and act.
This article was first published on Scotland B2B - https://scotlandb2b.co.uk/2017/10/20/brexit-the-real-impacts-and-best-reactions/ and it also reflects my comments at the recent meeting of the St Andrews Business Club